The 1985 Consolidated Omnibus Budget Reconciliation Act (COBRA) contained a federal law that permits terminating employees and dependents to continue their group health coverage. The law applies to employers who have 20 or more employees on the payroll (full-time and part-time) in the last calendar year. Religious organizations such as churches and church affiliated hospitals are exempt from the COBRA law, although many offer a COBRA-like extension. Federal employees are not covered under COBRA, but there is a similar law that applies to them.
COBRA applies to health insurance offered by an employer and any accompanying coverages such as dental, vision and prescription drug coverage. It does NOT include life insurance or long term disability insurance.
For people with HIV, there are several provisions of the law of which to be aware:
NOTIFICATION: The law requires that the employer notify the employee in writing of his/her right to continue coverage within 30 days of termination of coverage. The employee then has 60 days to say he/she accepts COBRA Continuation Coverage.
COST: The law permits employers to charge terminating employees the entire cost of the premium but it cannot exceed the cost of the coverage to the employer plus 2 percent. Also, any rate increases that the employer receives may be passed along. The first premium payment is not due until 45 days after accepting continuation coverage. Note that the premium must be paid, however, all the way back to the effective date of the COBRA continuation.
BENEFITS: The benefits must be identical to the benefits active employees are receiving. If the employer has an open enrollment each year to make changes, the COBRA Continuee must be allowed to participate in the health choices. This means, also, that if the employer changes plans or benefits, the COBRA Continuation Coverage will change also.
LENGTH OF COVERAGE: Coverage for terminating employees lasts 18 months. For dependents losing coverage by divorce or age, it lasts for 36 months. Persons who are disabled when their continuation coverage starts may extend their coverage. See OBRA Disability Coverage below.
TERMINATION OF COVERAGE: Coverage may end before the normal expiration date. It will end earlier when:
In 1997, California enacted Cal-COBRA. Similar to the federal COBRA statute, it is aimed at employer groups with less that 20 employees who are not subject to the federal law.
The law is very similar to the federal COBRA law, although there are a few important differences:
Because this law impacts small employers who do not have full-time personnel staff, the law requires the insurance company to take a more active role in transitioning beneficiaries to Cal-COBRA and maintaining them. The employer is obligated to notify the insurance company in writing in a timely manner of COBRA qualifying events, and the carrier is obligated to send the necessary notices and accept the premium payments. Also, the employee must notify their acceptance of COBRA Continuation Coverage in writing.
The regulatory authority for Cal-COBRA are the state offices, Department of Insurance for insurance plans and the Department of Managed Health Care for Health Maintenance Organizations and Blue Cross and Blue Shield.
In 1989, the Omnibus Budget Reconciliation Act (OBRA) modified COBRA to extend the period of coverage for persons who left their employment due to disability. Since it was designed to fill the gap between the original 18 months of coverage and eligibility for Medicare, the extension lasts only 11 months. (Generally, Medicare begins after 29 months of disability.)
The OBRA Disability Extension is not automatic. It must be applied for. To qualify for the extension, the employee must:
It is recommended that the award letter be sent with a cover letter requesting written confirmation of eligibility for the extension.
Due to the complexities surrounding these requirements, many employers do not understand OBRA. Therefore, if your client does not qualify by the above rules, the client may still want to contact the employer. In fact, their interpretation of the law may be more permissive.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) created a method for people to retain good quality health insurance even after leaving group coverage and after the expiration of coverage. To become federally eligibility, a person must have been covered under a group health plan at least eighteen months and used up any available COBRA extension. The carrier will provide a Certificate of Creditability confirming the time covered upon a person's termination of coverage.
The individual will then have 63 days from loss of coverage to apply for individual coverage with any carrier offering individual health insurance in that area. Upon being presented with the Certificate, the carrier is required to offer one of their top two individual plans, based on premium volume, to the person regardless of their health condition or health history.
Note that persons covered under any other form of health coverage including Medicare and Medi-Cal are not eligible for HIPAA plans.
The most important part of this law is that these plans are very broad compared to the old Conversion plans. They offer broad in-patient benefits as well as prescription coverage and other benefits found in broad health plans, although the premium is not necessarily reasonable.