How to Administer Cal-COBRA

Below are steps to administering benefits under the California Continuation Benefits Replacement Act (Cal-COBRA).

Cal-COBRA administration may be handled by either the employer or a third-party administrator, but as the legal obligation still falls to the employer to comply with the law, all employers should make sure these administrative steps are being completed and done so in a timely manner. Cal-COBRA administration requires four basic compliance components:

• Notifying all eligible group health care participants of their Cal-COBRA rights.
• Providing timely notice of Cal-COBRA eligibility, enrollment forms, and notice of the duration of coverage and terms of payment after a qualifying event has occurred.
• Collecting premiums, reinstating coverage and supplying appropriate notices if premiums are not received.
• Providing timely notices when Cal-COBRA coverage ends before the expected duration and responding to employees seeking coverage who are not eligible for Cal-COBRA.

Step 1: Eligibility for Cal-COBRA

Cal-COBRA applies to employers and group health plans that cover from two to 19 employees. It covers indemnity policies, preferred provider organizations (PPOs) and health maintenance organizations (HMOs), but not self-insured plans. Unlike federal COBRA, church plans are covered under Cal-COBRA. Cal-COBRA allows individuals to continue their group health coverage for up to 36 months. Cal-COBRA also applies to employers and group health plans that cover 20 or more employees in that after federal COBRA has been exhausted, Cal-COBRA may extend continuation of group health coverage for a combined period of up to 36 months. For example, if an individual has used up 18 months of federal COBRA, Cal-COBRA then allows the individual to maintain coverage for up to 18 more months for a combined period of 36 months.

Employees and their dependent spouses, domestic partners and children who are enrolled in the employer's employee benefits plans at the time of a qualifying event are known as "qualified beneficiaries" and are eligible for Cal-COBRA, unless an individual meets one of the following criteria:

• Becomes covered under another group benefits plan that does not impose any pre-existing condition limitations affecting the individual.
• Becomes eligible for federal COBRA.
• Becomes entitled to Medicare.
• Becomes eligible for Medi-Cal.
• Fails to notify the health plan of a qualifying event in the time specified by law (generally within 60 days).
• Fails to pay premiums on a timely basis.

Qualifying events include the following:

• Death of the covered employee.
• Termination or reduction of hours of the covered employee's employment for reasons other than gross misconduct.
• Divorce or legal separation from a covered employee.
• A child's loss of dependent status. 
• The covered employee becoming entitled for Medicare. 

Step 2: Initial Notification

Employers should ensure that a Cal-COBRA General Notice is provided to all eligible group health care participants and their qualified beneficiaries within 90 days of becoming eligible to participate in the group health plan.

The General Notice must be included in the summary plan description (SPD), and employers must provide this to the employee, or send by first-class mail to the employee's home address with the employee's name and "& Spouse" or "& Family," if applicable.

The General Notice must be presented to both the employee and his or her spouse (if married). Options for providing notice include:

• A letter sent by first-class mail to the home address with the employee's name and "& Spouse" or "& Family," if applicable. If notices are sent by mail, they must be mailed separately to the employee and to his or her spouse unless, at the time the notice is sent, the administrator has documentation showing the employee and spouse reside at the same address. If the employee and spouse both reside at the same address, a single notice must be addressed to both the employee and spouse. If spousal coverage began after the employee's coverage, a separate notice must be sent to the spouse.
• A letter given to the employee personally. If the employee is given the General Notice personally, a separate copy must be mailed to the spouse. Separate notice does not need to be given to dependent children.

Step 3: Qualifying Event Notices

When employees or dependents experience a qualifying event, employers must provide an election notice within 14 days of the notice of the qualifying event, notifying them of their eligibility to enroll in Cal-COBRA coverage, the terms and amount of the premium payment, and the beginning and ending dates of coverage. Employers that are also plan administrators have 44 days to provide the election notice to the employee and any eligible dependents. Employers should send notices by first-class mail to the employee's last known address and keep a log of letters sent, or obtain a certificate of mailing. Certified mailing should be avoided, as a returned receipt with no delivery acceptance signature proves the participant did not receive the required notice.

Step 4: Insurance Carrier Notification

Within 30 days of a qualifying event resulting in the termination of the employee's group coverage, the employer must notify the insurance carrier and let the carrier know that a Cal-COBRA election form has been provided. If Cal-COBRA is elected, insurance will be reinstated as of the date group coverage ended.

Step 5: Election Form and Payment

If Cal-COBRA coverage is not elected within 60 days of when the election notice was sent, the employer's obligations end, and no further action is required.

