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State law generally requires both insurance companies and HMOs to allow group health plan participants, whose coverage under a group plan is terminated for a reason other than nonpayment of premiums, to convert to an individual policy without having to present evidence of insurability.
Under California law, you must notify an employee of the right to convert to an individual policy within 15 days of termination of group coverage.1 COBRA requires plan administrators to provide notice of any conversion rights — both at the time of the qualifying event and when COBRA coverage ends.2 ERISA, the federal law that regulates employee benefit plans, may pre-empt this requirement. See Employee Retirement Income Security Act (ERISA) for more information. Employee associations and entities providing hospital, surgical or major medical benefits to their employees or members must also provide conversion coverage.
1. Lab. Code sec. 2806
2. Treas. Reg. sec. 54.4980B-7, Q&A-8