Initial COBRA Notification Continuation Rights Under COBRA

Introduction Initial COBRA Notification Continuation Rights Under COBRA Below is the Group Health Continuation under COBRA - notice. The purpose of this initial notice is to acquaint you with the COBRA law, your notification obligations and your possible rights to COBRA coverage in the future. This notice is provided to all new enrollees of the benefit plan and must be delivered by first class mail or included in the Summary Plan Description (SPD) for the employer s group health plan. If there is a covered dependent whose legal residence is not yours, please provide written notification to your employer so a notice can be sent to them as well. Should you add additional dependents in the future, notice to the covered employee and spouse at this time will be deemed notification to the newly covered dependent. A single notice is being provided to all plan participants at this time, since based upon the information provided to your employer, all plan participants reside at the same location. If there is a covered dependent whose legal residence is not yours, please provide written notification to the benefits department. However, continuation coverage rights apply to individually to a covered spouse and/or covered dependent children. To provide options for individuals who lose health coverage from an employer-sponsored health plan, Federal Government enacted the Consolidated Omnibus Budget Reconciliation Act of 1985 (Public Law 99-272, Title X), commonly known as COBRA. The following will explain your rights under the law and what should be done by you or your qualified beneficiary (any covered dependent) who experiences a COBRA qualifying event. I. Length of Continuation Coverage - 18 Months If the event causing the loss of coverage is a termination of employment (other than for reasons of gross misconduct), or reduction of work hours, then for each qualified beneficiary will have the opportunity to continue coverage for a maximum period of 18 months. Each individual listed on the cover page, is a qualified beneficiary and has independent election rights to continuation coverage. For example, a spouse could elect continuation coverage even if the covered employee does not elect to continue coverage. Or a parent could elect to continue coverage on behalf of their dependent child who is losing coverage as a result of the qualifying event. Premium rates, however, will be determined by the number of qualified beneficiaries electing to continue coverage. If elected, continuation coverage is available to qualified beneficiaries subject to their continued eligibility. Pinnacle Claims Management, Inc. reserves the right to verify eligibility and terminate continuation coverage back to the original continuation effective date, if it determined you are ineligible or coverage was obtained through a material misrepresentation of the facts. Exception: If you are participating in a health flexible spending account at the time of the qualifying event, you will only be allowed to submit claims to the health flexible spending account until the end of the current plan year in which the qualifying event occurs. Premium Payments If a qualified beneficiary elects to continue health benefits, a qualified beneficiary is responsible for the full (100%) applicable premium payment for coverage selected, plus 2% administration charge. The applicable payment includes both the employer and employee s share of the total premium. Monthly payment amounts are fixed on a (calendar year) basis. If the applicable payment amount is adjusted, you will be notified as soon as possible prior to the new premium rates going into effect. Any person or entity can pay COBRA premium for a qualified beneficiary, however, it is the qualified beneficiaries responsibility to insure that the payment is made on a timely basis. If a third party agrees to pay your continuation coverage premium, you should call the third party each month to insure that a timely payment has been made. All premiums are to be postmarked by the required due date (the end of the month). If not, coverage will terminate, and not be reinstated. Initial Premiums A qualified beneficiary has maximum 45 calendar days from that date of election (postmarked date) to pay the initial premium payments. This initial premium payment is for the retroactive coverage period from the date of the loss of coverage to the end of the current month. For example, if you lose health coverage on January 31, and elected continuation coverage on March 1, you would have until April 16, to pay for the retroactive months of February, March and April. This 45-day period is the maximum period in which to make initial premium payments. You are responsible for making sure the amount of your payment is enough to cover this entire period. You may contact Pinnacle Claims Management to confirm the correct amount of your first payment. Monthly Premiums

