Small employers take note - AB 23 provides notice and second chance opportunities for certain involuntarily terminated employees under Cal-COBRA
May, 2009
Under urgency legislation containing an immediate effective date, Governor Schwarzenegger signed into law on Tuesday, May 12, 2009, Assembly Bill 23 (AB 23) requiring health plans and insurers of California's small employers to provide notice of premium assistance and second chance elections under Cal-COBRA. These requirements are made in connection with recent changes to federal COBRA laws.
The American Recovery and Reinvestment Act of 2009 (ARRA) provides premium assistance under federal COBRA and state programs with comparable continuation coverage (state "mini-COBRA" laws) for certain assistance eligible individuals. In general, instead of paying the entire Cal-COBRA/COBRA premium amount, an assistance eligible individual would pay 35% of the premium, and the remaining 65% would be paid by the employer, health plan or insurer, but is reimbursable to the employer, health plan or insurer as a credit against certain payroll taxes. The premium assistance applies to periods of health coverage beginning on or after February 17, 2009 and lasts for up to nine months. Assistance available under ARRA has been the subject of several other eAlerts:
Federal COBRA is available only to employers with 20 or more employees (under the federal rules governing the count of employees for such purposes). A state "mini-COBRA" law generally only governs "small employer" plans (businesses with 2-19 employees). Since California is a state with "comparable continuation coverage" the general provisions of the ARRA apply. However, AB 23 ensures that employees are notified of the federal subsidy and provides the special "second chance" election that would not be available without such enabling legislation. With California having one of the highest uninsured rates and one of the highest unemployment rates in the country, the availability of federal premium assistance for small employers under Cal-COBRA was determined by the state to require urgency legislation.
Although the requirements under AB 23 and Cal-COBRA generally fall on health plans and insurers rather than on small employers themselves, employers need to be aware since AB 23 is advertised in the press as health insurance relief for those laid off from work. A California employee who meets the definition of a "qualified beneficiary," who works for a "small employer" and who is involuntarily terminated from his or her job between September 1, 2008 and December 31, 2009 must be notified by the employer's health plan or insurer of available federal premium assistance to help pay for and keep health coverage through Cal-COBRA. AB 23 creates a separate definition for "qualified beneficiary eligible for premium assistance under ARRA" as a qualified beneficiary who was or is eligible for Cal-COBRA coverage as a result of the involuntary termination of the covered employee's employment from September 1, 2008, through December 31, 2009, who elects Cal-COBRA coverage, and, who meets the definition of a qualified beneficiary under the federal Employee Retirement Income Security Act of 1974 ("ERISA").
AB 23 also contains revised notice deadline dates and election dates. For qualified beneficiaries who had a qualifying event between September 1, 2008 and May 12, 2009 (the effective date of AB 23), notice by a health plan or insurer must be provided within the later of 14 calendar days of May 12, 2009 (inclusive) or 7 business days after the date the plan or insurer receives notice of the qualifying event. If the qualifying event occurs after May 12, 2009 and on or before December 31, 2009, notice is to be provided under the period of time required by current law, which is 14 days. Although the obligation is on the health plan or insurer to provide this notice, if an employer has contracted with its provider to have the employer provide Cal-COBRA notices, the employer must provide the new notices as well. A qualified beneficiary must elect Cal-COBRA continuation coverage no later than 60 days after the date of the required notice. AB 23 and the ARRA have specific statutory requirements for the content of the notices sent to qualified beneficiaries. The Department of Labor (DOL) has provided four forms of Model COBRA Notices under the ARRA, which notices were the topic of a prior eAlert "New model COBRA notices under ARRA's federal subsidy."
AB 23 also implements a second election for individuals who lost their job as far back as September 1, 2008 and who have not yet elected COBRA coverage. A qualified beneficiary who rejected or discontinued continuation coverage prior to receiving the notice required by AB 23 has the right to withdraw that rejection and elect continuation coverage with the premium assistance. Such a special "second chance" election would not be available under a state mini-COBRA law like Cal-COBRA without enabling legislation such as AB 23.
In addition, AB 23 authorizes a "switching" option for Cal-COBRA qualified beneficiaries under the same terms as the federal law. This permits qualified beneficiaries eligible for federal premium assistance to switch Cal-COBRA health plans and insurers, under certain conditions. Finally, AB 23 contains rules governing verification of involuntary termination of a person seeking premium assistance.
Employers constituting "small employers" of California employees should be generally aware that their employees' health plans and insurers will be providing notices to qualified beneficiaries, and that qualified beneficiaries will be provided with the special second chance election to obtain coverage under Cal-COBRA. Also, these small employers should become familiar with the verification rules of AB 23.
If you are interested in learning about the provisions in the American Recovery and Reinvestment Act of 2009, your state mini-COBRA law, or would like assistance in implementing any aspect of the COBRA subsidy program please contact the Employment or Tax Group at Bullivant Houser Bailey PC at 1.800.654.8972.
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