The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for retirement and health benefit plans in private industry. ERISA does not require any employer to establish a plan. It only requires that those who establish plans must meet certain minimum standards.
ERISA covers retirement, health and other welfare benefit plans such as life, disability and apprenticeship plans. Among other things, ERISA provides that those individuals who manage plans (and other fiduciaries) must meet certain standards of conduct. The law also contains detailed provisions for reporting to the government and disclosure to participants. There also are provisions aimed at assuring that plan funds are protected and that participants who qualify receive their benefits.
ERISA has also been expanded to include new health laws. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) amended ERISA to provide for the continuation of health care coverage for employees and their beneficiaries for a limited period of time if certain events would otherwise result in a reduction in benefits. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) amended ERISA to make health care coverage more portable and secure for employees.
DEPARTMENT OF INSURANCE & DEPARTMENT OF MANAGED CARE
Each state regulates their own fully insured health insurance companies. Below is a table with links to each regulatory agency.
All California HMOs
California Department of Managed Health Care (www.dmhc.ca.gov)
Blue Shield of California PPO
California Department of Managed Health Care (www.dmhc.ca.gov)
Most other PPOs in California
California Department of Insurance (www.insurance.ca.gov)
Medicare Advantage Plans
Federal Center for Medicare Services (www.medicare.gov)
Medicare Supplement Plans (Medigap Plans)
California Department of Health Care Services (www.dhcs.ca.gov)
Medi-Cal Managed Care Plans
MRMIP, Healthy Families, and AIM
Self-Funded Plans (non-government entities)
U.S. Department of Labor (www.dol.gov)
Self-Funded Plans (government, church or school-sponsored entities)
The government agency or church or school entity that issued the health plan
COBRA (Small Employer Overview)
What rights to health care continuation coverage does COBRA provide?
If you are covered by an employer's health plan, COBRA may give you the right to stay covered even if something happens, like losing your job, that would otherwise cause you to lose coverage. This continuation coverage under an employer's plan is called "COBRA coverage." COBRA coverage usually lasts only for a limited time, and you usually have to pay for it.
If you are covered by an employer's health plan, and an event occurs that would otherwise cause you to lose that group health coverage, you need to understand whether COBRA applies to your specific situation and, if so, what your rights are under COBRA.
Which employer health plans are subject to COBRA?
COBRA applies to most employer group health plans but not to all of them. For example, it does not apply to plans of employers with fewer than 20 employees or to church plans. Many plans of small employers, though, are subject to State laws similar to COBRA, in California, Cal-COBRA.
What events result in COBRA rights and for how long is COBRA coverage available?
Even if COBRA applies to your group health plan, it gives rights only to certain people who would be losing health coverage for certain specific reasons. Some of the most common situations that give people COBRA rights are:
- Loss of job. If you are covered by your employer's
health plan and you lose or leave your job, COBRA generally gives
you the right to stay on the employer's plan for up to 18 months.
The same rights apply if you are the spouse or dependent child
of an employee who loses his or her job. (The 18 month period
can be increased to 29 months if someone in the family is disabled.)
- Reduced hours. If you are covered by your employer's
health plan and your hours are reduced, the employer's plan may
provide that you lose coverage unless you elect COBRA. In this
case, COBRA generally gives you the right to stay on the employer's
health plan for up to 18 months. The same rights apply if you
are the spouse or dependent child of an employee whose hours
are reduced. (The 18 month period can be increased to 29 months
if someone in the family is disabled.)
- Death or divorce of spouse. You have the right to
COBRA coverage if you are covered by a group health plan of your
spouse's employer and you would lose coverage because your spouse
dies or you and your spouse divorce or legally separate. In these
cases, COBRA gives you the right to stay in the plan for up to
- Death or divorce of parent. You have the right to
COBRA coverage if you are a dependent child covered by a group
health plans of your parent's employer and you would lose coverage
because a parent dies or your parents divorce or legally separate.
In these cases, COBRA gives you the right to stay on the plan
for up to 36 months.
- Change of status as Dependent. COBRA also gives you rights if you are a dependent child covered by a group health plan of your parent's employer and you would lose coverage because you reach an age or condition that causes you to no longer be covered as a dependent under the plan. In these cases, COBRA gives you the right to stay on the plan for up to 36 months.
If you become covered by another group health plan or by Medicare before your COBRA coverage would otherwise end, you usually lose the right to COBRA coverage. However, you do not lose the right to COBRA coverage if the new group health plan does not cover illnesses or conditions because you had them before you became covered under the plan.
What are the requirements for obtaining COBRA coverage?
If you want COBRA coverage, you can be required to elect it within 60 days after your coverage would otherwise end. If you elect COBRA coverage, the plan is required to continue the same coverage for you but can charge you for it.