Once your initial premiums are paid, future monthly premiums are due on the first of each month for which they are intended for. You will have a maximum (30) days grace period following the due date in which to make these premiums payments. If applicable payment is not made within the grace period, then coverage will be canceled back to the end of the prior month that was paid. Once COBRA coverage is canceled you will not be reinstated. No partial premiums will be accepted for your monthly contribution/premiums. It is the qualified beneficiary s responsibility to make these monthly payments, as you will not receive a monthly billing or warning notice. Failure to make a timely premium by the 1 st of the month they are intended for will result in suspension of certain medical and prescription benefits. Benefits Verification If a medical provider (hospital, Physician, Pharmacy, etc.) requests verification of benefits during this period, they will be told that you have 60 days to elected COBRA coverage but have yet to pay the premium and that no claims, including prescription drug charges, will be considered until the premium is paid. Employee/Qualified Beneficiary Notification Responsibilities While the employer is responsible for certain qualifying events, under group health plan rules and COBRA law the employee, spouse, or other family member has the responsibility to notify PCMI of the divorce, legal separation, or a dependent child losing dependent status under the plan. For examples of complete descriptions on the plan eligibility rule regarding a spouse and/or children, please read your summary plan description provided to you when you become eligible for benefits. To protect your continuation coverage rights in these situations, written notification of a qualifying event must be made within 60 days from whichever date is later, that date of the event or the date on which health plan coverage would be lost under the terms of the Plan because of the event. You must provide this notice to PCMI. Procedures for making this proper notice are listed below. Mail a complete copy of the Final Judgment Divorce Decree, or Legal Separation For dependent children to be eligible under guardianship, the child must: Live with you full time Be financially supported continuously and primarily dependent upon you for at least 50% of their support. PCMI must approve in advance any child dependent by guardian relationship Bankruptcy Qualifying Event In the case of the event that is the bankruptcy of the employer, to lose coverage means any substantial elimination of coverage under the plan, occurring within 12 months before or after the date the bankruptcy proceeding commences, any qualified that is covered on the day before the qualifying event. In the case of a qualifying event is the bankruptcy of the employer A covered employee who had retired on or before the date of substantial elimination of group health plan coverage is also a qualified beneficiary Any spouse or surviving spouse Dependent child of such a covered employee if, on the day before the bankruptcy qualifying event A proceeding in bankruptcy under title 11 of the United States Code with respect to an employer from whose employment a covered employee retired at any time. Consequences of Not Electing To Continue Your Group Health Benefits In considering whether to elect continuation coverage, you should take into account that failure to continue your group health coverage will affect your future rights under federal law. First, you could lose the right to avoid having pre-existing condition exclusions applied to you by other group health plans if you have more than a 63-day gap in coverage, and election of continuation coverage may help you not have such a gap. Second, you will lose the guaranteed right to purchase individual health insurance policies that do impose such pre-existing condition exclusions if you do not maintain continuation coverage for the maximum time available to you. Finally, you should take into account that you have special enrollment rights under federal law. You have the right request special enrollment in another group health plan for which you are otherwise eligible (such as a plan sponsored by your spouse s employer) within 30 days after your group health coverage ends. You will also have the same special enrollment right at the end of continuation coverage if you get continuation coverage for the maximum time available to you.

