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COBRA and New Jersey Small Group Continuation…and other continuation options

COBRA is a federal law that allows employees and their covered dependents to elect continuation of coverage under a group health plan when the employee and/or the dependent would otherwise lose coverage because of some event, such as a lay-off of the employee.  COBRA applies to most employers with 20 or more employees.  New Jersey has a state group continuation law (NJSGC) that is very similar to COBRA, and is sometimes referred to as Mini-COBRA.  With a few exceptions, the NJSGC applies to employers with fewer than 51 employees, when the employer offers a group health benefits plan.  So, some employers must comply with both COBRA and NJSGC, and some must comply with one of the laws even when the other does not apply.  In New Jersey, most employers must comply with one, if not both, group continuation laws.

The Similarities
  • Both COBRA and NJSGC establish continuation rights for most of the same groups of qualified beneficiaries – employees, spouses and child dependents – if covered under the group health plan immediately preceding the “qualifying event.”
  • Both COBRA and NJSGC establish continuation rights as the result of most of the same types of qualifying events.
  • Both COBRA and NJSGC establish continuation periods of the same duration.
  • Both COBRA and NJSGC permit the employer to require that the person electing continuation coverage pay 100% of the cost of the coverage, plus a 2% administrative fee (that is, 102% of the cost).
The Differences
  • COBRA applies to employers offering a group health plan only when the employer has at least 20 employees, with some exceptions (such as church plans).
  • NJSGC applies to employers offering a group health benefits plan, but only when the employer has 50 or fewer employees, including employers to which COBRA does not apply (such as church plans).
  • COBRA applies to employers offering a group health plan regardless of whether the group health plan is self-funded or insured.
  • NJSGC applies when there is an insured group health benefits plan.
Qualifying Events

Qualifying events vary based on whether a person is the covered employee, a spouse or a child.

Qualify events for employees include the following:

  • Voluntary or involuntary termination of employment for reasons other than gross misconduct
  • Reduction in the number of hours of employment (making the employee ineligible for the group health plan)

Qualifying events for spouses (which include civil union partners and domestic partners with respect to NJSGC), include the following:

  • Voluntary or involuntary loss of the employee’s eligibility for coverage under the group health plan
  • The employee becomes entitled to Medicare
  • Legal action occurs to dissolve a marriage, including legal separation (for NJSGC, this includes dissolution of a civil union or domestic partnership)
  • Death of the employee

The qualifying events for a child are the same as for the spouse, but also include the loss of dependent child status under the plan rules (for example, the child attains age 26).
 

Duration of Continued Coverage

An employee is entitled to continue the coverage that was in effect immediately prior to his or her ineligibility – including covering dependents that were covered – for 18 months.  The continuation period can be extended to a total of 29 months if, within 60 days after the employee’s qualifying event, the employee is determined to be disabled by the Social Security Administration.

When a dependent makes a continuation election, the dependent is entitled to continue coverage for up to 36 months. 

Continued coverage can end earlier if:

  • the employer stops offering any group health plan
  • the covered person stops making required payments
  • the covered person becomes covered under another health plan that applies no pre-existing condition limitation to the covered person and anyone else covered under the continued health plan
  • the covered person becomes entitled to Medicare
Other Continuation Options – Total Disability

New Jersey law (N.J.S.A. 17B:27‐51.12 and N.J.S.A. 17:48E‐32) requires that when a covered employee terminates employment due to total disability, the employee may continue coverage (including coverage for his or her dependents) under the group’s health benefits plan. The employee must have been covered under the group health benefits plan at least three months prior to termination of employment. The employee may be required to pay the group rate for the continued coverage. An election must be made within 31 days after the date the coverage would otherwise terminate. An employee’s eligibility for Medicare or entitlement to Medicare does not limit the right to continue coverage under the group health benefits plan.

Under this election, continued coverage will end:

  • for both the employee and dependents if the employee fails to pay the required premium
  • for both the employee and dependents if the employee again becomes employed and eligible for another group health plan
  • for both the employee and dependents if the employer stops offering a group health benefits plan to all employees
  • for a dependent when the dependent stops being an eligible dependent, or becomes eligible for another group health plan

Should the employer replace the group health benefits plan with another such plan, the disabled former employee has the right to become covered under the replacement group health benefits plan, so long as that group health benefits plan is subject to the law.  

Other Continuation Options – Dependent to Age 26 and Age 31

The federal Patient Protection and Affordable Care Act (often referred to as the ACA), enacted March 23, 2010, requires that dependent children be covered under group and individual plans at least until age 26, IF dependent children are covered at all.  Coverage of dependent children may no longer be limited based on whether the child is financially dependent on the parent, or residing in the parent’s household, or a full-time student.  The young adult may remain covered under his or her parent’s plan even if he or she marries.

However, the federal ACA allows “grandfathered” health plans to remove children from a parent’s plan before reaching age 26 if the young adult could be covered through a group health plan as an employee or an employee’s spouse.  Generally, grandfathered plans are health plans that were in effect on or before March 23, 2010.

If a group health benefits plan is delivered in New Jersey, a parent may continue to cover a young adult until age 31 by making a Dependent Under 31 election (DU31).  A DU31 election can be an alternative to making a COBRA or NJSGC continuation election or can be an alternative to buying coverage in the individual market.  However, there are eligibility requirements and coverage limitations that may not make the DU31 election the best choice for everyone.  For a discussion of the DU31 election, see
http://www.state.nj.us/dobi/division_consumers/du31.html#compcobranjsgcrdu  
  

More Information

For more information about COBRA, go to the federal Employee Benefits Security Administration website regarding COBRA continuation at https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra.  You can find An Employee’s Guide to Health Benefits Under COBRA there.

For more information about NJSGC (mini-COBRA), see the SEH Buyer’s Guide, available at http://www.nj.gov/dobi/division_insurance/ihcseh/shop_seh.htm.

For more information regarding DU31, a comparison of COBRA, NJSGC and DU31, and the interrelationship of these continuation options, go to http://www.state.nj.us/dobi/division_consumers/du31.html#compcobranjsgcrdu.

For more information about Medicare, see:  www.Medicare.gov.

For more information about Social Security disability, see:  https://www.ssa.gov/disability/.

 

 

 
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