The federal Consolidated Omnibus Budget Reconciliation Act (COBRA) generally requires group health plans sponsored by employers with 20 or more employees in the prior year to offer employees and their families the option to continue benefits for limited periods of time when coverage under the plan would otherwise end due to certain qualifying events. These events include voluntary or involuntary job loss, reduction in hours worked, death, divorce, and other life events.
COBRA sets rules for how and when continuation coverage must be offered, how employees and their families may elect COBRA, and what circumstances justify terminating coverage. The length of time for which continuation coverage must be made available depends on the type of qualifying event. For termination of employment or a reduction in hours, the maximum period of COBRA is generally 18 months. Up to 36 months of coverage may be available due to other qualifying events, or if a second qualifying event occurs during the initial period of COBRA coverage.
Please review our COBRA Steps to Success to understand the key areas involved in implementing COBRA for your company. Most states also have laws (commonly referred to as "mini-COBRA" laws) which require that group health plans provide COBRA-like continuation of benefits for certain employees and their families.
Massachusetts law provides employees of small businesses (those with 2-19 employees) and their eligible spouses and dependents the right to continue coverage on their small group health benefit plan, except self-funded plans, for certain time periods under circumstances where coverage would otherwise be lost.
Continuation coverage generally must be provided for covered employees, spouses, and dependent children upon the occurrence of the following qualifying events, for up to 18 months:
In the case of a covered employee, spouse, or dependent child who is determined to be disabled under the federal Social Security Act at the time of a qualifying event involving termination or reduction in work hours, coverage may be extended from 18 months to 29 months if notice of such determination is provided to the carrier within 60 days of the date of such determination and before the end of the 18-month period.
Continuation coverage must be provided for covered spouses and dependent children upon the occurrence of the following qualifying events, for up to 36 months:
There are also certain instances under Massachusetts law where retirees (and their spouses and dependent children) whose former employers are involved in bankruptcy proceedings may be eligible to receive continuation of coverage.
Notice of the right to continue coverage must be provided to employees and spouses at the time coverage commences, and to qualified beneficiaries within 14 days of the date the small group carrier becomes aware of a qualifying event.
A small group carrier may require an employer to issue notices to qualified beneficiaries. The small group carrier in this case should provide the employer with written instructions that clearly and simply define the small group carrier's procedures regarding mini-COBRA and the employer's responsibilities with regard to the issuance of such notices.
Premiums for continuation of coverage may not exceed 102% of the group rate for similarly situated individuals who have not had a qualifying event, except that disabled individuals may be required to pay 150% of the premium after the initial 18-month period expires. The first premium payment must be made within 45 days after continuation of coverage is elected. The law allows a minimum 30-day grace period for subsequent premium payments.
Continuation of benefits may be terminated before the maximum time period for coverage expires for the following reasons:
Under the federal Patient Protection and Affordable Care Act (Health Care Reform), beginning with plan years starting on or after September 23, 2010, group health plans that offer dependent coverage must make the coverage available until a child reaches the age of 26. There is a temporary exception for grandfathered group health plans, which may exclude adult children who are eligible to enroll in an employer-sponsored health plan other than the group health plan of the parent. This exception will no longer be available for plan years beginning on or after January 1, 2014.
Individual states may have requirements that are more favorable to plan participants. For information about your state, please click here and contact your state insurance department for guidance.
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