- Cost of COBRA coverage? If you elect COBRA, the plan can require you to pay the entire cost of coverage, plus a small (2%) charge for administration. If you are getting a longer period of coverage because of a disability, you may have to pay more. The cost of COBRA coverage will probably be more than you were paying for coverage before. You can pay for COBRA coverage in monthly installments.
What is Cal-COBRA? COBRA (the Consolidated
Omnibus Budget Reconciliation Act of 1989) is a federal law that
allows for temporary continuation of employer health insurance
for employees and their dependents when that insurance would otherwise
end. Under COBRA, companies with 20 or more employees must allow
qualified employees and dependents to continue group health coverage
at their own expense for a least 18 months after a "qualifying
event" such as employment termination or divorce.
Cal-COBRA provides COBRA-like coverage to small business employees, dependent spouses and their children. It applies to small groups, which don't qualify for COBRA (those which employed between 2 and 19 eligible employees on at least 50% of the work days in the prior calendar year or in the preceding calendar quarter, if not in business during the prior year). Because federal COBRA counts part-time employees in determining group size, a group with 18 full-time and 4 part-time employees, for example, would be subject to federal COBRA, not Cal-COBRA.
Who is eligible for Cal-COBRA? Employees
and dependents enrolled in employee benefit plans at the time
of a "qualifying event" as listed below:
Qualifying Events for Employees:
- Employment termination for any reason other than gross misconduct or
- Reduction in work hours below the threshold for group eligibility
Qualifying Events for Insured Dependents:
- Death of the covered employee
- Divorce or legal separation from the covered employee
- Child's loss of dependent status or
- Employee's eligibility for Medicare
Beneficiaries are not eligible if they:
- Obtain coverage from another group plan without pre-existing condition limitations
- Become eligible for federal COBRA
- Become eligible for Medicare
- Become eligible for Medi-Cal
- Fail to submit required premiums or
- Fail to notify the health plan of a qualifying event
What happens to a Cal-COBRA enrollee if the employer becomes eligible for COBRA? The individual stays with Cal-COBRA until this coverage is exhausted.
What are employer responsibilities under Cal-COBRA? Employers are responsible for notifying the health plan of two kinds of qualifying events - employee termination for reasons other than gross misconduct or a reduction in hours that disqualifies an employee from group coverage. The employer must notify the plan in writing within 31 days of the qualifying event and must clearly specify that a "qualifying event" has taken place and give the date of the event. Simply crossing an employee off a bill is not sufficient notification to initiate Cal-COBRA. If the health plan does not receive complete and timely notice of the qualifying event, the health plan has no obligation to provide Cal-COBRA coverage.
In addition, the employer must notify beneficiaries of changes or termination of their group plan 30 days in advance or when all enrolled employees are notified, whichever is later.
What are employee responsibilities under Cal-COBRA? Employees must notify the health plan in writing of all other qualifying events (death, divorce, loss of dependent status or eligibility for Medicare) within 60 days of the qualifying event. Employees must clearly specify in their notification the qualifying event and the date of the qualifying event to initiate Cal-COBRA. If the health plan does not receive complete and timely notice of the qualifying event, the health plan has no obligation to provide Cal-COBRA coverage.
Who administers Cal-COBRA coverage and how does it work? Carriers have primary responsibility for administration but may contractually shift this burden to employers. Blue Cross, for example, handles administration and paperwork for their members at no charge, notifying individuals of their Cal-COBRA right after a qualifying event, and billing them separately. If clients change carriers, the group or the new health plan may be responsible for administration.
- Employers have 31 days from the date of reduction in hours or employment termination to give written notification to the health plan. A subscriber has 60 days from any other qualifying event to give the health plan written notification. These written notices must specifically state the nature and date of the qualifying event.
- Within 14 days of notification, the carrier offers Cal-COBRA coverage to the beneficiary in writing at the beneficiary's last known address.
- The member has 60 days from the date of notification to elect Cal-COBRA coverage in writing. If the premium is included the carrier institutes Cal-COBRA coverage with no lapse in coverage. If the premium is not included, the carrier bills the member, who has 45 days from the billing date to remit all premiums due. Coverage will not be activated until the required premiums are received. Please note that all rights to HIPAA guarantee issue coverage will be lost if Cal-COBRA is not elected and all available benefits are exhausted.
Which benefit plans are covered by Cal-COBRA? Health, dental and vision plans are covered. However, if a carrier offers a package of these benefits, it cannot be required to offer only dental and/or vision under Cal-COBRA. Continuation coverage is the same coverage in effect at the time of the qualifying event and is subject to any subsequent changes in that coverage.
How long does Cal-COBRA coverage last?
