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This Illinois Human Resources Manual is offered to you for free. Find state specific laws and regulations below.

Health insurance continuation coverage — Illinois

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that requires that most employers offer temporary continuation of group health coverage to covered employees, their spouses, their former spouses, and their dependent children when such coverage would otherwise be lost due to certain specific events.

Coverage

All employers who maintain a group health plan are subject to COBRA if the employer employed at least 20 employees (counting full-time and part-time) on at least 50% of its typical business days during the previous calendar year. Part-time employees are counted as partial employees. Also, for purposes of the 20-employee threshold, employees of all companies that are in a controlled group with the employer must be counted.

Generally, employers that are a federal governmental entity or a religious organization are not subject to the COBRA requirements. State and local governmental employers, however, are subject to COBRA. COBRA applies to only group health care plans maintained by a covered employer that provides any of the following kinds of medical care for employees or their families:

  • inpatient or outpatient hospital care
  • dental care
  • vision care
  • prescription drugs
  • surgery benefits
  • physician service.

Disability income plans and life insurance plans are not included.

COBRA rights must be offered for each separate plan sponsored by the same employer.

COBRA continuation coverage includes continuation coverage required under federal law (COBRA or Temporary Continuation Coverage) or a state law that provides comparable continuation coverage for employers not covered by the federal law.

Illinois continuation coverage

Illinois law (mini-COBRA) protects individuals who lose their group health insurance coverage with an employer group of any size due to termination of employment or a reduction in hours below the minimum required by the group plan. The law covers employers with group insurance plans administered in Illinois and subject to the Illinois insurance code.

Plans subject to continuation coverage

  • Employers offering fully insured group and accident health plans, regardless of the group’s size.
  • Employers offering fully insured HMO coverage, regardless of the group’s size.

The Illinois law does not apply to:

  • self-insured employers
  • self-insured health and welfare benefit plans, such as union plans
  • insurance policies or trusts written in other states.
    • Note: For HMOs, the law does apply to contracts written outside of Illinois if the HMO member is a resident of Illinois and the HMO has established a provider network in Illinois.

Eligibility for continuation coverage

Continuation coverage must be offered to an employee and eligible dependents who were continuously covered under the group policy for three months prior to termination of employment or a reduction in hours below the minimum required by the group plan. Continuation coverage does not apply if:

  • an employee is terminated for committing a work-related felony and has admitted to or been convicted of such felony
  • an employee is terminated for a work-related theft for which the employer was in no way responsible, and the employee admitted to or was convicted of such theft
  • the employee is covered by Medicare
  • the employee is covered by any other insured or self-insured plan of group hospital, surgical or medical coverage.

Notification

An employer must notify an eligible employee in writing of the right to continuation coverage within 10 days after termination of employment or reduction in hours. An employee must request continuation coverage in writing within the 30-day period following the later of the following two situations:

  1. the date of employment termination or reduction in hours
  2. the date written notice of an employee’s right to continuation is presented or mailed to the employee.

In no event may an employee elect continuation coverage more than 60 days after the date of employment termination or reduction in hours below the minimum required by the group plan.

Benefits

Benefits contained within the group hospital, surgical, major medical, PPO, or HMO plan are the same as they were under the previous group coverage. However, separate plans for dental, vision care, prescription drug benefits, disability income, specified disease benefits and supplementary benefits may no longer be available under the continuation coverage.

In general, the maximum period of coverage is 12 months after the date the insurance stopped because an employee was terminated or hours were reduced below the minimum required by the group plan.  Continuation coverage may terminate earlier than the maximum period if:

  • an employee becomes eligible for Medicare
  • an employee is covered by any other insured or self-insured group medical, hospital, or surgical plan
  • an employee fails to make timely premium payments for coverage
  • an employer’s group policy is terminated in its entirety and not replaced with another group policy.

Spousal continuation coverage

Illinois law also protects a covered spouse and dependent children who lose group health insurance coverage due to death or retirement of an employee or divorce from an employee.

Plans subject to spousal continuation coverage

  • employers offering fully insured Illinois group and accident health plans, regardless of the group’s size
  • employers offering fully insured Illinois HMO coverage, regardless of the group’s size.

