California's new extended COBRA law

[Mary C]

Has anyone had a chance to review AB 1401 which took effect for events after 1/1/03? As I understand it, anyone who experiences a COBRA event after 1/1/03 in the state of California who was covered by an insured group plan is eligible for 36 months of COBRA.

A few years back, California tried to extend COBRA for indidivuals over age 60 until they became eligible for Medicare. This was quickly challenged in court and ERISA preempted it. The law was rewritten as part of the Insurance Code and the insurance companies, not the employers or COBRA administrators, became liable for carrying these folks for the extra period of time. The only obligation the employer or COBRA administrator has is to notify these individuals of their right to elect continued coverage by contacting the carrier after COBRA expires.

What I'm trying to determine is if the new AB1401 works the same way? i.e., the employer or COBRA administrator carries the COBRA participant for their normal 18 or 29 month period (if disabled) and then the insurance carrier is responsible for billing and administration of the remaining 36 months.

Any thoughts?

[Larry M]

As I read the change in law, the onus for the continuation remains on the employer.

From that standpoint, it appears as if this change is headed for the courts to determine whether it conflicts with ERISA's preemption clause.

[Mary C]

Managed to get my hands on a copy of the regulations - the employer only needs to notify the COBRA participant to contact the carrier to possibly continue the coverage longer and the carrier collects the premium for the additional coverage. This only applies to insured plans and is written into the California Insurance Code so it is not subject to ERISA preemption.

[Kirk Maldonado]

Mary C:

Are you sure that ERISA's preemption clause wouldn't preclude the enforcement of the state law against the employer.

It seems that the state could regulate the insurance companies without triggering ERISA's preemption, but when it goes to telling employers what to do, it seems at least arguable that is not regulating "insurance."

[Mary C]

Kirk -

in 1997-1998 California passed a law that said employers were to provide extended COBRA coverage to retirees and their spouses who met certain age & service requirements for five years or until the retirees qualified for Medicare. This was immediately challengened in court and preempted by ERISA. California then went back and revoked that law and rewrote it to require any insurer who wrote a group contract covering employees in California to offer this coverage (identical to the group contract they were coming off of). This was not able to be preempted because it regulates insurance, not an ERISA plan or Federal COBRA. The extended coverage for all events was tacked on to the existing regulations for retirees in the state's insurance code and, according to experts/news releases I've read, is also not subject to preemption.

I am not a lawyer and can't comment on whether the requirement to provide notice of extended coverage can be preempted or not, but California has for years required that employers send a copy of their HIPP (Health Insurance Premium Payment) program to employees who have had a COBRA qualifying event when the COBRA notice is sent and this requirement has survived challenges.

[Kirk Maldonado]

Mary:

I am drawing a distinction between what California says you have to do and what they can legally enforce you to do.

Being a Californian, I can tell you that California is one of the most aggressive states in the country in refusing to recognize ERISA's preemption. Although, I know from personal experience that at least in some cases, the legislature enacts bills without even considering whether they are preempted by ERISA.

In other words, just because the California legislature enacts it, doesn't mean that it isn't preempted.

Of course, if you are willing to do whatever the state legislature enacts, then the point is moot. Most of my clients aren't thrilled about having to comply with laws that are preempted.