When should I send a COBRA General Notice?
The COBRA General Notice (formally called the “COBRA Initial Notification”) is letter that is required to be sent to by USPS First Class mail to the employee (and enrolling spouse) within 90 days from their group plan effective date. This seems fairly straight forward but is this the only time I need to send the COBRA General Notice?

First, let’s review the importance of the COBRA General Notice. The document is designed to inform the employee and covered spouse that their employer is a COBRA-mandated employer and describes their rights under federal COBRA law. The following elements are required to be part of the General Notice so if you have edited the software’s model notice, you may want to review the following requirements are included in your notice.

• The group plan name, address and customer service phone number;
• A general description of COBRA continuation coverage;
• The qualified beneficiary’s responsibility to notify the employer of a divorce, legal separation or when a dependent loses their insurance plan “dependent status;”
• Explains the 11 month disability extension and the requirements to receive the extension; and
• Mentions the qualified beneficiary’s responsibility to notify the Plan Administrator of a change in address.

COBRA specifies the enrolled employee and spouse receive the COBRA General Notice but does not include children. It is assumed the parents will act as the child’s representative in regards to group health benefits.

Returning to the original question, the following list should be adhered to in deciding when you should send a COBRA General Notice:

1. Newly-hired employees and enrolling spouse should receive the General Notice within 90 days from their effective date on the group plan;
2. Groups that pass the threshold of having 20 or more employees on half of the business days in the previous calendar year are required to produce a COBRA General Notice to all enrolled employees and covered spouses;
3. Newly married spouses should be mailed the COBRA General Notice within 90 days of being added onto the group health plan; and
4. If COBRA should experience a significant change, all covered employees and spouses should be sent the notice.

Note: Not included in the list above is when an employee enrolls on a new group plan whether it is a newly offered plan or a change in carriers (i.e. changing from Blue Cross to Aetna medical plan). There is conflicting information on whether you need to provide a General Notice to the employee and enrolled spouse in these situations. It is our belief that the law requires group plans (insurance companies) to provide COBRA General Notice information in their Summary Plan Document (SPD), therefore meeting the General Notice requirement when changing plans. We recommend you contact council in regards to whether your group should provide a new COBRA General Notice in these situations.

What should the employer do if it is determine the employee or spouse did not receive the COBRA General Notice? It is recommended the employer send the COBRA General Notice as soon as it is determined the notice was not sent. Why? Because the 60-day notice dead-line for informing the Plan Administrator of events such as Divorce, legal separation or a loss of dependent status will be nullified. So, a spouse may notify the Plan Administrator of one of these events 1 year, 2 years or anytime in the future and the employer will be forced to offer continuation coverage. And, in most cases the insurer will not agree to reinstate the qualified beneficiary leaving the employer to “self-insure” the individual’s claims.

How should the COBRA General Notice be delivered? The Department of Labor has approved USPS First-class, Second-class, Third-class mail, hand-delivery and electronic disclosure. It is recommended the COBRA General Notice be sent by First-class mail. If the Plan Administrator sends the notices second- or third-class mail, return/forwarding postage must be guaranteed and address correction must be requested. Hand-delivery is not recommend unless you have the employee sign a form stating it was received. Electronic disclosure has many requirements and is outside the scope of this article to discuss. Please refer to federal government guidelines for providing information via electronic disclosure.

Many employers have a work force where English is not a first language. Should the employer translate the COBRA General Notice into multiple languages? Although it would be nice and could eliminate confusion in the future, the law does not require the notifications to be provided in the employee’s first language.

Lastly, insurance companies are required to provide COBRA information in the Summary Plan Description (SPD) but in many cases the information provided does not meet the COBRA General Notice requirements. The Department of Labor expressly permits combined SPD and General Notice provided that the covered spouse receives the SPD. Employers should contact their insurance providers to confirm the SPD does meet the General Notice requirements and file a SPD every year to prove compliance.

Handling Cobra Premium Payment Shortfalls
Perhaps the most common recurring administrative challenge comes from the fact that the amount paid by the qualified beneficiary does not match up with the amount owed. The following true story illustrates this challenge:

A qualified beneficiary accidentally writes his check for $0.02 (two cents) less than the required premium amount for a given month. Although there were attempts by the Plan Administrator to notify the qualified beneficiary of the shortfall, he does not realize his error, therefore does not pay the two-cent shortfall before the end of the applicable grace period. So in “strict compliance” with the law, the Plan Administrator cancels his COBRA coverage leaving him unable to receive care for his illness.

According to COBRA law, qualified beneficiaries must pay their premiums in full and on time. If not, as a general rule, the Administrator has the right to terminate the COBRA coverage; however, COBRA regulations include a stipulation that applies when the shortfall is by an amount that is “not significant.” To be deemed “not significant” the amount of the shortfall must be no greater that the lesser of: a) $50 or b) 10% of the required COBRA premium.

In the event the shortfall is determined to be “not significant,” the Plan Administrator has two options:

1. Consider the payment as “paid in full.”
2. Notify the qualified beneficiary of the deficiency and extend to him or her a reasonable time period to make up the shortfall. A safe harbor for this extension, according to regulations, is considered to be 30 days.

