HR4U

On October 9, 2009, an important new Federal law affecting employer-sponsored group health plans will become effective. For calendar-year plans, the law will apply as of January 1, 2010.

The new law is known as “Michelle’s Law” and expands employers’ coverage and notice obligations for eligible college students. California already has its own version of Michelle’s Law.

New Requirement
All group health plans must allow a college student with a “serious illness or injury” to remain eligible for active dependent coverage for 12 months, even if he or she no longer qualifies as a full-time student.

The 12 months, however, does not extend coverage beyond another independent event that would end active/dependent status, such as the parent’s termination of employment or the student exceeding the plan’s age limit. COBRA coverage would not be offered until after the 12-month special period has expired, unless the student returns to full-time status and remains eligible under other terms of the plan.

New Notice or Disclosure Requirements
If a health plan requires employees to certify the full-time student status of any dependent, then any description of that requirement must include a notice about the 12-month extension. The notice must be written in a manner that is understandable by the typical plan participant.

The California Twist
Once again California has chosen to do things differently than the Congress. The California law became effective January 1, 2009 so as of October 9, you will now have to wade through both laws.
• California allows for an extension beyond one year. In the event that the disabling condition persists and the student is chiefly dependent upon the covered employee for support and maintenance then coverage will continue beyond the limiting age upon timely submission of proof to the insurer/HMO.
• Under the state law, the insurer/HMO can terminate the student’s coverage if it has not received proof of the disabling condition and that the employee is the chief provider of support and maintenance within 60 days of the insurer/HMO’s notice that coverage is terminating for loss of student status. Please note that federal law sets no time limit for providing evidence.
• California law requires all insurers/HMOs offering health care coverage to provide a notice to the covered employee with a dependent 90 days prior to the reaching his/her initial limiting age (e.g. age 19). The notice must include a description of the requirements for extension under Michelle’s Law. Coverage will terminate for that dependent absent a showing of student status or that student status was interrupted by a qualifying injury, illness or condition within the 60 day period following the carrier notice.
• The California law also makes it clear that health care coverage for students cannot terminate solely due to a break in the school calendar.
• At present, under California law, the insurers and health care service organizations must circulate all appropriate notices including a notice to dependents that are approaching the end of eligibility.

Generally, in California, when State and Federal law conflict, you must follow the law that is more favorable to the employee. Therefore, should any issues develop around Michelle’s law, you should check with your legal counsel before making any final decisions.

What You Need to Do Now
If you haven’t already done so, you should review your plan document and summary plan description to update and clarify any provisions related to dependents who are full-time college students, including the addition of language about the special 12-month period. You also need to make sure your benefits and human resources staff is trained on how to recognize situations that will trigger these new requirements. It would also be a good idea for employers or plan sponsors to audit the status of dependents under their plan with regard to continuing eligibility for benefits absent any carrier efforts to do so

The Electronic Discovery Act
Governor Arnold Schwarzenegger has signed into law California’s first set of electronic discovery regulations, the Electronic Discovery Act effective 6/29/09. The new law largely follows federal regulations establishing procedures for litigants who seek electronically-stored information.

Under the new law, a party seeking electronic information may specify the form in which documents are to be produced. If the request does not specify the form for production, the party producing the information should produce it in a form in which it was ordinarily maintained or in a form that is reasonably usable. The party seeking the information must take reasonable steps to avoid imposing undue burden or expense on the producing party.

A party who objects or seeks a protective order on the grounds the requested data is not reasonably accessible because of undue burden or expense bears the burden of demonstrating this. However, even if the electronically-stored data is from a source that is not reasonably accessible, a court may nonetheless order discovery if the requesting party shows good cause. In this case, the court also may set conditions for the discovery, including allocation of expenses.

The Act provides some safe harbor protections to responding parties. It shields a respondent from sanctions “for failure to provide electronically-stored information that has been lost, damaged, altered, or overwritten as the result of the routine, good faith operation of an electronic information system.”

How the California ESA Differs from the Fed
The one area where the California EDA differs from the federal approach concerns the discovery of electronically stored information from sources that a party identifies as not reasonably accessible.

The California EDA does not contain explicit language that states a party does not have to provide discovery of inaccessible ESI. Just as important, unlike the Federal Rules, which put the burden on the requesting party to file a motion to compel to obtain discovery from sources of ESI that are identified as not reasonably accessible, the California EDA appears to place the burden on the producing party to file a Protective Order to claim that specified data sources are inaccessible due to undue burden or expense, and thus do not have to be searched.

Conclusion
Given the new California EDA, it is more important than ever for California employers to become intimately familiar with their own IT systems, policies and practices. In order to identify sources of information that are not accessible due to undue burden or cost, you must understand your IT systems, where relevant data resides, and how difficult and/or burdensome it is to extract the information for discovery. Further, detailed knowledge of your IT systems is critical for determining the form of production for ESI, which now needs to be addressed at the time discovery requests are served or responded to. Without such knowledge, you may agree to produce ESI in a manner that your IT systems will simply not allow and may fail to identify opportunities to take advantage of the cost-shifting provisions discussed above.

From a practical standpoint, the California variation on the treatment of inaccessible ESI is not that much different than the Federal Rules. In either case, responding parties have to be proactive if they intend to not search or produce electronic data from inaccessible sources by:
o Promptly identifying sources of ESI that are not reasonably accessible by lodging a timely objection to a discovery request; and
o Providing sufficient details about the burdens and costs of providing the discovery from and the likelihood of finding responsive information on the sources identified.

Therefore, given the cost-shifting provisions of the EDA that are unique to California, employers need to be aggressive about seeking mandatory cost-shifting when dealing with a discovery request that calls for the production of ESI contained on any type of back-up media.