Beginning Jan. 1, small employers offering certain employee benefits such as group medical, dental and vision insurance will be required to offer continuation of coverage for 18 months to employees separating employment under the new law. This sounds very similar to Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) that employers with 20 or more employees must follow. The Arizona law will require small businesses with one or more covered employee to follow almost the same rules. While we do not have all the details yet, here is what we do know.
While the law itself (S.B. 1217) is relatively short, it sets out the provisions for notifying qualified beneficiaries of their rights (within 30 days) and the qualifying beneficiary’s requirement for accepting coverage (within 60 days) and making ongoing payments. It also allows the employers to charge a 5 percent administration fee above the actual plan cost for administering the option.
So, why is this so important? Here are some important things small employers will need to remember:
- In order for an employee to be eligible, they must have been covered under the employees plan for at least 90 days.
- If the employer changes plans (or if the premiums change) as they frequently do during annual enrollment, any qualified beneficiary will have the same options to change plans as any other employee would.
IMPORTANT NOTE: Employers must notify participants 30 days prior to a plan benefit or premium change. This is going to be very difficult to administer as many small employers work on plan modifications up until the actual renewal date.
While the current COBRA law is full of stiff financial penalties for employers failing to meet certain requirements, I have not found the penalties for SB 1217 yet. Most employers who are required to abide by COBRA pay a third party administrator to handle this administration at a reasonable rate. We expect those administrators to offer their services for SB 1217 as well. FBN
For more information, or if you would like to talk the employee benefit team at Crest, please call us at 928-526-5691.
By Ed Gussio