COBRA CONUNDRUMS • Covered Employers: The federal COBRA rules apply to private-sector group health plans that are maintained by employers with 20 or more employees on more than half of the typical business days in the previous calendar year. Part-time employ-ees are counted as a fraction of a full-time employee, based on the number of hours that the part-time employee works. Employers that are exempt from federal COBRA rules may not be exempt from state rules. For example, if a state law applies to employers with fewer than 20 employees, these companies will have to follow the state laws. For example, Cal-COBRA, California’s continuation law, es-tablishes requirements for small employers with between two and 19 employees. This is a common difference between federal and state continuation laws. • Length of Coverage: Under the federal laws, COBRA coverage typically lasts for either 18 or 36 months. The coverage lasts for 18 months when the qualifying event is the employee’s termination or reduction in work hours. Other qualifying events result in a coverage period of 36 months. Additionally, the 18-month coverage pe-riod can be extended by 11 months if one of the recipients becomes disabled, and it can be extended by 18 months if a second qualifying event occurs. The length of coverage required under state laws can be different. For example, states may establish longer periods of coverage or additional options for ex-tending coverage. For example, Cal-CO-BRA provides an additional 18-month period to the 18-month period allowed under COBRA, resulting in 36 months of coverage. Small employers not covered by federal COBRA rules must also offer 36 months of coverage under Cal-COBRA. • Administrative Charge: The federal COBRA rules allow employers to bill COBRA recipients for 100% of the premium cost plus a two-percent ad-ministrative fee. State COBRA laws may establish a different administrative fee. In some cases, the fees allowed under state COBRA rules may be higher than two percent. However, it is still necessary to comply with federal rules. For example, if a state extends coverage requirements to small employers and allows a five-percent fee, large employees must still comply with the federal law and charge no more than a two-percent fee. • Qualifying Events: Federal COBRA laws are applicable after qualifying events, which include employee termi-nation, reduction of hours, death of the covered employee, the covered employee becoming entitled to Medicare, divorce, legal separation, and loss of dependent status. Additional state continuation laws may apply to a different set of quali-fying events. HOW CAN BUSINESSES COMPLY? When it comes to the law, ignorance is not an excuse. Don’t ignore state continuation laws. Learn what they are so you can fol-low them. This is especially important for employers with fewer than 20 employees. Although they may think they are off the hook because they are exempt from federal COBRA laws, many states have continua-tion laws that apply to small employers. If you operate in multiple states, make sure that you’re complying with all relevant state continuation laws. Also keep in mind that state laws can change. States without current continuation laws may establish new laws in the future, and states with current continuation laws may increase the requirements. For example, Arizona’s new state continu-ation law, established by Senate Bill 1217, went into effect for plans issued or renewed Continued on page 25 By Robert Meyers President, iTedium Inc. Kansas City, MO Robert.Meyers@itedium.com THE STATE OF STATE CONTINUATION REQUIREMENTS Complying with federal COBRA rules isn’t enough. You also have to follow state continu-ation laws. Each state has the right to establish its own healthcare-continuation laws, and many have taken advantage of this to create rules that go beyond the federal requirements. Businesses must comply with both. HOW DO STATE LAWS DIFFER? Employers in all states must comply with federal COBRA regulations. Addition-ally, most states also have their own state continuation laws, sometimes called min-COBRA rules. In these states, employers must comply with the state laws in addition to the federal laws. The state laws typically expand COBRA requirements in at least one way. The details can vary significantly, so it’s important to read your state’s laws. However, typical dif-ferences include the following: benefitspecialistmagazine.com | ABS 13
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