Under the federal Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), employers with 20 or more employees that offer their employees group health insurance benefits must provide employees the option to continue health benefits, at the employee’s expense, for a limited period of time – typically 18 months – after their employment ends. Under COBRA, small employers – those with fewer than 20 employees – are not required to extend insurance continuation rights even if they elect to provide group health insurance benefits to their employees. Filling in that gap, the Arizona legislature recently passed, and Governor Ducey signed into law, A.R.S. § 20-2330, which, beginning January 1, 2019, will require all Arizona employers with at least one but not more than 20 employees to provide similar post-termination coverage extension rights, if they provide employees with health insurance benefits.
Under this new law, Arizona small businesses must notify enrollees in health insurance plans, in writing, of their right to continue benefits within 30 days after a qualifying event (e.g., termination of employment). The notice must include the following information: (1) the enrollee’s and his or her qualified dependents’ right to continue coverage at their own expense, including administrative fees; (2) the full cost of coverage; (3) the process and deadline to elect coverage; (4) the date and time by which the enrollee must pay to continue coverage; and (5) that failure to timely pay the premium and administrative fees will result in loss of coverage. To maintain coverage, the enrollee must elect coverage within 60 days after the date of notice and make ongoing, uninterrupted premium payments. Further, enrollees only qualify for continuation benefits under the new statute if they were enrolled in the plan for at least three months before a qualifying event occurs. The employer must also notify participants 30 days prior to a benefit or premium change. Under the statute, the employer can charge a 5% administrative fee in addition to the full cost of the premium.
In addition to setting out the information that employers must provide in the notice to enrollees, the statute requires the Arizona Department of Insurance (DOI) to prepare a sample notice of coverage continuation form and post it on the DOI’s website. If employers use and properly complete the DOI’s form, they will be presumed to have met the notice requirement. However, as of November 13, 2018, the DOI has not yet released the form on its website. We will monitor this situation and provide updates accordingly. For more information on this new statute and its requirements, please contact the firm lawyer with whom you work or one of the lawyers listed below.