Electing Continuation Coverage To elect your continuation coverage rights, you will have a maximum of 60-days to decide if you wish to elect continuation coverage. Please follow the election procedures listed below. Step 1 Sign and date COBRA election form. Step 2 Make copy of the signed COBRA election form for your records. Step 3 Mail the COBRA election form back to PCMI at the address listed on the election form. It is recommended you obtain proof from the Post Office you mailed your COBRA election form. Your election is deemed made on the date election form is sent to PCMI. If the election form is not postmarked by the due date, then your rights to continue coverage will end. No late COBRA elections will be accepted. Step 4 Call PCMI within 10 days to insure your election form has been received. No Health Coverage During Election Period Qualified beneficiaries will not be covered under the plan during the above election period. If a health claim is submitted during this time, it will not be paid. In addition, if a medical provider calls for verification of benefits, they will be told you currently do not have benefits, but upon election and payment of applicable premium all valid claims will be released for payment. No-Qualified Beneficiaries Elected If a qualified beneficiary who is either the covered employee, spouse, and or covered dependents elects COBRA continuation coverage and the election form does not specify who the election is for only the covered employee will be enrolled for continuing medical benefits. The COBRA election form needs to be completely filled out according to your election preference. Retroactive Reinstatement Of Health Coverage If a qualified beneficiary elects to continue health coverage, it will not be re-activated until you elect and pay. If an election to continue coverage is made and applicable premiums are paid as detailed in this notice, then your health coverage will be retroactively reinstated back to your loss of coverage date and any valid pending claims will be released for payment. Keep in mind however it may take a period of time for the paper work to be processed by PCMI and the coverage to be re-activated. Should you receive medical services prior to reinstatement of your coverage, keep any medical payment receipts, and upon reinstatement, submit the claims for payment under the plan provisions. II. Length of Continuation Coverage - 36 Months COBRA law specifies four qualifying events that provide eligible qualified beneficiaries (dependent spouse or children) with 36 months of continuation coverage. 36 Months Qualifying Events The death of a covered employee; The divorce or legal separation of a covered employee from the employee s spouse; A covered employee s becoming entitled to Medicare benefits under Title XVIII of the Social Security Act (42 U.S.C. 1395-139 5ggg); A dependent child s ceasing to be a dependent child of a covered employee under the generally applicable requirements of the plan If elected and paid for, each qualified beneficiary has the right to continue coverage for a maximum 36 months from date of qualifying event. This means continuation coverage will begin on the date after group coverage terminates. Exception: if you will be participating in a health flexible spending account at the time of the qualifying event, you will only be allowed to continue the health flexible spending account until the end of the current plan year in which the qualifying event occurs. While the employer is deemed to know when and employee has died or when they have become entitled to Medicare, it is the qualified beneficiaries responsibility to inform PCMI when a divorce/legal separation has occurred or when a dependent has ceased to be a dependent. The 36 months of coverage is measured from the date of the qualifying event. An employer can determine the qualifying event date to be the actual date of the event or the date coverage is lost due to the event. If the loss of coverage date is used, this must be used consistently and without discrimination. Each qualified beneficiary is entitled to 36 months of continuation coverage. This includes the covered spouse, and/or covered dependent children.

Individual Conversion Policy At the end of your federal continuation coverage, a qualified beneficiary may have other health care options available to them. A qualified beneficiary would be allowed to enroll in an individual conversion health plan if provided by another carrier at that time. Change To Eligibility Requirement for Senior COBRA Effective January 1, 2005 Under new law passed by the California legislature and approved by the governor, changes the eligibility requirements for Senior COBRA only to those individuals who meet the eligibility requirements PRIOR to January 1, 2005. What this means is that if an employee experiences a qualifying event (termination of employment) on or after January 1, 2005, then the extended Senior COBRA benefits are NOT available at the end of their federal continuation coverage! To qualify for the extended coverage, the qualified beneficiary must be 60 years of age or older, worked for the employer for five years, and experience the COBRA qualifying event before the end of 2004. III. Secondary Event Extensions Another extension of the 18 months or 29 months continuation period can occur, if during the 18 months or 29 months of continuation coverage, a second qualifying event takes place such as a divorce, or legal separation, death, Medicare entitlement (under Part A, Part B, or both), or dependent child ceasing to a dependent. A second event can only occur if the second event would have caused the spouse or dependent child to lose coverage under the plan had the first qualifying event not occurred. Continuation coverage would be extended to a maximum 36 months from the date of the original qualifying event for eligible dependent qualified beneficiaries. It will be the qualified beneficiary s responsibility to notify PCMI of a second event. Procedures for making proper and timely notice of a second event will be detailed in the election notice when a qualifying event occurs. Social Security Disability Extension The 18 months of continuation coverage can be extended for an additional 11 months of coverage, to a maximum of 29 months, for all qualified beneficiaries if the Social Security Administration determines a qualified beneficiary was disabled according to Title II of XVI of the Social Security Act. The disability would have to have started at some time prior to the date of the qualified date or with in the first 60 days of continuation coverage and must last until the end of the 18 months period of continuation coverage. At any time during the first 60 day of continuation coverage, if a new born or adopted child is added to a covered employee s continuation coverage, then the 60-day disability window for the new born or adopted is measured from the date of birth or date of adoption: this notice can be made by any qualified beneficiaries. IMPORTANT NOTICE: If a qualified beneficiary already has a disability determination prior to the date of the qualifying event notice must be made to PCMI with in 60 days of the qualifying event if these time frames are not complied with then additional 11 month extension of continuation coverage will not be provided. If the coverage is extended to 29 months due to Social Security disability, premiums will equal 150% of the applicable premium during the extended coverage period. This extension applies separately to each qualified beneficiary who chooses not to continue coverage, then the other qualified beneficiaries are still eligible for the extension. If coverage is extended and the disabled qualified beneficiary has elected the extension, then the applicable premium rate is 150% of the rate. If only non-disabled qualified beneficiaries extend coverage, the premium rate will remain at the 102% level. It is also the qualified beneficiaries responsibility to notify PCMI within 30 day if a final determination has been made that they are no longer disabled.

