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Cobra Insurance Rules And Guidelines For California

Understanding Cobra insurance rules will likely give you a major headache. Even if you are a seasoned HR professional, Cobra insurance rules can send you in a diabetic coma requiring largo amount of chocolate to recover!

Which is why we put this Cobra chart together with the help from our friends at Zywave. It will help give business owners and individuals some good information to help you understand this snake in the grass.

Comparison of Federal and California Continuation Laws

 

FEDERAL (COBRA)

CALIFORNIA (Cal-COBRA)

Covered Employers and Health Plans

Group health plans (fully insured and self-insured) maintained by private-sector employers with 20 or more employees. Most group health plans maintained by governmental employers are required to offer COBRA. However, group health plans maintained by churches are exempt from COBRA.

Small Employers: Insured group health plans sponsored by employers that have 2 to 19 eligible employees.

Large Employers: Insured group health plans that are subject to federal COBRA must offer continuation coverage under Cal-COBRA for employees who were only eligible for 18 months of COBRA coverage and exhausted that coverage.

The coverage generally must be the same coverage that applies to similarly situated individuals under the group benefit plan. However, the Cal-COBRA extension for large employers does not apply to non-core coverage (that is, dental or vision care coverage).

Self-insured ERISA plans are not subject to state continuation coverage requirements.

Qualified Beneficiaries

An employee, spouse or dependent child covered by a group health plan on the day before a qualifying event. In addition, any child born to or placed for adoption with a covered employee during the period of COBRA coverage is considered a qualified beneficiary.

Any individual who is covered by the group health plan on the day before the qualifying event. In addition, any child born to or placed for adoption with a former employee during the period of Cal-COBRA coverage is considered a qualified beneficiary if the child is enrolled within 30 days of the birth or placement.

Qualifying Events

Events that trigger an obligation to offer COBRA coverage include:

·      Termination of employment for reasons other than gross misconduct (all qualified beneficiaries);

·      Reduction in the number of hours of employment (all qualified beneficiaries);

·      Covered employee's becoming entitled to Medicare (spouse and dependent children);

·      Divorce or legal separation of the covered employee (spouse and dependent children);

·      Death of the covered employee (spouse and dependent children); and

·      Loss of dependent child status under the plan (dependent children).

Events that trigger an obligation to offer Cal-COBRA to qualified beneficiaries include:

  • Termination or reduction in hours of the covered employee’s employment (except termination for gross misconduct);
  • Death of the covered employee;
  • Divorce or legal separation of the covered employee from his or her spouse;
  • Dependent’s loss of dependent status; and
  • With respect to covered dependents only, the covered employee’s entitlement to benefits under Medicare.

Maximum Continuation Period

The maximum duration of COBRA coverage depends on the type of qualifying event, as follows:

18 months - Employment termination or reduction in hours of work

29 months – The Social Security Administration (SSA) determines the qualified beneficiary is disabled during the first 60 days of COBRA coverage. This 11-month extension applies to the qualified beneficiary with the disability and all of the qualified beneficiaries in the family.

36 months – Divorce or legal separation, employee’s death, entitlement to Medicare or loss of dependent child status

36 months – After a qualifying event that is an employment termination or a reduction in hours of work, a second qualifying event occurs that is the death of the employee, the divorce or legal separation of the covered employee and spouse, Medicare entitlement (in certain circumstances) or loss of dependent child status under the plan.

Small Employers (2 to 19 employees): Up to 36 months for any qualifying event.

Large Employers (20 or more employees): Enrollees who have exhausted their coverage under federal COBRA may have the opportunity to continue coverage under Cal-COBRA for up to 36 months from the date COBRA coverage began, if the enrollee was entitled to less than 36 months of COBRA coverage. Dental and vision care coverage are not subject to this extension.

 

Early Termination of Coverage

Coverage begins on the date that coverage would otherwise have been lost by reason of a qualifying event and will end at the end of the maximum period. It may end earlier if:

·      Premiums are not paid on a timely basis;

·      The employer ceases to maintain any group health plan;

·      After the COBRA election, coverage is obtained with another employer group health plan that does not contain any exclusion or limitation with respect to any pre-existing condition of the beneficiary; or

·      After the COBRA election, a beneficiary becomes entitled to Medicare benefits.

Continuation coverage requirements do not apply to the following individuals:

·         Individuals who are entitled to or who become entitled to Medicare benefits (entitlement to Part A only constitutes entitlement to Medicare benefits);

·         Individuals who have other hospital, medical or surgical coverage, or who are covered or become covered under another group benefit plan, including a self-insured employee welfare benefit plan, that provides coverage and does not impose any pre-existing condition exclusion or limitation;

·         Individuals who are covered, become covered or are eligible for federal COBRA;

·         Qualified beneficiaries who fail to timely meet notification requirements; and

·         Qualified beneficiaries who fail to timely submit the correct premium amount or fail to satisfy other terms and conditions of the plan contract.

