Tuesday December 11th, 2018
Arizona is set to implement its newly hatched “mini-COBRA” plan. With the passage of the enabling legislation earlier this year, Arizona became the forty-first state to pass one of these plans that extend coverage to employees of businesses below the federal Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) base of 20 or more employees.
Beginning January 1, 2019, Arizona businesses with even one covered employee will have to offer continuation of coverage for 18 months to any worker who quits or is fired. Most mini-COBRA laws extend coverage to employees of companies with fewer than 20 employees, while a few others specify two to 19 employees. The only states now without a mini-COBRA law are Alabama, Alaska, Arizona, Hawaii, Idaho, Indiana, Michigan, Montana, and Nevada.
The Arizona law (S.B. 1217) requires employers to notify qualified beneficiaries of their rights to Arizona State Continuation (mini-COBRA) within 44 days of separation. The former employee must accept coverage within 60 days and begin making payments. It also allows the employers to charge a 5 percent administration fee above the actual cost of administering the option.
Under the new law, employees are eligible if they have been covered under the employer’s plan for at least three months. If the employer changes carriers or if premiums change, as they often do during annual enrollment, any mini-COBRA beneficiary has the same option to change plans as current employees do.
Extended coverage is triggered by termination of employment (except for gross misconduct), reduction of hours, an employee's death, divorce or legal separation, eligibility for Medicare, loss of dependent child status, or the employer's bankruptcy (for retirees only). The coverage extends to employees, their spouses, former spouses and dependent children for 18 months, or 29 months in the case of disability and 36 months if there is a second qualifying event such as the employee's death, divorce or legal separation. The separated employee may pay a premium of up to 105 percent or, in the case of disability, up to 150 percent after 18 months.
One aspect of Arizona’s new law may prove tricky to implement. Employers must notify participants 30 days before any changes in benefits or premiums. Many small employers are still struggling with plan modifications until the actual renewal date.
Most employers pay a third-party administrator to handle their Federal COBRA or state continuation administration. Employers that are now required to comply with this new Arizona state requirement may consider that same path to insure compliance.