Monthly Archives: April 2009

Update: Looking for Cal-COBRA Clarity from AB 23

There has been a great deal of recent confusion about the COBRA subsidy in the American Recovery and Reinvestment Act (ARRA). The uncertainty has stemmed from a lack of “ownership” on the local level as to who was going to notify all the small group assistance-eligible individuals (AEIs) of their new COBRA rights.

AEIs are employees involuntary terminated between Sept. 1, 2008 and Dec. 31, 2009 who also meet other qualifying criteria.

Pending legislation addresses this issue head-on, but some important details remain open-ended. This bill (AB 23) dictates that it’s the insurers who should notify all qualified beneficiaries eligible for premium assistance under Cal-COBRA (sending out these “second-chance” letters).

The insurance carriers will comply. But instead of sending specific, detailed letters only to assistance-eligible individuals, most insurers plan to send notifications to all terminated employees in the relevant timeframe (Sept. 1, 2008-March 31, 2009). Those former employees will have to read the form letter and determine for themselves if they’re eligible for the subsidy, as defined by the ARRA. That means small group employers may well be getting some phone calls from confused former employees who don’t know where they stand.

Additionally, some carriers are requesting small group employers to identify their own AEIs and send that information along to the carrier. If AB 23 passes in its current form, we know it’s the insurer who will be ultimately sending out these notification letters. But it’s clear that any small group with 2-20 employees should be proactively identifying all their AEIs. Your carrier may ask you for information … and so could AEIs themselves.

At Stephenson Welsh Insurance Services, we’re helping our small groups identify their AEIs. Your broker should be doing that, too. We’re also finding that some employers are receiving requests for information from carriers but aren’t sure exactly what to do or what specific information to send back. Your broker should be touching base with you so you’re aware of what’s happening and, if necessary, educate you so you’re comfortable complying with any requests made.

One final note on this topic: If you are an individual reading this who was involuntarily terminated from your job between Sept. 1, 2008 and now, we encourage you to contact your former employer directly if you’re unclear about your “second-chance” COBRA eligibility or COBRA rights. Regardless of this momentary confusion, many will benefit from this new ARRA subsidy and should be taking advantage of it.

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Are You Ready to Notify Your COBRA Assistance-Eligible Individuals?

As we’ve discussed in prior posts, the American Recovery and Reinvestment Act (ARRA) includes a subsidy for COBRA premiums for assistance-eligible individuals. Unfortunately, there is a great deal of confusion on the state level as to how notification of these new COBRA rights will be handled.

As you might imagine, insurance carriers aren’t going to simply volunteer to incur the time and expense of identifying all these assistance-eligible individuals (AEIs) and sending out millions of notification letters unless they absolutely must. Now, the ARRA identifies that in state continuation programs (in our case Cal-COBRA), the carrier has the responsibility to (A) manage and notify any eligible individuals and (B) pay the subsidy. The idea was to take the onus off the employer small groups altogether for Cal-COBRA. But most carriers haven’t yet explicitly stated they’re going to do that, and one of the problems is if you read any type of COBRA literature, everything ultimately falls back on the employer.

That’s why it’s essential that employers who fall under Cal-COBRA (2-20 employees) identify any AEIs and are prepared for any eventuality. Yes, it seems this notification falls on the carriers’ plates. But you should still be ready to react to any changes to model notices released by the Department of Labor.

Small group employers are understandably worried that if changes to model notices shift the responsibility, they’ll be on the hook if anything falls through the cracks. No one wants to be sued by former employees who claim that, by law, they were supposed to be notified of their new COBRA rights as defined by the ARRA.

That’s where a good broker can really provide a support system. Your broker should be both looking out for you and be ready to answer questions about the latest developments. Here at Stephenson Welsh Insurance Services, we’ve been going through our groups and giving employers a “heads-up” about these ongoing circumstances because they may need to act quickly if things change.

Be sure to contact your broker with any questions you may have. If you need a broker, feel free to contact us.

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COBRA & the Current Economy: What Happens When Your Company Goes Under?

If you’re terminated from your job or otherwise lose your employment, you automatically become eligible for COBRA coverage. But it’s not given to you. You have to elect it, and then you’re responsible for its hefty premiums. You also have a deadline for electing coverage and cannot miss a payment without running the risk of plan termination. COBRA also only lasts a set amount of time, so it’s important individuals are looking down the road to their post-COBRA coverage decisions.

Most people also don’t realize that if their former company goes out of business, COBRA coverage will die with it. If there’s no plan, there’s no COBRA. That also means if all the employees under a plan leave or are laid off, that plan—and its associated COBRA benefits—can be terminated.

And then what do you do?

Well, you’ve got to go find your own insurance. And people scramble—especially those with preexisting conditions. They’re all wondering, “How do I secure health insurance for my family?

The reality is people who are considered “uninsurable” by carriers don’t have many options. They either need to find a new job with group coverage or start their own business. (A business owner with at least two employees can secure a guaranteed-issue group plan). Unfortunately, a lot of people are otherwise uninsurable in a market that has only gotten more difficult. Carrier underwriters are extremely picky right now in terms of whom they’ll insure for individual/family coverage.

The most important thing for people in any of these scenarios to know is there are affordable options out there. People just aren’t aware how to find them … or if they’re eligible … or where to look. They should be getting help from their broker to do so—and to discuss all the options and strategies available to someone in their specific situation.

People should also be sure to use their broker for regular reviews of their individual plan to make sure it’s still the best option (with realistic premium levels) for current circumstances. When individual/family plan premiums skyrocket, a lot of times that person is eligible for a free transfer to a more affordable plan under the same carrier. Importantly, that switch can be made without having to again go through the underwriting process. Carriers just aren’t always quick to volunteer that information.

These are all issues and questions that a broker can answer in minutes, as opposed to the hours or days that it may take someone to call customer service lines and do research on their own. There are ways to secure coverage or lower premiums, but people need the help of a good broker to know how.

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