Governor Wilson has just signed a new law which will provide employees of small organizations access to COBRA-type continuation health care benefits. The new rules take effect January 1, 1998.
Existing Requirements
Currently, the federal COBRA law applies to employers who have 20 or more workers and who provide group health coverage. They must offer employees and their eligible beneficiaries the opportunity to continue their benefits for 18 months (or more in some situations) after their group health coverage ends, which is usually because their employment terminates.
A few years ago, we reported on a new law we called Cal/COBRA. It provided that certain workers age 60 or older had the right to purchase continuation benefits after their initial COBRA benefits terminated, giving them a total of up to 60 months of coverage.
Impact On Small Employers
Beginning next year, if you have two to 19 employees, your workers will be entitled to continuation notices and benefits similar to those required under federal COBRA.3 Your insurer is on the hook for handling most of the paperwork, but you and the insurer can agree that you’ll provide the notices specified below. In any event, it’s important for you to know the rules so that you can assist employees in understanding their rights. Heres how the new law, officially called Cal-COBRA, works.
- Eligibility. If you provided group health or disability insurance benefits and an employee or their qualifying beneficiary loses coverage, the insurer must provide them with continuation coverage under your plan. As with COBRA, the rules apply only when certain qualifying events, including termination of employment or divorce, occur.
- Notice to employees and insurer. Within 14 days after an employee or beneficiary gives notice of a qualifying event, the individual must be notified of their rights under Cal-COBRA and provided with premium information and enrollment forms. Also, you have to notify your insurer within 31 days of any employee who has had a qualifying event.
- Disclosure to employees. Everyone enrolled in your plan is entitled to a written disclosure about Cal-COBRA rights. The disclosure has to inform enrollees that they are obligated to notify you of qualifying events and that they must elect in writing to stay on the plan. The notice must also give details about making premium payments. It’s not clear when this disclosure must be provided, but it’s a good idea to give it at the time of hire or when individuals are first covered under your plan. After January 1, 1999, this disclosure must be in your plan’s evidence of coverage document.
- Length and cost of benefits. Coverage under Cal-COBRA can be for up to 18 months if the reason the person qualifies is termination or a reduction in hours; it’s available for up to 29 or 36 months in other situations. Generally, the charge can be 110% of the normal group health premium or up to 150% in certain circumstances.
Older Worker Benefits Extended
Existing California law gives older workers whose federal COBRA coverage has ended the right to continuation coverage.
The new law contains a provision that takes effect on January 1, 1999, giving certain workers who are age 60 or over the right to extended Cal-COBRA coverage when their regular Cal-COBRA benefits have run out. Depending on the situation, these workers can be charged up to 213% of the group premium rate for this insurance.