This Just In: Mini COBRA Law for Arizona

Try not to panic.  While this is important information coming down the pike, it relates to insurance coverage, not the terrifying serpent native to Southeast Asia.  I know, I know, you have to take a moment to catch your breath.  You thought you were going to read about how to manage a baby snake population inhabiting Arizona.

So, to ease your mind, the cobra is not the venomous snake you need to worry about in Arizona—that’s the rattlesnake.  What a relief, right? COBRA, however, is an important word business owners of all sizes need in their vocabulary.  Mini COBRA, as you can guess, is essentially a smaller version coming to Arizona in 2019.

Furthermore, a new law going into effect on January 1, 2019, will make COBRA even more relevant.  You are about to learn about Mini COBRA and how it could affect you.

Big COBRA

COBRA is an acronym for Consolidated Omnibus Budget Reconciliation Act of 1985.

Before this bill, if an employee was fired, left to work for another company, or was getting a divorce, the employee was at risk of immediately losing health insurance coverage.

Congress passed this bill to protect terminating or divorcing employees from an immediate loss of health insurance coverage.  The law required employers with more than 20 employees to offer COBRA to prevent a gap in coverage.

Note:  this is not a healthcare insurance plan.  COBRA extends the existing employer-sponsored coverage.  COBRA extends coverage to the employee’s spouses and/or children as well.

For an employee to be eligible for COBRA coverage, the employee must meet the following criteria:

  • COBRA covers the employee’s health plan.
  • A qualifying event has occurred.
  • The covered employee or a qualified beneficiary is the person requiring coverage.

In case you are wondering about the definition of “qualifying event,” it could be any one of the following as it pertains to a covered employee:

  • Death
  • The termination or reduction of hours
  • Eligibility of Medicare coverage
  • Divorce or legal separation
  • Loss of dependent status for a covered employee’s child

It sounds great, right?  Well, one thing you should know is that COBRA isn’t cheap.  While many employers pay some portion of healthcare coverage costs as part of their fringe benefits offerings, that perk is not part of COBRA.  People with COBRA coverage must pay 102% of the health insurance premium, which could add up to hundreds of dollars more than what they were paying previously.

Mini COBRA

So, now that you know what COBRA is and you understand its purpose, you can probably predict why a mini version of the coverage would be a good idea.  Did you notice that extending coverage is only required by companies who employ 20 people or more?  Well, that is changing… starting with the state of Arizona. Hence the name, mini COBRA.

As of January 1, 2019, for medical group plans only (not dental or vision plans), Arizona businesses with fewer than 20 employees must also offer COBRA to covered employees.

Here are some features you should check out:

  • After December 31, 2018, employers must comply with Mini COBRA requirements upon the issue of a new medical plan or upon the plan’s renewal.
  • Eligibility is based on an employee’s coverage under the employer’s health benefit plan for at least 90 days prior to the qualifying event. There are special considerations for spouses and dependent children as well.
  • COBRA coverage can last up to 18 months, although, depending on the circumstances, the length of coverage may be extended or shortened.
  • The employee will be responsible for the full cost of coverage, as well as an administration fee (which could be up to 5% of the premium).
  • The employer must comply with specific notification requirements. First, after the qualifying event, the employer only has 30 days to notify the employee of the right to continued coverage through COBRA.  Next, the employer has 44 days to send notification in writing to the employee’s last-known address.  The employer is also required to notify any covered dependents who live at separate addresses.  Finally, the employer needs to be aware that non-compliance with these notification requirements could require the employer to extend the employee’s election period.
  • As long as the employer has met the notification requirements, the employee has 60 days from the date of notification to opt into COBRA coverage, and then 45 days to provide the first month’s premium.

Don’t get bitten

The takeaway here? Arizona employers and employees alike need to be aware of the Mini COBRA bill, and the requirements for coverage and notification.  This will help avoid the sting of penalties for COBRA violations. Penalties can include excise taxes and/or per-diem penalties for employers and lapse in healthcare coverage for employees.

The employer’s responsibility is to make employees aware of the option for coverage. They must also do so within the mandated time frames. If the employee does not meet the deadlines for election or payment, it will be the employee’s responsibility to seek insurance benefits elsewhere.

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This is not meant to provide legal counsel or advice. Every situation is different. Please contact an HR professional or employment attorney before taking any action.

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