How Does COBRA Insurance Work in Massachusetts?

Health insurance coverage often changes when an individual experiences a significant life event, such as a job loss. Federal and state laws provide mechanisms that allow individuals to temporarily continue their health benefits.

Federal COBRA Eligibility and Duration

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law offering temporary continuation of group health coverage. This law generally applies to group health plans sponsored by private-sector employers with 20 or more employees, as well as most state and local governments. A “qualified beneficiary” is an individual covered by a group health plan prior to a qualifying event.

A qualifying event is an occurrence causing loss of health coverage. Common qualifying events for employees include voluntary or involuntary termination of employment (other than gross misconduct) or a reduction in hours. For spouses and dependent children, additional qualifying events include the covered employee’s death, divorce or legal separation from the covered employee, or the covered employee becoming entitled to Medicare. A dependent child also experiences a qualifying event when they cease to be a dependent under the plan’s rules.

COBRA’s maximum coverage period depends on the qualifying event. If the qualifying event is termination of employment or a reduction in hours, coverage lasts up to 18 months. For other qualifying events, such as divorce, legal separation, or loss of dependent child status, the maximum coverage period is 36 months.

Certain circumstances can extend these periods. A disability extension may allow an additional 11 months of coverage, totaling 29 months, if a qualified beneficiary is determined by the Social Security Administration to be disabled within the first 60 days of COBRA coverage. A second qualifying event (e.g., death of the covered employee or divorce) during the initial 18-month COBRA period can extend coverage up to 36 months from the original qualifying event.

Massachusetts State Continuation Coverage

Beyond federal COBRA, many states, including Massachusetts, have their own laws for health insurance continuation, often referred to as “mini-COBRA” laws. Massachusetts continuation laws (Chapter 175, Section 110G for insured plans and Chapter 176G, Section 4A for health maintenance organizations (HMOs)) apply to smaller employers below the 20-employee threshold for federal COBRA.

Massachusetts law often provides for continuation of coverage for 18 months, aligning with federal COBRA’s employment termination duration. These state laws generally cover similar qualifying events as federal COBRA. Eligibility criteria are often broader, potentially including individuals not qualifying for federal COBRA due to employer size.

The interplay between federal COBRA and Massachusetts state continuation laws is important. If an employer is subject to federal COBRA, it generally takes precedence. However, if federal COBRA does not apply, or if the state law offers more favorable terms, individuals may utilize the state’s continuation provisions.

Individuals cannot elect both federal COBRA and state continuation coverage simultaneously. Instead, they benefit from the most advantageous provisions available, ensuring a pathway to continued health coverage, regardless of employer size.

Notifying and Electing Coverage

Notifying and electing COBRA or state continuation coverage involves responsibilities for both the employer and qualified beneficiary. Employers must provide initial notices to employees and their spouses when they become covered under a group health plan. This notice informs them of their COBRA rights and general continuation coverage information.

When a qualifying event occurs, the plan administrator (often the employer) must provide an election notice to the qualified beneficiary. This notice details the right to elect continuation coverage, its specific coverage period and cost. This election notice must be provided within a specific timeframe after the qualifying event or plan administrator notification.

Qualified beneficiaries must notify the plan administrator within 60 days for events like divorce or legal separation, or a child ceasing to be a dependent. Failure to provide timely notification can result in loss of the right to elect continuation coverage.

Upon receiving the election notice, a qualified beneficiary has at least 60 days to elect continuation coverage. This period begins on the later of the notice date or the date coverage would otherwise terminate. To elect, the qualified beneficiary must complete and return the required forms to the plan administrator within this period.

Understanding Coverage Costs

Individuals electing COBRA and state continuation coverage bear the full cost of premiums. Unlike active employee coverage, where employers often subsidize a significant portion, they are responsible for both employee and employer portions. This can make continuation coverage considerably more expensive than active employee premiums.

Continuation coverage cost is based on the group health plan’s cost for similarly situated active employees. Employers can charge up to 102% of the full premium, with 2% for administrative fees.

Premiums are typically due monthly. The initial payment covers the period from when coverage would have otherwise been lost. Subsequent monthly payments usually have a 30-day grace period for payment without immediate termination.

Failure to make timely premium payments, even within a grace period, can terminate continuation coverage. Once coverage is terminated for non-payment, it is generally not reinstated. Understanding these financial responsibilities is important for maintaining health benefits.

Citations

Massachusetts General Laws Chapter 175, Section 110G; Chapter 176G, Section 4A. U.S. Department of Labor. “COBRA Continuation Coverage”. www.dol.gov.