COBRA Continuation of Benefits (Cal-COBRA) in California (CA)

Federal COBRA

The federal Consolidated Omnibus Budget Reconciliation Act (COBRA) generally requires group health plans sponsored by employers with 20 or more employees in the prior year to offer employees and their families the option to continue benefits for limited periods of time when coverage under the plan would otherwise end due to certain qualifying events. These events include voluntary or involuntary job loss, reduction in hours worked, death, divorce, and other life events.  

COBRA sets rules for how and when continuation coverage must be offered, how employees and their families may elect COBRA, and what circumstances justify terminating coverage. The length of time for which continuation coverage must be made available depends on the type of qualifying event. For termination of employment or a reduction in hours, the maximum period of COBRA is generally 18 months. Up to 36 months of coverage may be available due to other qualifying events, or if a second qualifying event occurs during the initial period of COBRA coverage.

Please review our COBRA Steps to Success to understand the key areas involved in implementing COBRA for your company. Most states also have laws (commonly referred to as "mini-COBRA" laws) which require that group health plans provide COBRA-like continuation of benefits for certain employees and their families.

California Continuation of Coverage ("mini-COBRA")

Cal-COBRA requires employers with 2 to 19 employees to allow individuals who would otherwise lose group health plan coverage due to certain events ("qualified beneficiaries") to continue coverage for up to 36 months. For employers with 20 or more employees, Cal-COBRA may extend continuation coverage for an additional 18 months (up to 36 months total) for individuals who exhaust federal COBRA.

Qualifying Events

Continuation coverage must be offered upon the occurrence of the following qualifying events, which would otherwise result in a loss of coverage under the group benefit plan:

• Death of the covered employee;
• Termination of employment (except for gross misconduct) or reduction in hours of the covered employee’s employment;
• Divorce or legal separation of the covered employee from the covered employee’s spouse;
• Loss of dependent status by a dependent enrolled in the group benefit plan; and
• With respect to a covered dependent only, the covered employee’s entitlement to Medicare benefits.

Cal-COBRA also provides an extension of coverage for those who have exhausted their 18 months on federal COBRA (or longer in special circumstances) for a combined total of 36 months of continuation coverage.

Continuation coverage under Cal-COBRA is not required for those individuals who:

• Are entitled to Medicare benefits or become entitled to Medicare benefits; or
• Are covered or become covered under another health plan.

Employer/Employee Notice Requirements

• Notice of the right to continuation must be provided in each evidence of coverage issued to an employee, including information on election and payment, as well as any requirements for providing notice of certain qualifying events. In addition, every plan disclosure form must include notice that continuation coverage may be available under state law and that additional information regarding eligibility for coverage may be found in the plan's evidence of coverage. Every disclosure for a group benefit plan subject to Cal-COBRA must include the following notice:

"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."

• A qualified beneficiary must provide written notice of a qualifying event that is the death of the covered employee, the divorce or legal separation of the covered employee from his or her spouse, loss of dependent status or the covered employee's entitlement to benefits under Medicare within 60 days of the qualifying event.
• The employer must notify the plan, in writing, of any employee who has had a qualifying event that is the termination of employment (except for gross misconduct) or reduction in hours of work within 30 days of the qualifying event.
• Necessary benefits information, premium information, enrollment forms, and other required disclosures must be provided to qualified beneficiaries within 14 days of receiving notice of a qualifying event, to allow the qualified beneficiary to formally elect continuation coverage.
• A qualified beneficiary who wishes to continue coverage must request the continuation in writing within 60 days following the later of the date that the enrollee's coverage under the group benefit plan terminated or will terminate by reason of a qualifying event, or the date the enrollee was sent notice of the ability to continue coverage under the group benefit plan.
• Qualified beneficiaries generally must be notified of the date continuation coverage will terminate during the 180-day period ending on the coverage termination date (except when the continuation coverage is terminated because the group contract is being terminated).

Premium Payments

Employers may require a qualified beneficiary electing continuation coverage to pay not more than 110% of the applicable rate, on or before the due date of each payment, but not more frequently than on a monthly basis. In the case of a qualified beneficiary who is determined to be disabled, the qualified beneficiary may be required to pay an amount no greater than 150% of the group rate after the first 18 months of continuation coverage. The first premium payment must be delivered within 45 days of the date the qualified beneficiary provided written notice of the election to continue coverage.  

How Coverage May Be Terminated

Continuation of benefits may be terminated before the end of 36 months for the following reasons:

• The qualified beneficiary fails to pay required premiums on time;
• The employer ceases to provide any group benefit plan to his or her employees;
• The qualified beneficiary moves out of the plan’s service area or commits fraud or deception in the use of plan services;
• The qualified beneficiary enrolls in, or becomes eligible to enroll in Medicare; or
• The qualified beneficiary enrolls in another health plan.

For More Information

• California Health and Safety Code: Cal-COBRA
• California Department of Managed Health Care
• California Department of Managed Health Care: Federal COBRA and Cal-COBRA
• California Department of Managed Health Care: FAQs About Cal-COBRA Benefits

Dependent Status and Health Insurance

Under the federal Patient Protection and Affordable Care Act (Health Care Reform), beginning with plan years starting on or after September 23, 2010, group health plans that offer dependent coverage must make the coverage available until a child reaches the age of 26. There is a temporary exception for grandfathered group health plans, which may exclude adult children who are eligible to enroll in an employer-sponsored health plan other than the group health plan of the parent. This exception will no longer be available for plan years beginning on or after January 1, 2014.

Individual states may have requirements that are more favorable to plan participants. For information about your state, please click here and contact your state insurance department for guidance.