- If the qualifying event is an employment termination or reduction in hours, eligible beneficiaries can maintain coverage for up to 18 months. If the beneficiary becomes totally disabled (as determined by the Social Security Administration) within 60 days of one of these qualifying events, Cal-COBRA can be extended another 11 months (a total of 29 months),
- After January 1, 1999, employees who have worked for the employer at least five years and are at least 60 years old at the time of the qualifying event can continue Cal-COBRA coverage to age 65. To continue coverage, employees must submit a written request to extend coverage within 31 days of the end of their Cal-COBRA continuation period.
- For all other qualifying events, Cal-COBRA coverage lasts up to 36 months.
What happens after Cal-COBRA benefits expire? Some individuals are eligible for an individual policy through guarantee issue under HIPAA. Blue Cross sends Cal-COBRA members a notice 90 days prior to the end of Cal-COBRA coverage, with information on conversion options.
What does Cal-COBRA cost? Most employees pay 110% of their group coverage premium. Beneficiaries with total disabilities (as determined by the Social Security Administration) can continue coverage for 11 more months at 150% of the group premium. Subscribers are responsible for premium payments; failure to make a timely payment can result in discontinuation of coverage with no reinstatement option.
HIPAA Guaranteed Issue
What is Group-to-Individual Portability? The President and Congress sought to address the problem created when employees left group policies and were unable to purchase individual coverage due to health conditions or other factors. Their solution was to require individual health plans to accept consumers moving from group plans on a guaranteed issued basis if certain specific criteria were met.
What criteria must individuals meet to be eligible for Group-to-Individual Portability? It is not easy to qualify for HR 3103's portability provisions. An individual must:
1) Have had prior medical coverage for 18 consecutive months with the most recent coverage under an employer group health plans;
2) Be ineligible for or have exhausted other coverages, including:
- Other group coverage
- But, not including eligibility for a conversion policy;
3) Not have other coverage;
4) Not have lost the prior coverage due to fraud or non-payment of premium;
5) Apply no later than 62 days after the loss of their last coverage.
Does prior individual coverage count towards the 18 months continuous coverage requirement? Yes. But the most recent coverage must have been under an employer plan.
Which individual plans are available under HIPAA? Most California carriers will make their two most popular plans available to eligible consumers on a guarantee issue basis (some may opt to offer a "high" and "low" benefit plan under certain circumstances, but this option is unlikely to be widely used). Popularity is measured by in-force premium.
Does this mean the Major Risk Medical Insurance Plan (MRMIP) goes away? No, there is still a need for a high-risk pool. Remember, only individuals leaving a group plan and meeting other requirements are eligible for guarantee issue in the traditional market. Consumers with no prior coverage or who fail to meet any of the other requirements still will need the benefits afforded by MRMIP.
When does Group-to-Individual Portability take effect? In California, on January 1, 1998.
What price can the carriers charge for guarantee issue coverage? The law does not limit what carriers can charge for these guarantee issue plans. However, responsible carriers will not attempt to circumvent the law by pricing them beyond the reach of consumers.
What should employers and their employees know? Employees leaving a group plan need to know how critically important it is to maintain continuous coverage. Under state law, a break in coverage of more than 62 days means their pre-existing conditions may not be covered under their new individual health plan, in which case a new pre-existing condition waiting period would need to be satisfied. A break in coverage of more than 180 days may require a new waiting period if the new coverage is an employer plan. Under HIPAA, failure to exhaust COBRA or Cal-COBRA could mean the employee is unable to purchase an individual or family policy on a guarantee issue basis. Both COBRA and Cal-COBRA require the employer to notify employees prior to leaving the firm. However, this required information does not explain the impact failing to accept COBRA or Cal-COBRA can have under HIPAA. You should make sure your employees are aware of this situation.
Health Insurance Guides by State
(look at right column to choose state)
In August 2006, the National Endowment for Financial Education (NEFE, www.nefe.org) and Georgetown University's Health Policy Institute (hpi.georgetown.edu & healthinsuranceinfo.net) collaborated on three guides to assist consumers in finding and keeping health insurance coverage. These three guides are now available here for free.
Book One, Understanding Private Health Insurance. ( PDF format, 39 pages, 1 MB)
- What is Good Health Insurance? What to Look for and What to Avoid
- Special Worksheet to Help You Evaluate Your Health Insurance Choices
- Insurance Transitions — What They Are and How to Navigate Them
Book Two, Medicare and Medicaid: A Health Care Safety Net for People with Serious Disabilities and Chronic Conditions. (PDF format, 40 pages, 948 KB)
- When, Where and How to Apply for Social Security Disability Determination
- An Overview of Medicare Parts A, B, C and D
- Other Places for People with Disabilities and Their Families to Seek Medical Coverage
- Directory of Medicaid Offices for Every State and Territory
Book Three, Options for Avoiding and Managing Medical Debt. (PDF format, 33 pages, 616 KB)
- Places to Go for Free Health Care
- You Can Negotiate with Your Doctor for a Discount on Medical Care
- Answering Questions about Bankruptcy
- What You Need to Know about Credit Reports and Credit Scores