Why are some of my Covered California for Small Business clients receiving delinquency and termination notices?

CCSB’s processes on late payment notices and contract terminations are similar to that of other carriers in the small group market. When an employer does not make payment by the last day of the month for the following month’s coverage they will receive a Notice of Delinquency. The payment must be for the full amount of the invoice. It’s recommended that employers not “self-adjust” based on additions or deletions of plan participants. Employers should pay the invoiced amount.

• If your client receives a Notice of Delinquency, they will have until the end of the delinquent month (referred to as the “grace period”) by which to make full payment for that delinquent month, otherwise, their coverage will be cancelled.

Once an employer loses coverage with CCSB or any carrier and fails to have a replacement plan in place resulting in an unplanned gap in coverage, there are potentially serious consequences, including but not limited to:

• If deductions have been made from employees’ payroll for a plan that has been cancelled and not replaced there are potential ERISA violations and tax consequences by and for the employer. A tax advisor and employment attorney should be consulted immediately.
• If there is a gap in coverage, this may impact employees’ conformance with the individual mandate and may open them up to a penalty for 2018.
• CCSB or any carrier will still pursue the employer for reimbursement of unpaid coverage months.

If your client’s coverage is cancelled they may request that the coverage be reinstated. The decision to rescind the termination is made solely at the discretion of the carrier.

To help you and your clients, we have developed Advice to Agents About CCSB’s Payment Policies. However, the most important piece of advice we can provide: advise your clients to pay on-time and for the invoiced amount.

Finally, when you and your client are simply terminating coverage in order to move to another carrier, you should always notify the current carrier via a formal letter of intent to terminate prior to the termination date. CCSB and any other carrier will issue delinquency and termination notices if they have not been notified and will expect to be paid for any unpaid coverage months if they have not been notified in advance of a termination.