The Illinois law does not apply to:

  • self-insured employers
  • self-insured health and welfare benefit plans, such as union plans
  • insurance policies or trusts written in other states.
    • Note: For HMOs, the law applies to contracts written outside of Illinois if the HMO member is a resident of Illinois and the HMO has established a provider network in Illinois.

Eligibility for spousal continuation coverage

Spousal continuation coverage may be triggered when one of the following qualifying events occurs:

  • divorce from the employee
  • death of the employee
  • retirement of the employee.

On the occurrence of such an event, the following individuals may receive coverage:

  • the divorced or widowed spouse (any age) and dependent children of the employee who were covered under the group plan on the day before the qualifying event
  • the spouse and dependent children of a retired employee, if the spouse is age 55 or older, who were covered under the group plan on the day before the qualifying event.
Notification

The eligible spouse must notify the employer and insurance company in writing of the dissolution of marriage or the death or retirement of the employee within 30 days of the qualifying event.

The employer must notify the insurance company within 15 days after receiving the request for spousal continuation coverage.

The insurance company must notify the employee of the right to continuation by certified mail, return receipt requested, within 30 days after receipt of the notice from the employer.

The spouse must return the notice of continuation election form by certified mail, return receipt requested, within 30 days after the date of mailing receipt from the insurance company.

Benefits

Benefits for hospital, surgical or major medical are the same as they were under the previous group coverage. 

Continuation coverage resulting from an employee’s death or divorce shall be offered for a maximum period of two years if the individual is under age 55 at time of the qualifying event. If the individual is age 55 or older at the time of qualifying event, the maximum period of coverage extends until the employee is eligible for Medicare.

Continuation coverage resulting from an employee’s retirement is only available to spouses who are age 55 or older at the time of the retirement. The maximum period of coverage extends until the spouse is eligible for Medicare.

Dependent child continuation coverage

Illinois law protects dependent children who lose their group health insurance coverage with an employer group of any size, due to either of the following situations:

  1. attainment of the limiting age under the policy
  2. the death of the insured parent (and coverage is not available for spousal continuation coverage).

Plans subject to dependent continuation coverage

  • Employers offering fully insured Illinois group and accident health plans, regardless of the group’s size.
  • Employers offering fully insured Illinois HMO coverage, regardless of the group’s size.

The law does not apply to:

  • self-insured employers
  • self-insured health and welfare benefit plans, such as union plans
  • insurance policies or trusts written in other states.
    • Note: For HMOs, the law applies to contracts written outside of Illinois if the HMO member is a resident of Illinois and the HMO has established a provider network in Illinois.

Eligibility for dependent continuation coverage

Continuation of coverage must be offered to eligible dependents covered under group coverage on the day before the qualifying event. Coverage does not apply if the child is:

  • covered by any other insured or self-insured plan of group hospital, surgical, or medical coverage
  • eligible for coverage under the Illinois spousal continuation coverage law.
Notification deadlines

The dependent child or responsible adult acting on behalf of the dependent child must notify the employer or the insurer in writing of the qualifying event within 30 days of the event.

Benefits

Benefits for hospital, surgical, or major medical are the same as they were under the previous group coverage.

Continuation coverage must be provided for a maximum of two years after the date the insurance stops because of attainment of the limiting age or death of insured parent.

Employees and dependents eligible for COBRA coverage

Any employee who is covered by a group health plan on the day before a qualifying event (explained herein) is known as a “qualified beneficiary” covered by COBRA, unless that employee was terminated for gross misconduct. Qualified beneficiaries may also include the employee’s dependent children, spouse and former spouse if they are covered under the plan on the day before a qualifying event, unless the covered employee was terminated for gross misconduct. Children born or adopted by the covered employee during a COBRA continuation period are also qualified beneficiaries.

Other dependents acquired during the COBRA continuation period may be added to the COBRA coverage, but do not gain the status of qualified beneficiaries. An individual who marries a qualified beneficiary on or after the date of the qualifying event, or a newborn or adopted child of a qualified beneficiary (other than the covered employee) are not qualified beneficiaries.

