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The California Continuation Benefits Replacement Act (Cal-COBRA) affects nongovernment organizations with two to 19 eligible employees who offer group health insurance coverage but who are not covered by the federal Consolidated Omnibus Budget Reconciliation Act (COBRA). Every healthcare service plan that provides coverage under a group benefits plan must provide continuation coverage to employees and qualified dependents after a qualifying event occurs.

Cal-COBRA differs from the federal program in two ways: 

    • Cal-COBRA applies to employers and group health plans that cover from two to 19 employees. 
    • Cal-COBRA allows individuals to continue their group health coverage for up to 36 months.After federal COBRA has been exhausted, Cal-COBRA may extend continuation of group health coverage for a combined period of up to 36 months. 

Eligibility. Employees (and their dependent spouses, registered domestic partners or same-sex spouses and children) of firms who are enrolled in the employer’s employee benefits plans at the time of a qualifying event are known as “qualified beneficiaries” and are eligible for Cal-COBRA, unless the individual meets one of the following criteria:

    • Becomes covered under another group benefits plan that does not impose any pre-existing condition limitations affecting the individual.
    • Becomes eligible for federal COBRA. 
    • Becomes eligible for Medicare. 
    • Becomes eligible for Medi-Cal. 
    • Fails to notify the health plan of a qualifying event in the time specified by law (generally within 60 days). 
    • Fails to pay premiums on a timely basis. 

Individuals who are eligible for Cal-COBRA include the following:

  • Family members of an employee who is deceased. 
    • An employee (and covered dependents, including registered domestic partners and same-sexspouses) who voluntarily or involuntarily terminates his or her employment. However, CalCOBRAis not available for employees who are terminated as a result of gross misconduct or if the employer ceases its business operations and terminates all group health plans as a result of the business closure. 
    • An employee (and covered dependents) whose hours or work are significantly reduced.
    • An individual who is divorced from an employee.
    •  A former dependent of an employee. 
    • Family members of an employee who becomes enrolled in Medicare. 

Qualifying events. Qualifying events include the following:

    • Death of the covered employee. 
    • Termination or reduction of hours of the covered employee’s employment for reasons other than gross misconduct. 
    • Divorce or legal separation from a covered employee. 
    • A child’s loss of dependent status. The covered employee becoming eligible for Medicare 

Duration of coverage. If the qualifying event is due to termination of employment or a reduction in hours, the qualified beneficiary can maintain Cal-COBRA coverage for at least 18 months (assuming the qualified beneficiary remains eligible by, for example, paying premiums on time). If, within 60 days of qualifying for Cal-COBRA due to termination or a reduction in hours, the qualified beneficiary becomes disabled and is subsequently determined by the Social Security Administration to be totally disabled, CalCOBRA may be extended for up to another 11 months (for a total of 29 months).

Cal-COBRA is in addition to, and does not run concurrently with, federal COBRA coverage; therefore,when an individual exhausts 18 months of federal COBRA coverage, he or she may be eligible to purchase an additional 18 months of health insurance under Cal-COBRA.

Premiums. As with federal COBRA, individuals are responsible for paying both their share of the premium and the share of the premium the employer had been paying on their behalf. Employers are also allowed to charge a fee up to 10 percent of the cost of premiums to offset expenses associated with administering the plan.

Any individual (and covered dependents) who is or was involuntarily terminated from his or her job between Sept. 1, 2008, and May 31, 2010, and who would otherwise be eligible for coverage under COBRA or Cal-COBRA, is eligible for the premium reduction under the American Recovery and Reinvestment Act (ARRA). In addition, individuals (and covered dependents) who became eligible for COBRA or Cal-COBRA between Sept. 1, 2008, and May 31, 2010, due to a reduction in hours and who was later involuntarily terminated between March 2, 2010, and May 31, 2010, may also be eligible for premium assistance. However, covered dependents who are the grandchildren, same-sex spouses or domestic partners of the covered employee are eligible for coverage under Cal-COBRA, but they are not eligible for the premium reduction due to federal law requirements.

The COBRA premium reduction provisions apply to all group health plans sponsored by private sector employers or employee organizations (unions) subject to COBRA rules under the Employee Retirement Income Security Act (ERISA) of 1974. They also apply to plans sponsored by state or local governments subject to the continuation provisions under the Public Health Service Act and plans in the Federal Employee Health Benefits (FEHB) program.

 The COBRA premium reduction also applies to similar state continuation coverage programs, including Cal-COBRA. The Cal-COBRA premium reduction applies to all group health coverage, including dental,vision and other specialized health plan coverage, provided by small employers (two to 19 employees).

The premium reduction can last up to 15 months. However, the reduced premium will end earlier if the individual becomes eligible for Medicare or another group health plan (such as a plan sponsored by a new employer or a spouse’s employer).

Extension for retirees. After Jan. 1, 1999, employees who are age 60 years or older when they become eligible for Cal-COBRA and have worked for the employer for at least five years may continue their coverage, even after Cal-COBRA, until they turn 65.

Organizations with insurance are required to offer a COBRA extension to retirees and their beneficiaries.This extension is to last for five years. Former employees must be at least 60 years old and must have worked for at least five years at their previous employer. Coverage is coordinated directly with the health maintenance organization (HMO) or insurance company. Coverage must continue until one of thefollowing conditions are met:  

    • The individual accepts coverage with another group health plan. 
    • The individual ceases participating in any health plan. 
    • The individual accepts coverage with Medicare. 
    • The individual reaches age 65. 

Any plan that meets the Cal-COBRA and COBRA plan requirements is affected by this law.

Sources: California Department of Insurance; Department of Managed Health Care