California Small Group: AB 23 Enabling Legislation for ARRA Premium Assistance

On Tuesday, May 12, 2009 Governor Schwarzenegger signed long awaited legislation directing California insurers and Health Care Service Organizations to provide notice of the availability of premium assistance under the federal American Recovery and Reinvestment Act of 2009 (ARRA) to assistance-eligible Qualified Beneficiaries under California small group plans.

AB 23 authorizes the Director of the California Department of Managed Health Care and the California Insurance Commissioner to issue emergency regulations to implement ARRA’s premium assistance provisions as they may relate to California COBRA-eligible individuals.

Background
1. Overview. California COBRA’s Assistance Eligible Individual (CAEI) must have lost group health (medical, dental, vision) benefits as a result of an involuntary termination occurring on or after September 1, 2008 and no later than December 31, 2009. By operation of federal law, domestic partners are not eligible for the subsidy. They are, however, eligible for California small group COBRA continuation of health benefits.

2. The Subsidy. As specified under the federal law, the insurer/health care service organization must provide a premium subsidy of 65% of the CAEI’s actual COBRA premium obligation for up to nine months. For the most part, the former employer has that obligation under federal COBRA.

3. Subsidy Start Date. Even though California’s small group COBRA law needed additional legislation (AB 23) to implement the ARRA provisions, the subsidy still starts on March 1, 2009 for those whose Qualifying Events occurred between September 1, 2008 and February 28, 2009. For CAEIs who lose coverage after March 1, 2009, the subsidy begins on the date that COBRA coverage would ordinarily begin for the Qualified Beneficiary (e.g. the date coverage for an active employee ends).

4. Subsidy Ending. As under federal premium assistance legislation the subsidy will end upon the earliest of the following events:

a. Becoming eligible for other group health coverage;

b. Becoming eligible for Medicare;

c. Failing to pay the COBRA premium amount required;

d. The death of the CAEI;

e. The completion of nine months of subsidy benefits.

California Rules
1. The Notice. Each insurer or health care service plan (including specialty service plans (dental and vision)) must provide written notice by mail to a Qualified Beneficiary who has a COBRA Qualifying Event between September 1, 2008 and December 31, 2009, informing the individual of the premium assistance provisions contained in ARRA. It is important to note that the notice goes to all Qualified Beneficiaries without regard to the type of Qualifying Event.

2. The Notice Content. The notice shall include:

a. An explanation of the federal premium assistance law;

b. COBRA enrollment forms (if not already on COBRA);

c. A description of alternate coverage (if available) with instruction to contact the employer for prior approval;

d. Eligibility requirements for premium assistance;

e. Duration of the subsidy, and notice stating a 60 day time limit for making the subsidy election. It is important to note that the state does not extend the election period for alternative plan options (federal law is 90 days);

f. For individuals who rejected or discontinued continuation coverage prior to receiving the notice, notice of an opportunity to withdraw the rejection and to elect coverage with premium assistance; and,

g. The following statement: “IF YOU ARE HAVING ANY DIFFICULTIES READING OR UNDERSTANDING THIS NOTICE PELASE CONTACT [NAME OF HEALTH PLAN] AT [PHONE NUMBER].”

3. Timing of Notice. Insurers and health care service organizations who have notice of a Qualifying Event on or before May 12, 2009 must provide the notice to all Qualified Beneficiaries with Qualifying Events between September 1, 2008 and May 12, 2009 within 14 days from May 12, 2009 (i.e. May 26). For insurers and Health Care Service Organizations who receive notice of a Qualifying Event after May 12, within have 14 days from the date it receives notice of a Qualifying Event to provide the new notice.

4. Model Notices. AB 23 gives the Department of Managed Health Care and the Department of Insurance the option to create and use model notices without seeking the required State administrative approvals.

5. Effective Dates of Coverage.

a. Individuals with Qualifying Events between September 1, 2008 and February 16, 2009 inclusive who previously rejected coverage or ceased premium payment, may now elect COBRA continuation coverage: Both will commence on the first day of the month following the election.

b. Individuals with Qualifying Events between February 17, 2009 and May 12, 2009 (inclusive) who elect COBRA continuation coverage shall have the option to start coverage provided premium is paid:

i. The date of the Qualifying Event, or

ii. First day of the month following the election

c. Individuals enrolled in COBRA continuation coverage at the time ARRA became law (February 17, 2009), who are eligible for premium assistance, may request premium assistance as of March 1, 2009 or later.

6. Eligibility for Premium Assistance. Individuals with involuntary terminations during the time period (September 1, 2008 – December 31, 2009) will be considered eligible. Absent guidance from the federal agencies involved, California insurers and health care service plans may request verification of the involuntary termination by contacting the former employer by letter or facsimile within 7 business days from the date it receives the election. The former employer will have 10 calendar days to respond in writing.

The CAEI may provide written documentation from the employer or other information indicating that termination was involuntary. If the insurer or health care service plan cannot verify the involuntary termination within 14 days of its notice to the employer, it can accept or reject the election in writing. If the election is rejected, the notice must include a description of appeal rights under the federal law.

For a copy for a copy of the law, please visit: AB 23 Bill Text



Copyright © 2009 Alfred B. Fowler, Attorney at Law.
All Rights Reserved. Reprinted with permission.