When Health Coverage Ends PASBO 48 th Annual Conference March 20, 2003 NCAS Pennsylvania P.O. Box Harrisburg, PA (717) Presented by: Linda M. Zeigler Executive Director

2 AGENDA Continuation of Group Health Care Coverage – the Legislative Arena COBRA Considerations for the School Employer   Definitions   Responsibilities of the Employer/Employee/Plan Administrator  COBRA & FMLA  COBRA & Medicare   COBRA & Cafeteria Plans  COBRA & Disability Extensions  COBRA & Reduction or Elimination of Coverage Continuation Coverage Mandated Under Public School Code  Requirements  School Employer Responsibilities HIPAA Certificates of Credible Coverage  HIPAA Certificate Requirements  Responsibilities of Employer and Plan Administrator When Coverage Ends – Compliance Issues

3  The escalating national problem of uninsured citizens continues and intensifies.  Legislative response to guarantee workers under group plans equal access to health care coverage, protection from stringent pre-existing condition exclusions, portability of benefits between employers, access to purchase coverage beyond termination dates, and rights for dependents losing coverage.  Recent legislative proposals continue in the direction of individual protections: for example, Federal act granting premium tax relief to workers losing coverage in corporate bankruptcies; proposals to extend COBRA continuation periods.  Employers are being required to assume additional liability while premiums are increasing 15%+ annually. Continuation of Group Health Care Coverage – The Legislative Arena

4 COBRA Definitions – What is a Qualified Beneficiary? Any individual who, on the day before a qualifying event, is covered under a group health plan as an employee or as a spouse or dependent child of the employee Any child born or placed for adoption with a covered employee during a period of COBRA continuation coverage In the event of a qualifying event that is an employer bankruptcy, an employee who had retired on or before the loss of coverage and the spouse or dependent child of that employee COBRA Considerations for the School Employer

5 (Continued) COBRA Definitions – What is a Qualifying Event? A qualifying event is an event that causes the covered employee, or the spouse or dependent child of the covered employee to lose coverage under the plan. THE EVENT IS ANY OF THE FOLLOWING: The death of a covered employee The termination, or reduction of hours, of a covered employee resulting in loss of coverage The divorce or legal separation from the employee’s spouse A covered employee’s becoming eligible for Medicare Benefits A dependent child’s ceasing to be a dependent child of a covered employee A bankruptcy of the employer from whom a covered employee retired at any time COBRA Considerations for the School Employer

6 (Continued) – Initial Notice of COBRA Rights Required at the time of the employee’s initial employment Written notice and/or inclusion of COBRA rights in the plan booklet given to the employee – Employer/Employee Responsibilities When a Qualifying Event Occurs Employer must notify the plan administrator within 30 days of termination; loss of coverage due to reduction in work hours; death of employee; employee entitlement to Medicare. COBRA Considerations for the School Employer

7 COBRA Considerations for the School Employer (Continued) COBRA Definitions – What is the Continuation Period Per Event? Event Period Termination or reduction of hours of18 months covered employee  If second qualifying event occurs within the 18 month period, period will be extended to 36 months for qualified beneficiaries other than employee  If employee is disabled on the date of the qualifying event, or within 60 days, continuation period is 29 months for qualified beneficiary and all family members

8 COBRA Considerations for the School Employer (Continued) COBRA Definitions Event Period Divorce or legal separation from employee36 months Death of covered employee36 months Dependent child losing dependent child36 months status Bankruptcy of employer under Title 11  COBRA applicable to retirees who retired on or before the substantial elimination of coverage and their spouses and dependents  for covered employees (and their covered widows) who retired on or before the date of elimination of coverage – lifetime coverage  for covered spouses/dependents of a retiree – 36 months after the retiree date of death

9 (Continued) Responsibilities of the Employer/Employee/Plan Administrator - Employer/Employee Responsibilities When a Qualifying Event Occurs Employee/Qualified Beneficiary must notify plan administrator or employer within 60 days of divorce or legal separation; dependent child ceasing to qualify as dependent. In the case of a request for disability extension, the Qualified Beneficiary must provide notice of Social Security determination to the plan administrator or the employer within 60 days of the date of the determination. - Plan Administrator Responsibilities When Notice of Qualifying Event is Received Plan administrator has 14 days from the date of receiving the Qualifying Event information to issue the COBRA rights notice to the Qualified Beneficiary. The plan administrator monitors the timelines for receipt of initial and subsequent premiums, and issues termination information as appropriate. Premium Payment Requirements Initial premium must be paid within 45 days of the COBRA election. Subsequent premiums must be made within 30 days of the first day of the coverage period. COBRA Considerations for the School Employer

10 COBRA Considerations for the School Employer (Continued) COBRA & The Family Medical Leave Act of 1993 (FMLA) The topic is addressed in Section B-10 of the proposed COBRA regulations with five questions and answers. An employee covered under the health plan immediately prior to or during FMLA would have a qualifying event on: - Date of notification to the employer of the intent not to return - Date when the employee does not return at the end of the leave period The employer cannot condition the employee right to COBRA on payment of premiums required while on FMLA.