The Patient Protection and Affordability Act (ACA) signed into federal law in March 2010 generally requires plans to provide coverage to dependent children until age 26 without regard to the child’s marital status. For most plans this was effective on January 1, 2011.

Qualifying events

Qualifying events under COBRA are events which cause a loss of coverage under the health plan. A qualifying event occurs when a covered employee, his or her spouse, or dependent children lose coverage under the plan due to any of the following reasons:

  • The employee’s hours of employment are reduced.
  • The employee’s employment ends for any reason other than gross misconduct.
  • The employee dies.
  • The employee becomes entitled to Medicare benefits.
  • The employee becomes divorced or legally separated from his or her spouse.
    • Note: That the spouse who is being divorced from the employee is entitled under COBRA to continue coverage and must receive the COBRA notice.
  • The employee’s child stops being eligible for coverage under the plan as a dependent child.

If an employer offers retiree medical benefits under its group health plan, the employer’s filing for bankruptcy is also a qualifying event with respect to affected retiree participants if there is a substantial elimination of coverage that occurs within 12 months before or after the date the bankruptcy proceeding begins.

These are qualifying events only if the event causes a covered employee or his or her covered dependents to lose coverage under the health plan. A loss of coverage includes a change or decrease in benefits offered or an increase in the premiums or contributions required to be paid by the employee or his/her dependents.

Note: A plan with more than 20 participants cannot terminate an active employee’s coverage because he becomes entitled to Medicare, so for most plans an employee’s entitlement to Medicare is not a qualifying event.

The COBRA continuation coverage period generally starts on the day after the date of the qualifying event even if coverage is actually lost at a later date. Alternatively, a health plan may specifically provide that the continuation coverage period will begin as of the date of the loss of coverage. The qualifying event also triggers a duty on the part of both the employer and plan administrator to notify the qualified beneficiary that COBRA continuation coverage privileges are available. The qualified beneficiary has a 60-day election period (measured from either the date on which the plan administrator provides the COBRA election notice or the date on which coverage is actually lost, whichever is later) to elect COBRA continuation coverage (see page 248, COBRA notices for further details). Certain workers who lose their jobs due to the effects of international trade and who qualify for trade adjustment assistance under the Trade Act of 2002 may be entitled to a second chance to elect COBRA.

Family leave

A leave approved under the Family and Medical Leave Act (FMLA) does not count as a qualifying event because the employer is required to allow the employee (and dependents) to continue health coverage during the leave. However, a qualifying event occurs on the last day of the FMLA leave if the employee meets all of the following criteria:

  • is covered under the plan on the day before FMLA leave begins
  • does not return to work at the end of the FMLA leave
  • in the absence of COBRA coverage, will lose health care coverage.

The qualifying event (from which notice requirements and the length of the COBRA period are measured) occurs on the last day of the FMLA leave even if the employee allowed coverage to lapse or declined to continue coverage during the FMLA leave. Although the employer generally may require reimbursement of any health plan premiums paid by the employer on the employee’s behalf during the leave, the employer may not condition the right to COBRA coverage upon his or her reimbursement of these premiums. In addition, the date of the qualifying event is not affected by any state or local law that may require coverage for a longer period of time than that required under the FMLA.

Coverage periods

The maximum coverage periods under COBRA are:

  • 18 months if the qualifying event is the termination of employment of the employee or a reduction in hours
  • 29 months if at any time within the first 60 days of COBRA coverage, one of the qualified beneficiaries is determined to be disabled by the Social Security Administration. The employee or qualified beneficiary must notify the plan administrator before the end of the initial 18-month COBRA period and within 60 days of the Social Security Administration determination
  • 24 months for certain members of the military (and their spouse and dependents) when they are called to active duty
  • 36 months for all other qualifying events.
    • Note: If a second qualifying event, such as death or divorce, occurs during the time an 18-month or 29-month continuation period is in effect, the maximum coverage period generally is extended to a 36-month continuation period. However, a special rule applies to most healthcare flexible spending account plans. These plans are generally required to offer COBRA coverage only until the end of the plan year in which the qualifying event occurs.