In addition, coverage may terminate before the end of the maximum coverage period if:

·         The employer ceases to provide any group health plan for its employees;

·         The qualified beneficiary moves out of the plan’s service area; or

·         The qualified beneficiary commits fraud or deception in the use of plan services.

Notice Requirements

Health plan administrators must provide an initial general notice when group health coverage begins. When a qualifying event occurs, health plan administrators must provide an election notice regarding rights to COBRA continuation benefits to each qualifying beneficiary who loses plan coverage in connection with the qualifying event.

Qualified beneficiaries must respond to this notice and elect COBRA coverage by the 60th day after the written notice is sent or the day health care coverage would end, whichever is later. Additional COBRA notice requirements apply under federal law. 

A plan’s evidence of coverage must disclose the ability to continue coverage, the rules of continuation coverage and certain notice requirements, including a statement that individuals should examine their options carefully before declining continuation coverage.

Qualified beneficiaries must notify the insurer or employer in writing of all qualifying events (except a termination or reduction in hours) within 60 days of the qualifying event. Employers are required to notify insurers of any employee who has had a qualifying event that is a termination or reduction in hours of employment within 30 days of the qualifying event.

The insurer or employer must provide election information to a qualified beneficiary within 14 days of receiving notice of a qualifying event.

Qualified beneficiaries must request continuation coverage in writing within the 60-day period following the later of:

  • The date that coverage under the group benefit plan terminated or will terminate by reason of a qualifying event; or
  • The date the qualified beneficiary was sent notice of the ability to continue coverage under the group benefit plan.

In addition, during the 180-day period before Cal-COBRA coverage is exhausted, the insurer or employer must notify a qualified beneficiary that his or her continuation coverage will terminate and any available conversion options. This notice of pending termination also applies to large employers with respect to qualified beneficiaries who are entitled to less than 36 months of COBRA coverage. For large employers, this notice must explain a qualified beneficiary’s right to continue coverage under Cal-COBRA for up to 36 months from the date of the qualifying event.

Premium Rules

The maximum amount charged to qualified beneficiaries cannot exceed 102 percent of the plan’s total cost of coverage for similarly situated individuals. For qualified beneficiaries receiving the 11-month disability extension, the premium for those additional months may be increased to 150 percent of the plan's total cost of coverage.

Plans must provide at least 45 days after the election for making an initial premium payment. The plan sponsor may establish due dates for later payments, but it must provide a minimum 30-day grace period for each payment.

The maximum amount charged to qualified beneficiaries cannot exceed 110 percent of the applicable rate charged for covered employees or, for dependent coverage, similarly situated individuals.

The first premium must be paid within 45 days of the qualified beneficiary’s election for continuation coverage, and must equal an amount sufficient to pay any required premiums that are due.

Applicable Statutes

IRC § 4980B, ERISA §601 et seq., 29 CFR §§ 2590.606–1 through 2590.606–4.

CA Health and Safety Code § 1366.20-.29, CA Insurance Code § 10128.50-.59

Government Agency Contact

Departments of Labor and Treasury (private sector plans) and Department of Health and Human Services (public sector plans). More information on COBRA coverage is available from the Department of Labor.

CA Department of Insurance (Indemnity Policies) and Department of Managed Health Care (HMO/Managed Care Plans)

This comparison chart is provided for general informational purposes only. It is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

 

Young couple sitting in an office talking to a woman broker or investment adviser-2After looking at the table you may still be confused or have additional questions. It's important to speak with your broker concerning these issues.

A broker worth their salt, should be able to answer your Cobra questions or have access to the determine the correct course of action for you and your employees.

Cobra Fines and Penalties

Don't try to avoid Cobra or even have it slip past your mind. The government doesn't care if you made an honest mistake. Fines can rack up very quickly. Here are just a few of them:

  • Excise tax penalties of $100 per day ($200 if more than one family member is affected)
  • Statutory penalties of up to $110 per day under the Employee Retirement Income Security Act (ERISA)
  • Civil lawsuits.
  • Attorneys' fees and interest.

Make sure your notifications are timely. If you are not sure what to do, contact your insurance broker.

“Statements on this website as to policies and coverage's and other content provide general information only and we provide no warranty as to their accuracy. Clients should consult with their licensed agent as to how these coverage's pertain to their individual situation. Any hypertext links to other sites or vendors are provided as a convenience only. We have no control over those sites or vendors and cannot, therefore, endorse nor guarantee the accuracy of any information provided by those sites or the services provided by those vendors.” 

Cobra Insurance Rules

Craig Prince Craig’s background is quite diverse. His current focus is on Group Health Insurance, Medicare, Life, Disability, and Retirement Income, Keyman insurance, and Business Buy-out policy. Craig enjoys one-on-one with his clients to find the specific need of each employee or individual involved in the process.

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