11 COBRA Considerations for the School Employer (Continued) COBRA & Medicare COBRA Law – COBRA coverage ceases when an individual becomes “entitled” to (actually covered by) Medicare. In instances where the covered employee becomes entitled to Medicare, the period of COBRA available to the spouse or dependent child can be as long as 36 months from the date of Medicare coverage, but in any event will not be less than 18 months. COBRA administrators can notify a beneficiary that COBRA will cease when they are eligible for Medicare. The beneficiary has the right to continue COBRA if Medicare is not in effect. Entitlement to Medicare must first arise after a COBRA qualifying event to constitute a reason for termination of COBRA.

12 COBRA Considerations for the School Employer (Continued) COBRA & Cafeteria Plans Medical plans under a flexible benefit plan are subject to COBRA Qualified beneficiaries are those covered under one of the health plans on the day prior to the qualifying event. Employees who opt out of all health plans are not eligible for COBRA The qualified beneficiary who has elected COBRA has the same rights as active employees for elections of health options available during the open enrollment process.

13 COBRA Considerations for the School Employer (Continued) COBRA & Disability Extensions The 1989 Omnibus Budget Reconciliation Act allows qualified beneficiaries to an extension of 11 additional months if they meet the requirements and are determined to be eligible for Social Security disability. The disability extension for COBRA applies to all qualified beneficiaries covered with the disabled beneficiary through the same initial qualifying event. Each qualified beneficiary may elect the extension independently. Conditions allowing the COBRA extension are: - A covered family member is determined to have been disabled during the first 60 days of COBRA coverage. - The disabled individual, or other covered family member, gives the plan administrator notice of the disability determination within 60 days of the determination. The determination that a qualified beneficiary no longer is disabled, results in the termination of COBRA for all qualified beneficiaries who were entitled to the extension, but not before the end of the maximum initial COBRA period.

14 COBRA Considerations for the School Employer (Continued) COBRA & Reduction or Elimination of Coverage The 1999 final IRS COBRA regulations specify that a reduction or elimination of coverage is disregarded if in anticipation of a qualifying event. If coverage for a spouse is cancelled pending a divorce or legal separation, COBRA must still be offered. Upon notice of divorce or legal separation, the Employer must make coverage available effective the date of the divorce or legal separation. Timely notification (60 days) to the Employer applies in determining the Employer’s responsibility to extend COBRA notification.

15 Public School Code Requirements Annuitants of the Public School Employees’ Retirement System may continue to purchase coverage under the group health plan until age sixty-five, or until they are covered by another plan. Annuitants are eligible for reinstatement in the employer’s health plan if alternative coverage ceases. An annuitant is a member of the Public School Employees’ Retirement System who has taken a super annuation retirement, has retired with thirty (30) or more years of credited service or has taken disability retirement. The cost for purchase of annuitant coverage shall equal the cost of the program for active employees and dependents plus an additional two percent. The school employer must notify annuitants within 60 days of their retirement of their entitlement to purchase continuing healthcare coverage. Annuitants have 45 days to elect continuing coverage in the health plan. School employers are responsible to notify annuitants of deadlines for premium payment. Failure to pay premiums within 60 days of the notice will automatically terminate coverage. The Code does not prohibit reinstatement of persons into the plan in accordance with procedures established by the school employer, and consistent with policies of the provider of the health plan. Continuation of Coverage Mandated Under Public School Code 5-513

16 HIPAA Certificate Requirements HIPAA Certificates of Credible Coverage HIPAA group plan portability provisions were effective June 30, Portability rules require plans or health insurers to issue Certificates of Credible Coverage to members losing coverage. Primary goal of the rule is to prevent the imposition of pre-existing condition exclusion clauses in cases where there has been no significant break in coverage. Ruling also limited pre-existing condition exclusion plan provisions: - limit of six month “look-back” period prior to enrollment date to determine pre-existing. - pregnancy and newborn cannot apply to pre-existing - limit of exclusion period to 12 months post enrollment date (18 months for late enrollments) - days of credible coverage must be applied to reduce a group health plan pre-existing condition exclusion period. All forms of health insurance coverage are included in credible coverage. - days of credible coverage are those which occurred without a significant break in coverage (a period of 63 consecutive days during which the individual did not have any credible coverage) An employee covered under the health plan immediately prior to or during FMLA would have a qualifying event on: - Date of notification to the employer of the intent not to return - Date when the employee does not return at the end of the leave period

17 (Continued) Responsibilities of Employers and Plan Administrators Certificate must be provided within timeframe requirement of COBRA regulations, in writing, by first class mail. Administrator only required to provide coverage information for coverage periods for which it was responsible. Certificates must give date a waiting period began, date coverage began and date coverage ended. Dependents are also entitled to a written Certificate of Credible Coverage at the end of COBRA continuation period or when coverage ends. Upon hire, employees must be advised of their right to receive a Certificate of Credible Coverage upon termination from group coverage. HIPAA Certificates of Credible Coverage

18 When Coverage Ends – Compliance Issues Employers are required to comply with COBRA and plan coverage provisions - Monetary penalties for noncompliance - Claim liabilities if COBRA rights not extended and legal action sought by participants COBRA and Retiree Continuation of Coverage premium rates must equal fair value of the cost of the plan to active employees (plus 2% administration fee) Employer health plan coverage policies for active employees and retirees should be in compliance with law, fully documented, and consistently applied. If COBRA and/or Retiree Continuation Coverage is self-administered by the employer, deadlines for notification, premium receipt, and coverage termination must be followed consistently to protect against claim liability or employee discrimination complaints. When Coverage Ends - Compliance Issues