Paying for coverage

Generally, qualified beneficiaries must pay the entire cost of COBRA coverage. The premium charged may not exceed 102% of the cost (including both the employee and employer-paid portions) attributable to similarly situated active employees. For the additional 11 months of extended COBRA coverage due to a disability determined by the Social Security Administration, the premium charged may not exceed 150% of the total premium paid with respect to an active employee.

The qualified beneficiary must pay the initial COBRA premium within 45 days of making the COBRA election. The initial premium paid must include the amount necessary for coverage retroactive to the date of the qualifying event. From that point forward, each premium must be paid according to the payment schedule required by the health plan and within the grace period (which must be at least 30 days from the due date) allowed for receipt of premiums.

Termination of coverage

The period for COBRA coverage will end if any one of the following situations occur:

  • The employer stops providing group health benefits to all of its employees (if the employer is part of an affiliated control group, all members of the group must stop providing group health benefits).
  • Required premiums are not paid within the grace period (which must be at least 30 days from the due date under the plan).
  • The qualified beneficiary becomes covered under another group health plan not subject to a preexisting exclusion or limitation, or becomes entitled to Medicare, after electing COBRA coverage.
  • The qualified beneficiary is determined to be no longer disabled during the disability extension period.
  • The qualified beneficiary engages in fraud or other conduct that justifies termination of active employee coverage.
  • The maximum period for COBRA coverage is reached.

Notice requirements

Under COBRA, four written notices are required to be provided by the plan administrator:

  1. General notice - A “general notice” of COBRA rights and obligations must be sent to employees and their covered spouses within 90 days of the beginning of health plan coverage for the employee or his/her spouse.
  2. Continuation coverage election notice - A “continuation coverage election notice” must be given to each employee or beneficiary by the plan administrator within 14 days after the plan administrator receives notice from the employer or the employee or his or her spouse of the occurrence of a qualifying event. (The employer must notify the plan administrator within 30 days of certain qualifying events.) 
    • Note: Each qualified beneficiary has a separate election right and the notices must be sent so that they reach each qualified beneficiary. A notice sent to the employee or employee’s spouse is sufficient notice for dependent children residing with the individual to whom such notice was sent.
  3. Unavailability of COBRA coverage notice - A notice of “unavailability of COBRA coverage” must be provided by the plan administrator within 30 days of receipt of a request for COBRA coverage from an individual, if the plan administrator determines that the individual is not eligible for coverage.
  4. Termination of continuation coverage - As soon as practicable after a plan administrator determines that COBRA coverage is being terminated before the end of the maximum coverage period, a notice of “termination of continuation coverage” must be provided to each qualified beneficiary explaining why the coverage is being terminated.

In general, all required notices must be sent by first class, certified, or registered United States mail, addressed to the employee and spouse (if both are covered under the health plan) at the last known home address. Other methods of delivery, such as electronic delivery or hand delivery may be permissible in certain cases. Plans must keep complete and accurate records of all notices required by COBRA.

In addition to the notices that must be provided by the plan administrator, covered employees, covered dependents and qualified beneficiaries must also notify the plan administrator of certain events (generally, within 60 days), such as:

  • divorce
  • legal separation
  • a child ceasing to be a dependent
  • the occurrence of a second qualifying event
  • a determination of disability by the Social Security Administration, or cessation of such a disability.

The plan must establish reasonable procedures to be followed by individuals when notifying the plan administrator of such events.

Penalties

The Department of Labor, on behalf of participants, may assess a fine of up to $110 per day for a COBRA notice violation, accruing until the notice is issued. Each notice failure carries its own fine, so fines can become significant. Failure to comply with the COBRA can also result in other remedies for affected qualified beneficiaries. Additionally, an excise tax may be assessed by the Internal Revenue Service (IRS) against an employer for failure to comply with any of COBRA’s provisions. The excise tax generally is equal to $100 per day for each failure per covered beneficiary. The IRS is given the authority to increase the excise tax in certain circumstances or waive or lower the excise if the failure to comply is due to “reasonable” cause.