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State and Federal Legislation Regarding Continuation of Coverage

Federal Law — Groups over 20 in Size
Group health plans for employers with 20 or more employees on more than 50 percent of its typical business days in the previous calendar year are subject to COBRA. Both full and part-time employees are counted to determine whether a plan is subject to COBRA. Each part-time employee counts as a fraction of an employee, with the fraction equal to the number of hours that the part-time employee worked divided by the hours an employee must work to be considered full time.

We review your status at the anniversary of your group each year; however, your COBRA determination should be calculated on a calendar year basis - January through December - each year. Please evaluate your group’s COBRA responsibility each calendar year and notify your group representative if your status changes.

COBRA is not directly addressed to insurance companies, but rather is an obligation of the employer. You therefore need to make certain that you notify employees, spouses,and dependents of the rights they are entitled to under COBRA. Employers must give notice of the right to continue coverage to each employee, spouse, and dependent child(ren) at the time they become covered under your plan. When a spouse is added after initial enrollment of the employee in the group health plan, they are to be notified independently of their COBRA right. The Model General Notice of COBRA Continuation Coverage Rights can be used for both. However, you should always verify with your legal advisors that the information is current.

COBRA Penalties
The COBRA law is enforced by a number of different entities. For failing to comply with COBRA, the Internal Revenue Service can levy excise taxes, the Department of Labor can file a lawsuit against an employer, qualified beneficiaries can sue the employer, and a judge in a lawsuit can levy ERISA fines, make the employer pay claims and impose damage awards against the employer.

The employer is primarily designated for liability (or in the case of the multi-employer plan, the multi-employer plan is liable). Other persons can be liable for the tax if they are responsible for administering or providing benefits under the plan pursuant to a legally enforceable agreement and failed to perform one or more of the responsibilities under the agreement.

BCBSKS does not perform COBRA notifications. It is the employer’s or benefit plan’s responsibility.

Right to Continue COBRA
Once employees have elected continuation of coverage, and we receive the COBRA declaration form, we will bill them for the group coverage. If your group changes carriers during any COBRA continuation period, the COBRA continuation employees remain the responsibility of your group, whether the new carrier covers them or not, and BCBSKS will not provide coverage if our contract is terminated.

COBRA entitles a group health plan to bill a person exercising their continuation rights up to 102 percent of the “applicable premium” for active employees in the group. “Applicable premium” is generally the same premium, which applies to other similarly situated employees and dependents. In the case of self-insured groups, there is an alternative method for calculation of “applicable premium.” However, as the administrator, BCBSKS will ordinarily bill at 102 percent of the same premium that has been projected for current employees and dependents. In the case of one who has a right to an extension of continuation by reason of being disabled within 60 days of the qualifying event, the group health plan is entitled to charge up to 150 percent of the applicable premium for continuation of coverage months, after the 18th month.

Right to Continue Coverage — USERRA (applies to all group sizes)

The Uniformed Service Employment and Reemployment Rights Act of 1994 (USERRA) provides certain rights to employees who are absent from work for service in the “uniformed services.” Under this act, the employee has the right to continue the coverage he/she has under your company medical plan if certain conditions are met. (See the USERRA form.)

Groups Not Subject to COBRA
COBRA does not apply to the Federal government, the District of Columbia or churches and religious affiliates.

State Continuation of Coverage Law (for groups under 20 in size)
Employers who offer a group health plan for their employees and have fewer than 20 full-time equivalent employees on the payroll are affected by the provisions of the Health Care Reform Act of 2008.  This law governs group health insurance benefits for hospital, medical and/or surgical services.

Employees and their dependents who meet certain criteria must be offered continued group benefits for a total of 18 months from their state continuation effective date. This continuation of coverage must be offered at the same premium available through the group. Although the 2008 provisions state that employers will bill employees, BCBSKS will continue to undertake this administrative process as a value-added service for groups. This includes notification of eligibility to the employee and direct billing to the employee. The 2008 law affects all groups except those on self-insurance.

If the group health insurance is replaced by similar group coverage within 31 days, the employee is not eligible for continued group benefits under State continuation and conversion laws.

If the employee and/or dependents have not been covered by your group health insurance coverage for 90 days prior to termination, we will automatically offer them our Non-Group Conversion program in lieu of the continuation rights.

 

COBRA forms are available on this site