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

Health insurance continuation coverage — Massachusetts

 

Employer extension of coverage 

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that requires the majority of employers to extend group health plan privileges to employees who would otherwise lose coverage.

Coverage

All employers who maintain a group health plan are subject to COBRA rules unless either:

  1. The employer employed fewer than 20 employees (counting full-time and part-time employees) 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 threshold, the employer should count all employees of any related companies.
  2. The employer is a governmental entity or a religious organization. (However, government employers may be subject to similar rules under the Public Health Services Act.)

COBRA applies only to group healthcare plans, and includes continuation of the following services:

  • medical
  • dental
  • vision
  • prescription drugs
  • health maintenance organizations
  • healthcare flexible spending accounts (these plans are subject to special limitations under the COBRA rules).

The employer must offer COBRA rights for each of its separate healthcare plans. Also note, COBRA does not include disability income plans and life insurance plans.  

However, COBRA may include individual health insurance policies (such as voluntary cancer policies) if any of the following are true:

  • the employer provides contributions for any portion of the premium payments
  • premiums are established on a group basis
  • there is other employer involvement (including the payment of premiums through a cafeteria plan).

Qualifying events

The qualifying event triggers a duty for the employer and the plan administrator to notify the qualified beneficiary of the availability of COBRA continuation coverage privileges. Qualifying events under COBRA are events that cause loss of coverage under a health plan. A covered employee experiences a qualifying event when at least one of the following are true:

  • the employer reduces the employee’s hours of employment
  • the employee’s employment ends for any reason other than his or her gross misconduct
  • the employee dies
  • the employee becomes entitled to Medicare benefits
  • the employee becomes divorced or legally separated from his or her spouse
  • the employee’s child stops being eligible for coverage under the plan as a dependent child.

Loss of coverage requirement

These events 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.

Bankruptcy

If an employer offers retiree medical benefits to an employee under its group health plan, the employee may experience a qualifying event if the employer files for bankruptcy. This situation occurs when the employee substantially loses coverage within 12 months before or after the date the bankruptcy proceeding begins.

Family and medical leave

A leave approved under the Family and Medical Leave Act (FMLA) does not count as a qualifying event because the employer must allow the employee (and any dependents) to continue health coverage during the leave.

However, a qualifying event occurs on the last day of the FMLA leave if the employee:

  • 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 healthcare coverage.

Employees and dependents eligible for 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 the employer terminated the employee as a result of gross misconduct.

Qualified beneficiaries also include the employee’s dependent children and 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. 

An individual may acquire other dependents during the COBRA continuation period, but the dependents do not have the status of qualified beneficiaries. Because these individuals are not qualified beneficiaries, they may not elect coverage for themselves, and they may not continue coverage when the employee ceases to be covered.

Coverage starting date

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 state that the continuation coverage period will begin on the date of the loss of coverage.

Electing coverage

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, Notice requirements 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.

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
  • 24 months for certain members of the military (and their spouse and dependents) when they are called to active duty (see, Health insurance continuation of coverage for more information)
  • 36 months for all other qualifying events.

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 extends 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. When the Social Security Administration determines that an individual has a disability so that they obtain an additional 11 months of COBRA coverage, the premium may not exceed 150% of the total premium paid by an active employee. 

The qualified beneficiary must pay the initial COBRA premium within 45 days of making the COBRA election. In the initial premium, the individual should pay 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.

Subsidies

The American Rescue Plan Act of 2021 (ARPA), signed by President Biden on March 11, 2021, includes a number of provisions designed to assist workers impacted by the COVID-19 pandemic. Among them is a new COBRA premium subsidy that pays for 100% of the applicable COBRA premium for eligible individuals with respect to coverage periods beginning April 1, 2021, and ending September 30, 2021. In order to comply with the law, employers face a number of challenges and additional administrative responsibilities, including:

  • the identification of premium subsidy eligible individuals
  • contacting previously terminated employees not currently enrolled in COBRA but who are eligible for the premium subsidy
  • revising or supplementing existing COBRA notices
  • satisfying new notice requirements.

Covered plans and eligible individuals

The premium subsidy generally applies with respect to group health plans that are subject to the Employee Retirement Income Security Act (ERISA), Internal Revenue Code (Code) or the Public Health Service Act (PHSA), but does not apply to coverage under a health flexible spending arrangement (FSA) provided pursuant to a cafeteria plan. In addition, plans not subject to ERISA, the Code or the PHSA, but subject to state law that provides comparable continuation coverage (e.g., New York’s mini-COBRA law) are also covered by ARPA.