If Cal-COBRA coverage is elected within 60 days of when the election notice was sent, the employer must allow 45 days from the date of election for the initial premiums owed to be paid. Once received, the employer must notify the insurance carrier to reinstate coverage back to the initial end date so there is no gap in coverage. If the employee continues to pay premiums on a timely basis, and no secondary qualifying event or allowable reason for early termination occurs, no further action is needed.

Step 6: Notice of Coverage Exhaustion

180 days before Cal-COBRA coverage is exhausted, the insurer or employer must notify the covered individual that his or her continuation coverage will terminate and explain available conversion options. This notice also applies to large employers with respect to individuals who are entitled to less than 36 months of federal COBRA coverage. 180 days before federal COBRA coverage is exhausted, the employer or insurer must provide notice that explains the covered individual's right to continue coverage under Cal-COBRA for a maximum of 36 months from the date of the original qualifying event.

Step 7 (if needed): Late or Missing Payments

Premiums not received. If at any time premiums are not received by the established due date, the employer must allow a 30-day grace period to receive the premium. If payment is still not received by the end of the 30-day grace period, the employer may cancel coverage and must provide a written Notice of Termination of Coverage. The notice must include each of the following:

• Date of termination.
• Reason for early termination.
• Individuals' rights under the law or the plan to elect alternative group or individual coverage.

Significant portion of premium received. If the shortfall in payment received is no greater than $50 or 10 percent of the amount due, it must be accepted as payment in full unless the employer sends a notice indicating the amount still due and gives adequate time (30 days) for the shortage to be paid.

Step 8 (if needed): Early Termination

Early termination of Cal-COBRA is allowed under the following circumstances:

• Termination of all employer-provided group health plans.
• Failure to pay required premiums.
• A covered individual's entitlement to Medicare.
• The individual becomes covered as an employee or dependent under another employer's plan.

A written Notice of Termination of Coverage must be provided as soon as practicable to all qualified beneficiaries. 

Step 9 (if needed): Secondary Qualifying Events and Coverage Extensions

Secondary qualifying event. If a secondary qualifying event occurs during Cal-COBRA coverage (for example, a qualifying event triggered by a reduction in hours, followed by the death of the covered employee, triggering a secondary qualifying event), coverage may be extended to a maximum of 36 months from the first qualifying event. This extension is required only if the second qualifying event would have created an entitlement to 36 months' coverage if it had occurred before the first qualifying event.

Disability extension. An individual may extend his or her 18 months of continuation coverage for an additional 11 months of coverage to a maximum of 29 months for all qualified beneficiaries if the Social Security Administration (SSA) determines a qualified beneficiary was disabled according to Title II or XVI of the Social Security Act at the time of the qualifying event or at any time during the first 60 days of continuation coverage. This extended period allows people with disabilities continued coverage for the period of time that it normally takes to become eligible for Medicare. It is the qualified beneficiary's responsibility to obtain this disability determination from the SSA and to provide a copy of the determination to the appropriate plan within 60 days after the date of determination and before the original 18-month COBRA eligibility period expires. It is also the qualified beneficiary's responsibility to notify the plan within 30 days if a final determination is made that he or she is no longer disabled.

Medicare entitlement. If an employee becomes entitled to Medicare benefits prior to the date of an 18-month qualifying event, then his or her dependents are eligible for 18 months of COBRA continuation coverage, or 36 months measured from the date of the Medicare entitlement, whichever is greater (for example, if an employee becomes entitled to Medicare seven months prior to termination of employment, the dependents are offered 29 months of continuation coverage; the employee is offered only 18 months).

Extension for retirees. Employees who are age 60 or older when they become eligible for Cal-COBRA and have worked for the employer for at least five years may continue their coverage, even after Cal-COBRA, until they turn 65.

Organizations with insurance are required to offer a COBRA extension to retirees and their beneficiaries. This extension is to last up to five years. Former employees must be at least 60 years old and must have worked for at least five years at their previous employer. Coverage must continue until one of the following conditions is met:

• The individual accepts coverage with another group health plan.
• The individual ceases participating in any health plan.
• The individual accepts coverage with Medicare.
• The individual reaches age 65.

A letter indicating the new end date for Cal-COBRA and any new premiums must be sent as soon as practicable.

Step 10 (if needed): Ineligibility Notice

Current or former employees not eligible for Cal-COBRA continuation coverage who request Cal-COBRA coverage must be sent a Notice of Unavailability of Continuation Coverage within 14 days of the employer receiving the notice of a qualifying event, explaining the reasons they are not eligible for continuation coverage.