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New AZ mini COBRA insurance law takes effect

COBRA, ArizonaWith a new year comes new laws and 2019 is no exception. Small Arizona employers (1 to 20 employees) are now subject to a new law that requires “COBRA” coverage be offered to their qualifying employees. COBRA, of course, refers to the landmark federal law passed in 1986 that requires most group health plans to provide a temporary continuation of group health coverage in certain circumstances such as job termination or reduction of work hours.

Federal COBRA only applies to employers with at least 20 employees. So, many employees who work for small businesses are simply not covered by the protections offered by COBRA. Arizona recently passed legislation that will extend COBRA eligibility to these employees.

The new Arizona law dictates employers are responsible for notifying employees/dependents (who have been enrolled on a group plan for a minimum of three months and who are not entitled to Medicare) of their right to continue group coverage for 18 months (“total coverage period”) if they lose coverage due to experiencing any of the following “qualifying” events:

  • Voluntary or Involuntary termination of employment
  • Reduction of work hours
  • Divorce or separation
  • Death of the employee
  • Employee becomes eligible for Medicare
  • Loss of dependent status under the group plan

Employers are required to send a notice to the employee/dependent (“qualifier”) within 30 days of the qualifying event. The qualifier has 60 days from the date of the letter to notify the employer of their desire to continue their group coverage. Qualifiers are responsible for premiums and premiums must be made within 45 days from the day the employer was notified of their continuation decision.

The Arizona Department of Insurance provides information about the new law and a model notice for employer use. The law has a lot more detail than can be covered here, so as always, consult your Henry+Horne tax advisor.

Ron Greenfield, CPA