Individuals entitled to the premium subsidy are referred to as assistance eligible individuals (AEIs). In order to be an AEI, an individual must have been eligible for COBRA due to the covered employee’s involuntary termination of employment or reduction of hours, and the individual must elect COBRA. Qualified beneficiaries who are eligible for COBRA due to a voluntary termination of employment are not eligible for the premium subsidy (nor are individuals terminated for gross misconduct or whose qualifying event is anything other than involuntary termination of employment or a reduction in hours, such as children entitled to COBRA due to aging off coverage). An AEI must have been eligible for COBRA coverage during the period beginning on April 1, 2021, and ending September 30, 2021.

If an individual whose COBRA qualifying event was either an involuntary termination of employment or reduction of hours either has not elected COBRA, or previously elected COBRA and discontinued COBRA coverage before April 1, 2021, the individual may elect COBRA continuation coverage pursuant to a special “second-chance” election right. If elected, the subsidized coverage will commence April 1, 2021.

Note:

This rule differs from the normal COBRA rules that require the coverage to be effective as of the date of the original qualifying event.

This special election period begins on April 1, 2021, and ends 60 days after notice of the election period is provided. Plan administrators must provide this notice within 60 days of April 1, 2021.

Importantly, if COBRA is elected pursuant to this special election period, it does not extend the duration of the applicable COBRA period. That period continues to run from the date that would have applied if the individual had initially elected COBRA or, in the case of an individual who discontinued coverage, from the original COBRA commencement date.

Example

A qualified beneficiary whose COBRA period would have normally run during the 18-month period commencing July 1, 2020, and ending December 31, 2021, does not have his or her maximum period extended to 18 months following the April 1, 2021, effective date applicable under the special election rules – the end date for the COBRA period would continue to be December 31, 2021.

Duration of premium subsidy

The premium subsidy is available with respect to any premium owed for a period of COBRA coverage beginning on April 1, 2021, and ending on September 30, 2021. If an AEI has already paid the applicable premium for the month of April 2021, the AEI is entitled to a refund of the premium paid. The refund is due within 60 days of the date of payment.

Premium subsidies do not apply with respect to an AEI for months of coverage beginning on or after the first date an AEI is eligible for coverage under another group health plan (other than coverage for excepted benefits, a health care flexible spending account, or a qualified small employer health plan) or Medicare. Premium subsidies are also not available for any period following the maximum period of continuation coverage required under COBRA for the AEI.

An AEI is required to notify the plan administrator of the group health plan if he or she is eligible for other disqualifying coverage and is subject to monetary penalties for failing to do so.

Alternate plan coverage enrollment option

A group health plan, may, but is not required to, permit an AEI to elect a different coverage option than the one the qualified beneficiary is enrolled in at the time of the qualifying event. Under normally applicable COBRA rules, a qualified beneficiary may only elect the coverage that is in effect immediately preceding the qualifying event, subject to the right to change coverage during open enrollment or in connection with a HIPAA special enrollment right. Under ARPA, the employer can permit an AEI to change his or her coverage option if:

  • the premium for the new coverage option does not exceed the premium for coverage in which the individual was enrolled at the time of the qualifying event (e.g., the AEI can elect less expensive coverage)
  • the different coverage is also offered to similarly situated active employees
  • the different coverage is not coverage that only provides excepted benefits (e.g., stand-alone dental or vision coverage), a qualified small employer health reimbursement arrangement or a health flexible spending arrangement.

The election to change to an alternate coverage option must be made within 90 days of the date the AEI is notified of the alternative plan coverage enrollment option.

Notice requirements

For individuals who first become entitled to elect COBRA coverage between April 1, 2021, and September 30, 2021, the plan administrator must provide a written notification regarding the availability of the COBRA premium subsidy and the option to enroll in an alternative plan coverage option, if permitted by the employer.

The additional notification must also include:

  • the forms necessary for establishing eligibility for premium assistance
  • the name, address and telephone number necessary to contact the plan administrator and any other person with relevant information regarding the premium subsidy
  • a description of the special 60-day election period
  • a description of the qualified beneficiaries’ obligation to inform the plan administrator if the qualified beneficiary becomes eligible for disqualifying coverage
  • a description, displayed in a prominent manner, of a qualified beneficiary’s right to a subsidized premium and any conditions on entitlement to the subsidized premium
  • a description of the qualified beneficiary’s option to enroll in different coverage, if permitted by the employer.

This notice requirement may be satisfied by amending the employer’s current COBRA notice or by supplementing the current notice with a separate notice. It is important to note that this notice requirement applies with respect to all COBRA election notices provided to qualified beneficiaries who become entitled to elect COBRA between April 1, 2021, and September 30, 2021, and not just for those individuals whose COBRA qualifying event is an involuntary termination of employment or reduction in hours.