Special Medicare Entitlement Rule for Dependents Only If the employee had become entitled to Medicare benefits prior to the date of the original 18-month qualifying event, then the dependent qualified beneficiaries are eligible for 18 months of continuation coverage, or 36 months measured from the date of the Medicare entitlement, whichever is greater. For example, if a covered employee becomes entitled to Medicare eight (8) months prior to the date on which the employment terminates, the dependent qualified beneficiaries will be offered 28 months of continuation coverage. The covered employee however, is only offered 18 months. It is the responsibility of the qualified beneficiary or covered dependent to notify PCMI within 60 days of the 2 nd qualifying event and within the original 18 or 29-month continuation timeline. Employees who first experience a reduction in work hours followed by termination shall only be eligible for 18 months of COBRA continuation coverage. IV. COBRA Qualifying Beneficiaries For someone to be considered a qualified beneficiary, they must have been enrolled on the group plan on the day prior to the qualifying event. The exception to this rule is when a child is born to, or placed for adoption with, a COBRA qualified beneficiary during the COBRA continuation period. These children will receive all rights of a qualified beneficiary throughout the COBRA continuation period. Employees If you are an employee, covered by PCMI benefit plan, you have the right to choose COBRA continuation coverage if you lose your group health coverage because of a reduction in hours of employment or the termination of your employment for reasons other than gross misconduct on your part. Definitions of Voluntary, Involuntary Termination, or Reduction of Hours. If a covered employee voluntarily terminates (for example, quits or retires) employment and the termination will cause a loss of coverage, the termination is a COBRA qualifying event. All qualified beneficiaries are entitled to 18 months of continuation coverage measured fro the date of the qualifying event. If a covered employee is involuntarily terminated from employment and the termination will cause a loss of coverage, then the termination is a COBRA qualifying event. All qualified beneficiaries are entitled to 18 months of continuation coverage measured form the date of the qualifying event. Gross Misconduct: if the termination is due to Gross Misconduct, an employer is not obligated to offer COBRA continuation coverage to the exemployee nor any covered dependents. If a covered employee work hours are reduced, either voluntarily or involuntarily, and the reduction of hours will cause a loss of coverage, then the reduction of hours is a COBRA qualifying event. All qualified beneficiaries are entitled to 18 months of continuation coverage measured from the date of the qualifying event. Reduction of Hours can include: Full-time to Part-time Strikes Layoffs Leave of absence (not FMLA leaves)

Military Call-Up Military reservists and their covered family members are entitled to two years of premium coverage under bill passed October 7, 2004 by the U.S. House of Representatives. The employees and their covered dependents are offered 24 months of federal COBRA continuation coverage, rather then the standard 18 months. These are effective for coverage elections occurring on or after the bill s enactment (October 7, 2004). Spouses If you are the spouse of an employee covered by PCMI benefit plan, you have the right to choose COBRA continuation coverage for yourself if you lose group health coverage under PCMI benefit plan for any of the following reasons: The death of your spouse A termination of your spouse s employment for any reasons other than gross misconduct or reduction in your spouse s hours of employment Divorce or, if applicable, legal separation from your spouse; or Your spouse becomes entitled for Medicare (Part A, Part B or both) Under federal rules, the term "spouse" does not include domestic partners. Domestic Partners According to the COBRA statute, a qualified beneficiary is the covered employee the spouse of the covered employee, and the covered dependent child of the employee. The question arises as to whether or not a covered domestic partner is a covered spouse under the meaning of the COBRA statute. The answer, according to the IRS, is no. A domestic partner does not qualify as a spouse under federal law. While many health plans allow employees to add a registered domestic partners to the health plan, if for