AB 356: California Special COBRA Notice
The California Legislature has taken yet another step to keep Californians informed about their health care options. It has created specific wording which is to be included in all medical plan booklet-certificates, evidence of coverage, SPD or other disclosure materials (disclosure documents) for insurance policies issued, amended, or renewed in California on or after July 1, 2006. Health Insurers and HMOs (issuers) must include the wording. Additionally, this Statutory Wording must appear in COBRA Termination Notices.
The Statutory Wording
“Please examine your options carefully before declining this coverage. You should be aware that companies selling individual health insurance typically require a review of your medical history that could result in a higher premium or you could be denied coverage entirely.”
Discussion
1. Issuer Disclosure. The wording must appear in issuer produced disclosure documents. For insured plans, the burden is on the issuer to achieve compliance.
2. Medical Only. The Statutory Wording applies to full service medical plans only.
3. Individual Plans. Issuers who sell individual health policies must include a similar notice on its website or in its disclosure documents.
4. Additional Issues. AB 356 contains numerous other (rate changes, cancellations, etc.) notice requirements for individual health policies sold in California on or after September 1, 2006. Since these involve individual policies only, we do not discuss them here.
5. Employer COBRA Notice Obligations. This new California legislation also amends the California Labor Code. On or after July 1, 2006, every employer, employee association, or other entity, whether public or private, that is required to provide either State or federal COBRA, must include the Statutory Wording in its notice to qualified beneficiaries regarding conversion rights upon the completion of California or federal COBRA. If the Plan is insured, the notice must also refer to the supplemental (18 months) additional COBRA for former employees under AB 1401.
Action Plan
1. Third Party COBRA Administrators. To comply with the obligations imposed under the California Labor Code, employers should verify that their COBRA Administrator has incorporated the Statutory Wording for all COBRA Termination Notices issued on or after July 1, 2006.
2. Employer-Administered COBRA. Employers who self-administer COBRA must incorporate the Statutory Wording into the COBRA Termination Notice and implement the new wording for all full-term COBRA recipients within three months prior to the termination of basic COBRA.
3. Conversion. Some self-funded medical plans do not contain conversion rights. All self-funded medical plans are exempt from the 18-month extended COBRA applicable under group policies issued in California. It would appear that employers who do not offer conversion will have no compliance obligation.
If you would like to view the text of AB 356, please visit our website at www.abferisa.com. A link to the bill is available under Current News located on the top left of the home page.
Copyright © 2006 Alfred B. Fowler, Attorney at Law.
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