Assigned to HHS FOR
COMMITTEE
Assigned to HHS FOR
COMMITTEE
ARIZONA STATE SENATE
Fifty-Third Legislature, Second Regular Session
insurance; small employers; continuation coverage
Purpose
Allows continued coverage under a group health plan sponsored by a small employer for certain enrollees and their dependents
Background
The federal Consolidated Omnibus Budget Reconciliation Act (COBRA) requires most private sector group health plans that are maintained by certain employers to offer continuation coverage to covered employees, former employees, spouses, former spouses and dependent children who lose coverage due to certain qualifying events, including: 1) the death of a covered employee; 2) termination or reduction in the hours of a covered employee’s employment for reasons other than gross misconduct; 3) a covered employee becoming eligible for Medicare; 4) divorce or legal separation of a covered employee from their spouse; and 5) a dependent child’s loss of dependent status.
Group health plans that are subject to continuation coverage requirements under the federal COBRA law are those that are maintained by employers with the equivalent of 20 or more employees on more than 50 percent of the employers’ typical business days in the previous calendar year. Federal COBRA requirements also apply to state and local government-sponsored plans (U.S. Department of Labor). Group health plans that are sponsored by employers with the equivalent of less than 20 employees are not subject to the same continuation coverage requirements.
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
Continuation of Small Group Coverage
1. Requires a small group health benefit plan (plan) that is issued or renewed after December 31, 2018 to provide an enrollee and any qualified dependent with the option to continue coverage under the plan.
2. Requires a small employer to notify the plan in writing of an enrollee’s qualifying event within 30 days after the qualifying event.
3. Requires a plan to notify the enrollee in writing of their right to continue both their and any of their qualified dependent’s coverage within 14 days after the date of the above notice.
4. Requires the notice to inform the enrollee and any qualified dependent of the following information:
a) their right to continue coverage at the full cost of the coverage, including the employer and enrollee contributions as well as an administrative fee of up to 5 percent of the premium for the employer;
b) the amount of the full cost of coverage, stated separately for the enrollee and qualified dependent;
c) the process and deadline for the enrollee to elect continuation coverage for themselves and any qualified dependent;
d) the date and time by which the enrollee must submit the initial and ongoing payments to the employer to continue coverage; and
e) the loss of continuation coverage if the enrollee fails to pay the premium and administrative fee in a timely manner.
5. Requires the Arizona Department of Insurance (DOI) to prepare a sample coverage continuation notice form (form) and make the form available on the DOI website.
6. Specifies that use of the DOI form, if properly completed, is presumed to satisfy the above notice requirements.
7. Requires the enrollee or qualified dependent, in order to continue coverage, to:
a) elect continuation coverage within 60 days after the date of the continuation coverage election notice; and
b) submit the first month premium to the plan within 45 days of the date of election to continue coverage.
8. Specifies that if the enrollee or qualified dependent elects coverage, then coverage continues as if there had been no interruption.
9. Provides that the enrollee has 120 days after the continuation coverage election notice to elect continuation coverage and pay the required premium and administrative fee if the plan fails to provide complete, accurate and timely notice of their right to continue coverage.
10. Requires the plan, in instances where an insurance renewal occurs during the enrollee’s or qualified dependent’s period of eligibility for continuation coverage, to notify the enrollee or qualified dependent of any change to the premium due at least 30 days before the change becomes effective.
11. Specifies that the above continuation coverage provisions do not apply if:
a) the enrollee or qualified dependents are eligible for continuation coverage under the federal COBRA law; or
b) the enrollee or qualified dependent seeking to continue coverage is eligible for Medicare.
c) Specifies that continuation coverage ends at the earliest of the following:
d) 18 months after the date the continuation coverage begins;
e) the date on which coverage ceases under the plan as a result of an enrollee’s failure to pay the premium and administrative fee in a timely manner;
f) the date on which the enrollee or a qualified dependent becomes eligible for Medicare, Medicaid or obtains any other health care coverage;
g) the date on which the employer terminates coverage under the plan for all employees; or
h) the date the dependent child of an enrollee loses coverage under the terms of the plan due to attaining a certain age.
12. Allows an additional 11 months of continuation coverage for a qualified dependent who:
a) is determined under federal law to have a disability at the time of a qualifying event; and
b) provides a written determination of disability from the Social Security Administration to the plan within 60 days after the determination date and prior to the end of the 18-month continuation period.
13. Allows the plan to charge up to 150 percent of the group rate during the 11-month disability extension.
14. Allows an additional 18 months of continuation coverage for a qualified dependent if any of the following qualifying events occur during the initial 18-month continuation period:
a) divorce of separation from the enrollee;
b) death of the enrollee;
c) the enrollee becoming eligible for Medicare; or
d) a dependent child ceasing to be a dependent child under the plan.
Military Reserve and National Guard Enrollees and Dependents
15. Designates the instance where an enrollee is in the Military Reserve or National Guard, is called to active duty and has their employment terminated either after or during the active duty period, as a separate qualifying event that is distinct from the qualifying event that may have occurred when the enrollee was called to active duty.
16. Specifies that an enrollee in the above situation and their qualified dependents is eligible for a new 18-month benefit period, beginning on the later of the date that active duty ends or the date of employment termination.
17. Outlines the following qualifying events as being distinct from the qualifying event that may have occurred when the enrollee was called to active duty:
a) the enrollee dies during the period of active duty;
b) a divorce or legal separation of the enrollee from the enrollee’s spouse occurs; or
c) a dependent child ceases to be a dependent child under the plan.
Miscellaneous
18. Defines enrollee as an employee who is covered under an employer’s plan for at least three months before a qualifying event.
19. Defines qualified dependent as a person who is covered under an enrollee’s plan immediately before a qualifying event and who is the spouse or dependent of the enrollee.
20. Defines qualifying event as the date coverage ends due to:
a) voluntary or involuntary termination of employment for a reason other than gross misconduct or reduction of hours required to qualify for health benefits under the employer’s plan;
b) divorce or separation from the enrollee;
c) death of the enrollee;
d) the enrollee becoming eligible for Medicare;
e) a dependent child ceasing to be a dependent child under the employer’s plan; or
f) a retired enrollee, their spouse or dependent child losing coverage within one year before or after commencement of a bankruptcy proceeding under federal law by the employer from whose employment that enrollee retired.
21. Defines small employer as an employer that employs an average of at least one but not more than 20 eligible employees during the preceding calendar year.
22. Repeals statute relating to participation in healthcare group.
23. Becomes effective on January 1, 2019.
Prepared by Senate Research
February 12, 2018
FB/lat