example, a termination of employment occurs, the domestic partner is not a qualified beneficiary and is therefore unable to elect continuation coverage as an individual. That does not mean however, that the domestic partner cannot be added back to the plan according to the health care plan rules Domestic partners are considered members of the same sex. One or both of the persons meet eligibility criteria under Title II of the social security Act as defined in 72 U.S.C Section 402 (a) for old age insurance benefits or Title XVI of the social security Act as defined in 42 U.S.C. Section 1381 for aged individuals. While PCMI s health plans may allow domestic partners to be covered, if a domestic partner loses group health coverage as a result of one of the above listed events, they will not be offered the opportunity to continue group health coverage as a qualified beneficiary. California law defines a domestic partner as two adults of the same sex, who have filed a Declaration of Domestic Partnership with the Secretary of State and have received a confirmed copy of the Declaration. A domestic partner will also include a person eligible for Social Security benefits where at least one partner is over age 62. Health Care Service Plan May Require Domestic Partner Verification A health care service plan may require that the employee verify the status of the registered domestic partnership by providing to the plan a copy of a valid Declaration of Domestic Partnership filed/endorsed with the Secretary of State pursuant to Section 298 of the Family Code or an equivalent document issued by local agency of this state, another state, or a local agency of another state under which the partnership is created. The plan may also require that the employee notify the plan upon the termination of the registered domestic partnership.

Dependent Child If you are the covered dependent child of an employee, you will become a qualified beneficiary and have the right to elect continuation coverage for yourself if you lose group health coverage because of any following qualifying events: A termination of the parent-employee s employment for any reasons other than gross misconduct or reduction in the parent-employee s hours of employment; The death of the parent-employee; The parent-employee s divorce or, if applicable, legally separate; The parent-employee becomes entitled to Medicare benefits (Part A, Part B or both); or You cease to be eligible for coverage as a dependent child under the terms of the health plan. Elections On behalf Of Minors An election of behalf of a minor child can be made by the child s parent or legal guardian. Special Medicare Entitlement Rule For Dependents Only If the employee had become entitled to Medicare benefits prior to the original 18-month qualifying event, then the dependent qualified beneficiaries are eligible for the 18 months continuation coverage, or 36 months measured from the date of the Medicare entitlement, whichever is greater. For example, if a covered employee becomes entitled to Medicare eight (8)months prior to the date on which employment terminates, the dependent qualified beneficiaries will be offered 28 months of continuation coverage (36-8=28). The covered employee, however, is only offered 18 months. New Dependents and Open Enrollments If, during a period of continuation coverage, a qualified beneficiary gains a new dependent (such as through marriage or birth), the new dependent(s) may be added to the coverage according to the rules of the plan. However, the new dependent does not gain the status of the qualified beneficiary and will lose coverage if the qualified beneficiary who added them to the plan loses coverage. An exception to this is if a child is born to or a child is placed for adoption with the covered employee qualified beneficiary. If the new born or adopted child is added to the covered employee s premium coverage, then unlike a new spouse, the new born or adopted child will gain the rights of all other qualified beneficiaries. The addition of a new born or adopted child does not extend the continuation coverage period. Plan procedures for adding new dependents can be found in the (summary plan description). Premium rates will be adjusted at that time to the applicable rate. In addition, should an open enrollment occur during your continuation period, we will notify you that right as well. Each qualified beneficiary will have independent right to select any of the options or plans that are available for similarly situated non-cobra participants.