In most cases the Plan Administrator will opt to provide a premium shortfall notice and extend a 30-day grace period to the qualified beneficiary. It is rare to see a plan accept the shortfall as payment in full as this would set a bad precedent, not to mention the fact that making a determination as to what constitutes a significant amount or not is a complicated task. Plan Administrators should think through these issues in order to implement a compliant COBRA premium payment system. The following steps may be helpful in handling COBRA premium payments:

1. Review all COBRA notices, letters and premium payment coupons (if any) making sure they clearly convey all COBRA deadlines and premium amounts. Emphasize that COBRA coverage will be terminated if the payment policy is not strictly adhered to, and once the coverage is terminated, it cannot be reinstated. If partial payments are a recurring issue then Administrators may want to amend their Summary Plan Descriptions (SPD) and plan documents to include similar language. So in the event that a qualified beneficiary’s coverage is terminated for insufficient premiums, the documentation will support the Administrator’s actions.
2. Sending COBRA notices and letters regarding insufficient payment via certified mail or similar means may be an option in order to get the qualified beneficiary’s attention and to serve as a receipt. Many times the qualified beneficiary argues that they were willing to pay the shortfall but were never notified. This procedure may help eliminate such a claim.

Senate Bill 1217 – Arizona mini-COBRA
To address the lack of options for employees (and/or their covered dependents) that lose their group insurance from their employer with fewer than 20 employees (as calculated in the previous calendar year), Arizona legislation passed Senate Bill 1217 to allow limited-time group continuation coverage. Although similar to the federal law called COBRA, Arizona “mini-COBRA” has numerous differences.

Effective with a small group insurance plan renewal on or after January 1, 2019, employers are responsible for notifying employees/dependents (who have been enrolled on a group plan for a minimum of 3 months and who are not Entitled to Medicare) of their right to continue group coverage for 18 months (“total coverage period”) if they lose coverage due to experiencing any of the following “qualifying” events:

• Voluntary or Involuntary termination of employment;
• Reduction of work hours;
• Divorce or separation;
• Death of the employee;
• Employee becomes Entitled to Medicare; or
• Loss of dependent status under the group plan.

Employers are required to send a notice to the employee/dependent (“qualifier”) within 44 days of the qualifying event. (Unless the employer knows of a dependent’s different address, sending a single letter to the employee will satisfy the notification requirement.) If the notice is postmarked within this 44 day window, the qualifier has 60 days (from the date of the letter) to notify the employer of their desire to continue their group coverage. Qualifiers are responsible for premiums back to the date they are terminated from the group plan and must be made within 45 days from the day they notify the employer of their continuation decision.

If the employer does NOT meet the 44 day notification period, qualifiers will be allowed a 120 day election period and to pay premiums back to the coverage termination date. To ease the burden of creating a notice meeting the law’s requirements, the Department of Insurance has been tasked for providing a “model notice.”

Each qualifier will have an independent right to elect Arizona mini-COBRA. The premiums for the Qualifiers will be based upon the group plan rate plus a 5% administration fee. Employers are also required to notify qualifier of changes to the premiums 30 days prior to the change.

If a dependent is deemed disabled by the Social Security Administration within the first 18 months of continuation coverage, they shall be offered an 11 month extension for a total coverage period of 29 months. If a dependent experience a divorce, separation, employee’s death or Entitlement to Medicare or a loss of dependent status during their time under continuation coverage, they shall be offered an additional 18 months of continuation coverage (for a total coverage period of 36 months).

If a qualifier elects to continue coverage, they may continue until the:

1.  Qualifier completes their total coverage period;
2. Qualifier does NOT make “timely” premium payments;
3. Qualifier becomes Entitled to Medicare, Medicaid or other healthcare coverage; or
4. Employer terminates (without replacing) the group health insurance plan.

The law also addresses continuation coverage for employees in the Military Reserve or National Guard that is outside the scope of this article. For further information you may want to review https://www.azleg.gov/legtext/53leg/2R/laws/0164.pdf.

SSome of the differences we find between the way the law is written and federal COBRA are:

1. Regardless of qualifying event experienced, qualifiers will be offered 18 months of coverage;
2. Employers do not have to offer Arizona mini-COBRA to employees/dependents on Medicare at the time of the qualifying event;
3. The law mentions a 45 day grace period for submitting the initial premium payment but never defines “timely manner” payments. Without this information, we would assume subsequent premium payments are due on the first of the month of coverage with NO grace period.
4. Only dependents are eligible for the 11 month disability extension;
5. Qualifiers may be terminated from Arizona mini-COBRA if it is known they have obtained ANY other coverage;
6. Employers must notify qualifiers of rate changes 30 days in advance of the change;
7. Qualifiers may be charged a 5% administration fee; and
8. The qualifying event “divorce or separated” does not state “divorce or LEGAL separation.”

All contents of this article are our initial opinion of Senate Bill 1217. We request you contact an Arizona Benefits Attorney for advice on this bill. COBRA Solutions will be producing and releasing a separate software product for administering Arizona mini-COBRA after 01/01/2019.