Notice of the premium subsidy also must be provided to AEIs who became entitled to elect COBRA before April 1, 2021, and to individuals who did not have a COBRA election in effect on April 1, 2021, but who would be an AEI if they had elected COBRA, or who previously elected COBRA and discontinued coverage before April 1, 2021.

This notice must be provided within 60 days of April 1, 2021, and must include the same information as specified in the question above that applies to individuals who become entitled to elect COBRA between April 1, 2021, and September 30, 2021.

Plan administrators must inform AEIs when the premium subsidy will end. This notice must be provided no more than 45 days, and no less than 15 days, prior to the premium subsidy expiration date. The notice must include, in prominent language, a statement that premium assistance will end soon and the exact expiration date. It also must include a statement that the individual may be eligible for unsubsidized COBRA or coverage through another group health plan. This notice is not required if the premium subsidy is ending because of an individual’s eligibility for coverage under another group health plan or Medicare.

Payroll tax credit

Most employers will be reimbursed for the premium subsidy by a new tax credit that applies against the employer’s share of the Medicare hospital insurance tax. The credit is a dollar-for-dollar reimbursement of the COBRA premiums for AEIs that were waived pursuant to the ARPA subsidy. To the extent that the credit amount exceeds the employer’s Medicare hospital insurance payroll tax, the excess amount may be claimed as a tax credit. ARPA also includes a provision indicating the credit may be advanced, pursuant to forms and instructions to be developed by the IRS.

The tax credit is available only to the person to whom premiums are payable. For most large plans, this means the employer. For fully insured small plans subject to state continuation laws and not federal COBRA, the tax credit is available to the insurer of the group health plan. For multiemployer plans, the person to whom the premium is payable is the plan. Employers requesting the credit may not also claim a credit on the same amount that is taken into account as qualified wages under the CARES Act or as a qualified health expense under the Families First Coronavirus Response Act or paid family leave acts under Sections 3131 and 3132 of the Internal Revenue Code.

Tax impact on assistance eligible individuals

A premium subsidy provided to an AEI is not considered taxable income.

Next steps

The premium subsidy requirements require plan administrators to develop a compliance plan for satisfying its requirements. That compliance plan should involve identifying potential AEIs whose qualifying event date occurred in the past, but whose COBRA coverage period could include the April 1, 2021, through September 30, 2021, premium subsidy period (i.e., individuals who previously were eligible for COBRA by virtue of an involuntary termination of employment or reduction of hours and who either didn’t elect COBRA coverage initially or who dropped COBRA coverage prior to April 1, 2021).

Termination of coverage

The period for COBRA coverage will end if any of the following instances are true:

  • 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, the plan administrator must provide four written notices:

  1. General notice - The plan administrator must send a “general notice” of COBRA rights and obligations 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 - The plan administrator must give a “continuation coverage election notice” to each employee or beneficiary 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.) It is important to note that 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 - The plan administrator must provide a notice of “unavailability of COBRA coverage” 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 - The plan administrator must provide a notice of “termination of continuation coverage” explaining why coverage is being terminated as soon as practicable after it determines that COBRA coverage is being terminated before the end of the maximum coverage period.

In general, the plan administrator must send all required notices by first class, certified or registered U.S. 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.

The law also requires that covered employees, dependents, and qualified beneficiaries 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 the termination of such disability.

Penalties

The Department of Labor, on behalf of participants, may assess a fine of up to $119 per day for a COBRA notice violation, accruing until the notice is issued. Fines may be substantial because each notice failure carries its own fine. Failure to comply with the requirements of COBRA may 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 Internal Revenue Service is given the authority to increase the excise tax in certain circumstances or waive or lower it if the failure to comply is due to “reasonable” cause.

Small employer liability 

Massachusetts has enacted a Mini-COBRA law that increases the number of employers liable for continuation of health insurance coverage. 

The Massachusetts mini-COBRA is similar to the federal COBRA, however, the laws include some differences:

  • Federal COBRA applies to group health plans of employers with 20 or more employees; Massachusetts mini-COBRA applies to group health plans of employers with two to 19 employees.
  • Massachusetts mini-COBRA, unlike federal COBRA, does not apply to self-funded plans.  Self-funded plans are plans in which the risk for the cost of the benefits is borne by the sponsoring employer, rather than by a private insurance company.

Covered employers

Massachusetts law requires small group carriers to provide for the continuation of health benefits to employees of small businesses with two to 19 employees. As described earlier, this law does not apply to self-funded plans.

Eligible employees

The law requires that benefits be provided to individuals who are covered under a small group health benefit plan on the day before a qualified event. The nature of the qualified event determines the length of time coverage must be offered to the individual:

  • death of employee (36 months)
  • termination of employee’s employment other than by reason of employee's gross misconduct (18 months) 
  • reduction in hours worked by employee (18 months) 
  • divorce or legal separation of the employee from his/her spouse (36 months)
  • employee becomes entitled to Medicare (36 months) 
  • dependent child is no longer considered to be dependent under the small group health benefit plan (​​​36 months).