V. COBRA Law With the exception of church groups and the Federal Government, employers with 20, or more employees (CAL-COBRA 2 19 employees), that provide health benefits are subject to offering employees (and/or their covered dependents) the right to purchase group health coverage which you will be required to pay called continuation coverage upon experiencing a qualifying event. Should an actual qualifying event occur in the future, PCMI will send you additional information and the appropriate election notice at that time. This procedure is different from converting to individual coverage after terminating employment. The major advantages are that qualified beneficiaries cannot be discriminated against for having a pre-existing medical condition and will be charged the company s group rate plus 2% administrative fee. These COBRA rates may or may not be less than premiums under conversion policy so it is recommended that you contact an independent agent/broker directly to receive a quote on a conversion or individual plan. With many conversion plans, covered benefits are reduced. Under COBRA continuation, your benefits would remain identical to the group plan s coverage. COBRA also allows for covered dependents to independently continue their health coverage when lost through a qualifying event. If you choose an individual or conversion plan you will forfeit your right to COBRA continuation coverage. Coverage under COBRA Since COBRA continuation coverage is a continuation of benefits, your coverage/benefits would remain the same as prior to the qualifying event. If the employer elects to change plans and/or benefits, you would be eligible to enroll in the changed plan therefore receiving identical benefits as a similarly situated active employee. If your plan has deductibles and coinsurance maximums, a new determination will be made based upon expenses incurred prior to the qualifying event of only family members continuing under the plan. COBRA qualified beneficiaries that move from the plan s service area may lose coverage under the group plan, as would a similarly situated active employee. If your employer offers a plan that would provide coverage in the new area, the COBRA qualified beneficiary would be offered the right to enroll in the new plan. The law states that a COBRA qualified beneficiary may be terminated from the plan upon receiving other coverage. It should be understood that if an individual were enrolled on a plan, i.e. Medicare, prior to their COBRA continuation coverage election; they would still have the right to continue under COBRA coverage. If an individual is denied COBRA continuation coverage under the plan and is later determined that the denial was invalid, the individual will be reinstated and offered COBRA continuation coverage if a qualifying event has expired. Open Enrollment COBRA qualified beneficiaries are offered the same rights as similarly situated active employees during the employer s open enrollment period. You may change plans and add/delete eligible dependents. Although part of the family, dependents added during open enrollment will not have the same COBRA rights as the initial qualified beneficiaries. Premium Costs The cost of COBRA continuation coverage will be determined at the time of the qualifying event. Your cost will be the amount PCMI or the insurance company charges the employer for similar situated active employee plus a 2% administrative fee. Qualified beneficiaries deemed disabled will be charged up to 150% administrative fee during their 11-month extension. This notice reserves PCMI s right to institutionalize this administrative fee at any time. If PCMI or the insurance company delivers a premium increase or reduction, the COBRA qualified beneficiaries premium will be adjusted accordingly. Premium rates are set for a 12-month period based upon the employer s plan year.

If you elect to continue under COBRA continuation coverage, you will be granted an initial 45-day grace period to make your initial payment for premiums back to the date termination from the plan occurred. For your COBRA continuation coverage you may pay your 18, 29, or 36 months in full or you may pay monthly. Premiums are due by the first (1 st ) of the coverage month. There is a grace period of at least 30 days for payment of the regularly scheduled premium. However, it is the qualified beneficiary s responsibility to insure that payment is received by PCMI; regardless if a premium notice is received for that month or not. Failure to make a timely payment will result in suspension of certain medical benefits, including pharmacy. Additionally, failure to make the required payment by the end of the grace period will result in the loss of coverage back to the date for which premiums were to be applied without possible reinstatement. At the end of the 18, 29 or 36 month of COBRA continuation coverage, qualified beneficiaries will be allowed to enroll in an individual/family conversion or HIPAA guarantee issue health plan. Please consult an independent health insurance agent/broker for additional information and assistance. Notification Requirements Under the law, the COBRA qualified beneficiary or a family member has the responsibility to inform the PCMI, within 60 days from whichever date is later. The date of the event or the date on which health plan coverage would be lost under the terms of the plan because of the event of a divorce, legal separation or a child loosing dependent status under employer benefit plan. Generally, it is the Plan Administrator, but check with your employer s Human Resources Department to make sure. If the qualified beneficiary or a family member fails to notify the Plan Administrator within the required 60-day notification period, then rights to continuation coverage will be forfeited. You must provide this notice to PCMI. Procedures for making this proper and timely notice are listed below. Example: Complete PCMI Enrollment form Make a copy of the form for your records Attach the required documentation depending on the qualifying event For a divorce: Final judgment stamped & endorsed by the court in which finalized For a legal separation: Final judgment stamped and endorsed by the court in which authorized Mail the notification form to the address listed on the form and document your mailing Call PCMI within 10 days to insure the notification form has been received In addition, keeping an individual covered by the health plan beyond what is allowed by the plan will be considered insurance fraud on the part of the employee/qualified beneficiary. The employer has the responsibility to notify the PCMI or to initiate the COBRA process in the event of the employee s death, termination, and reduction of hours of employment or Medicare entitlement. If an employer files for bankruptcy reorganization and retiree health coverage is lost within 1 year before or after the bankruptcy filing, COBRA coverage could continue until death or a retiree (or a surviving spouse of a deceased retiree) for 36 months from the retiree s death (after the bankruptcy filing) in the case of the spouse and dependent child (ren). When the Plan Administrator is notified that one of these events has happened, it will turn notify you that you have the right to choose COBRA continuation coverage. Should an actual qualifying event occur and it is determined that you are eligible for continuation; you will be notified of all your actual rights at that time. Under the law, you have at least 60 days from the date you would loose group benefit coverage because of one of the events described above to inform the PCMI that you want COBRA continuation coverage. If you do not elect COBRA continuation coverage on a timely basis, your group benefit health benefits coverage will end.

Employer and Qualifying Beneficiaries Responsibilities When an employee or dependent has experienced a qualifying event, as described above, the employer must notify PCMI of the qualifying event within 30 days following the date group coverage is terminated. The employee will be sent notification of their rights to elect COBRA continuation coverage. Each qualified beneficiary has independent election rights and will have 60 days to elect continuation coverage. The employee or dependent qualified beneficiary has the responsibility to notify the employer or PCMI of his/her desire to continue coverage within 60 days from the later of the date of notification or loss of coverage. Upon acceptance, the qualified beneficiary would be notified of any enrollment forms that must be completed. For each qualified beneficiary who elects group health benefits continuation coverage, coverage will begin on the date coverage under the plan would be lost because of the event. If the qualified beneficiary does not elect continuation coverage within this election period, then rights to continue health benefits will end and they cease to be a qualified beneficiary. Qualified beneficiaries electing COBRA continuation coverage are responsible for premiums back to the date of termination from the group plan. Special Application Rules in California and only for Pinnacle Claims Management, Inc Eligible Employee or Participant. Individuals who are employed by California employers at the time they become eligible for COBRA continuation coverage and whose COBRA coverage would otherwise end in 18 months may, under Cal-COBRA, continue their coverage with the same group carrier or HMO for up to a total of 36 months. This is effective September 1, 2003 for individuals who began receiving federal COBRA continuation coverage after January 1, 2003. CAL-COBRA applies to employers with 2 19 employees. Children Born to, or Placed for Adoption with the COBRA Qualified Beneficiary after the Qualifying Event During the period of COBRA continuation coverage, a child is born to, adopted by or placed for adoption with a COBRA qualified beneficiary and the covered employee has elected COBRA continuation coverage for himself/herself, the child is considered a qualified beneficiary. The COBRA timeline for the new child born to adopted by or placed for adoption is measured from the date of the original qualifying event. The COBRA qualified beneficiary or other guardian has the right to elect COBRA continuation coverage for the child, provided the child satisfies the otherwise applicable plan eligibility requirements, i.e. age. The COBRA Qualified Beneficiary or a family member must notify the PCMI within 30 days of birth, adoption or placement to enroll the child on COBRA, and COBRA coverage will last as long as it lasts for other family members of the COBRA Qualified Beneficiary. The 30-day period is the Plan s normal enrollment window for newborn children, adopted children or children placed for adoption. If the COBRA Qualified Beneficiary or family member fails to notify the PCMI in a timely fashion, the COBRA Qualified Beneficiary will NOT be offered the option to elect COBRA continuation coverage for the child. The PCMI reserves the right to verify continuation eligibility status and terminate continuation coverage retroactively if a qualified beneficiary is determined to be ineligible or if there has been a material misrepresentation of the facts. VI. Family and Medical Leave Act Effective August 5, 1993, the Family and Medical Leave Act of 1993 (FLMA), was enacted to allow eligible employees the right to take up to 12 weeks of unpaid leave to care for themselves or a relative. If you elect to take this leave and later notify your employer that you will not be returning, you have the ability to continue your coverage for 18 months from the date benefits are terminated. FLMA does not apply to all organizations and can differ between states. Please contact your employer or H.R. representative where you work for further information on FLMA. COBRA Coverage If The Employee Does Not Return To Work If coverage lapses during the FMLA period due to non-payment of COBRA premiums on the part of the employee, and the employee does not return to work at the end of the FMLA period, the employer is obligated under the new COBRA rules to offer COBRA continuation coverage at the time.

