6.2 Arizona COBRA and State Continuation Rights

When an employee loses group health coverage, two continuation regimes may preserve it: federal COBRA (the Consolidated Omnibus Budget Reconciliation Act) for larger employers, and Arizona state continuation ("mini-COBRA") for smaller employers. Knowing which applies, the qualifying events, the time limits, and the premium rules is essential for the exam and for advising clients.

Federal COBRA: Who Is Covered

COBRA applies to group health plans of:

• Private-sector employers with 20 or more employees (on more than half of typical business days in the prior year)
• State and local government employers

COBRA does not apply to employers with fewer than 20 employees, the federal government (separate rules), or certain church plans.

Exam Tip: The dividing line is 20 employees. At 20+, federal COBRA governs; below 20, Arizona state continuation fills the gap.

Qualifying Events and Maximum Periods

The qualifying event determines who is a qualified beneficiary and how long continuation lasts:

Extensions

Notice and Election Timeline

COBRA imposes deadlines on both the employer/plan and the qualified beneficiary. Mixing these up is a common exam error.

Plan / Employer Duties

Beneficiary Duties

COBRA Premiums

The 102% comprises the employer's share + the employee's share + a 2% administrative fee. This often shocks beneficiaries who previously paid only a fraction of the true premium.

Exam Tip: COBRA costs up to 102% of the FULL premium, not just the employee's old payroll deduction. The 2% is the administrative load; the disability extension allows 150%.

Arizona State Continuation (Mini-COBRA)

For employers with fewer than 20 employees, federal COBRA does not apply, so Arizona's state continuation law provides comparable protection for insured group health plans.

Federal COBRA vs. Arizona Continuation

Because state insurance law cannot reach self-funded ERISA plans, Arizona continuation applies to insured small-group plans.

When COBRA Coverage Ends

Counseling Clients on Their Options

When a client loses group coverage, a producer should help compare all options, because COBRA is not always the cheapest:

1. COBRA / state continuation — keep the same plan and providers at 102%
2. ACA marketplace (HealthCare.gov) — loss of coverage is a special-enrollment event, and premium tax credits may make a marketplace plan far cheaper
3. Spouse's employer plan — special enrollment is usually available
4. Medicaid (AHCCCS) — if income now qualifies

Exam Tip: Losing job-based coverage triggers a special enrollment period on the marketplace. For many clients, a subsidized marketplace plan costs less than 102% COBRA — producers should present both.

Producer Responsibilities and Common Pitfalls

Producers who advise on continuation coverage must guide clients through deadlines that, if missed, permanently forfeit the right to coverage. Key counseling points:

• Confirm the qualifying event and the correct maximum period (18 vs. 36 months) so the client plans ahead.
• Explain the 60/45/30 timeline — 60 days to elect, 45 days for the initial premium, 30-day grace for each ongoing premium. A late initial payment voids the election.
• Compare total cost — 102% of the full premium is frequently more expensive than a subsidized marketplace plan; run both numbers.
• Watch the Medicare interaction — when a beneficiary is entitled to Medicare, COBRA generally becomes secondary, and an employer cannot force a COBRA election over Medicare; advise carefully to avoid coverage gaps and late-enrollment penalties.
• Document the advice — keep records of options presented, consistent with the producer's recordkeeping duties.

Missing the initial-payment window or assuming COBRA is automatically the best value are the two most common real-world mistakes producers can help clients avoid.

Exam Tip: COBRA election is not automatic — the beneficiary must affirmatively elect within 60 days and pay within 45 days of electing. Silence forfeits the coverage.