Determination of disability

When the Social Security Administration determines that an individual is disabled at the time of a qualifying event involving termination or reduction in work hours, healthcare coverage may be extended from 18 months to 29 months if notice of the determination is given to the small group carrier both:

  1. within 60 days of the date of such determination
  2. before the end of the 18-month period.

A disabled individual may have to pay 150% of the premium for coverage after the initial 18-month period expires. If the Social Security Administration determines that the individual is no longer disabled, the individual must notify the small group carrier within 30 days of the date of the final determination.

Notice

Small group carriers must provide qualified beneficiaries with certain notices of the right to continue coverage:

  1. Notice of rights at the time coverage begins - The law requires the small group carrier to provide notification to each employee and spouse of his or her rights under the law at the time of commencement of coverage.
  2. Notice of rights when the small group carrier is aware of a qualifying event - When the small group carrier is aware that a qualifying event has occurred, it should notify the qualified beneficiary of his or her rights under the law. Similar to federal COBRA, under mini-COBRA, a qualifying event is one that would cause a qualified beneficiary to lose healthcare coverage if continuation benefits were not available.
    The notice of rights should be provided within 14 days of the date the small group carrier becomes aware of the qualifying event.

In some cases, small group carriers may require the small employer/intermediary to issue notices to the qualified beneficiary. If it does impose this requirement, it must notify the small employer and provide the employer with the name and telephone number of a contact person who is familiar with the procedures. The small group carrier also must provide the employer with the form and content of the language required to be provided in any notice.

Carrier notification

Small group carriers and small employers should work together to make certain that the small group carrier is fully informed of any qualifying events. Carriers may require employers to provide them with notices of these events under the terms of their contracts. If the contract terms include such a provision, the carrier should provide written instructions that clearly define the carrier’s procedures concerning continued coverage the employer’s responsibilities concerning notification.

Election period

The election period is the time in which a qualified beneficiary may choose to continue his or her coverage by making a written request. A qualified beneficiary has 60 days in which to make an election. The election period runs 60 days from the later of the date on which coverage terminates by reason of a qualifying event or the date the notice to elect coverage is sent.

Premium payment

The premium to be paid by the individual for continuation coverage may not exceed 102% of the cost of the small group health benefit plan for individuals who have not had a qualifying event. However, disabled individuals may be required to pay 150% of the premium after the initial 18-month period expires.

Termination of continued coverage

The coverage provided under Massachusetts law ends when at least one of the following are true:

  • when the maximum time period for coverage expires
  • when a small group health benefit plan is no longer being provided to other similarly situated eligible employees
  • when an individual becomes covered under any other health benefit plan which does not contain any exclusion or limitation with respect to any preexisting condition of such individual
  • when premiums are not paid in a timely manner
  • when an individual becomes entitled to Medicare benefits.

Small group carriers may require small employers to assist with the administration of these rules by providing notices and/or by collecting premiums. 

The employee and his or her eligible dependents are entitled to continue their coverage under the group health plan for the portion of the month remaining after regular coverage terminates as well as for an additional three months.

Upon the termination of coverage after the additional three months, the employee and his or her eligible dependents are eligible to convert their coverage under the group health plan into individual health policies.

Military employees

The Uniformed Services Employment and Reemployment Rights Act (USERRA) requires a group health plan to continue health insurance coverage under the plan for employees serving in the uniformed services who will lose coverage as a result of active military service to the extent required by USERRA.

USERRA also permits an employee to elect coverage for his/her dependents if the employee’s dependents would lose coverage under a plan because of the employee’s active duty service. If an employee is serving in the uniformed services for no more than 31 days, coverage must continue as if the individual were actively working for the employer. 

If the absence is for a period longer than 31 days, the employee has the right to continue coverage for either:

  1. up to 24 months
  2. until the date after the employee is required to, but fails to, apply for a return to active employment as required under USERRA (if earlier).

As a plan design feature, many plans provide that continuation coverage under USERRA and COBRA run at the same time.

Where to go for more information

This chapter includes a brief overview of the healthcare continuation requirements under federal and Massachusetts law. It is by no means exhaustive. 

If additional information is needed, an attorney should be contacted and the sources listed herein should be consulted:

U.S. Department of Labor’s Employee Benefits Security Administration (EBSA)
Boston Regional Office
JFK Federal Bldg
15 New Sudbury St, Rm 575
Boston, MA 02203
Phone: (617) 565-9600
Fax: (617) 565-9666

Massachusetts Office of Consumer Affairs and Business Regulation