VII. Cancellation of COBRA Continuation Coverage COBRA continuation coverage has maximum time frames but you may voluntarily terminate coverage at anytime by notifying PCMI in writing, signed and dated in advance. COBRA continuation coverage may end prior to the expiration date of 18 months (29 or 36 if applicable) for any of the following reasons below: The former employer ceases to provide their group health coverage through Pinnacle Claims Management COBRA premiums are not paid in a timely manner If the COBRA qualified beneficiary and/or covered dependents becomes covered under another group plan after the date of COBRA election. However, if the plan excludes a covered person s pre-existing condition, that person may continue under COBRA continuation coverage. Health Insurance Portability and Accountability Act of 1996 limits maximum time frames for pre-existing. Therefore a person with prior creditable coverage exceeding the pre-existing limitation period of the new group plan may have any pre-existing timeframe eliminated by the employer A COBRA qualified beneficiary becomes entitled to Medicare after the date of COBRA election. Meaning enrollment in Part A, Part B or both. If a disabled qualified beneficiary is deemed no longer disabled during the 11-month extension, the entire family may be terminated from COBRA continuation coverage. A qualified beneficiary notifies PCMI in writing they wish to cancel COBRA continuation coverage. For cause, on the same basis that the plan terminates the coverage of similarly situated non COBRA participants Any required premium for continuation coverage is not paid in a timely manner as described A qualified beneficiary extended continuation coverage extended to 29 months due to Social Security disability and final determination has been made, the qualified beneficiary is no longer disabled (first day of the month after 30 days from the final determination). Should continuation coverage be terminated for one of the above reasons, a notice will be sent to you at that time outlining any available health coverage options that may be available to you. Important Requirement: If you become covered by another group health plan or become entitled to Medicare after electing to continue your group health benefits you are required to notify PCMI in writing at that time so a determination can be made as to your continued eligibility for our group health insurance. Address Change And Questions To receive accurate and timely information regarding your continuation rights, please notify PCMI of any change in address immediately by completing an enrollment card and mailing it to the listed address. You should keep a copy of the form for your own records and call within 10 days to insure that it has been received. Questions Regarding COBRA Remember, this notice is simply a summary of your potential future continuation coverage options and not a description of your actual health benefits under the plan. Should a qualified beneficiary need actual plan benefits information to assist in making the election decision please consult your summary plan description. You can get a copy of your summary plan description from (Pinnacle Claims Management, 17620 Fitch St. Irvine, CA 92614 or at 1(800) 649-9121. Should you have any continuation coverage questions regarding your information contained in this or any future notice, you should contact PCMI as listed above. For more information about your rights under ERISA, including COBRA, the Health Insurance Portability and Accountability Act (HIPAA), and other laws affecting group health plans, contact the nearest Regional or District Office f the U.S. Department of Labor s Employee Benefits Security Administration (EBSA) in your area. Addresses and phone numbers of Regional and District EBSA are available through EBSA s web site at www.dol.gov/ebsa