COBRA Federal and State Regulations

Subtitle 11 HEALTH INSURANCE—GROUP

Chapter 04 Group Health Insurance—Continuation of Coverage for Terminated Employees

.01 Purpose.

The purpose of this chapter is to provide standards for implementing requirements of the Insurance Article, Health-General Article, and Unemployment Insurance Law, Annotated Code of Maryland, with respect to continuation of coverage for certain terminated employees.

.02 Definitions.

A. In this chapter, the following terms have the meanings indicated.

B. Terms Defined.

(1) Applicable Change in Status.

(a) “Applicable change in status” means the termination of the insured’s employment other than for cause.

(b) “Applicable change in status” includes:

(i) Involuntary termination of the insured’s employment other than for cause; and

(ii) Voluntary termination of the insured’s employment by the insured.

(2) “Employer” means an employer, an association of employers, or a trust sponsored by an employer or an association of employers to whom a group contract has been issued.

(3) “Expense-incurred basis” means that the:

(a) Payment of benefits is based in whole or in part on the charge made by the provider; or

(b) Services are directly provided without additional charge except for any deductible or copayment specified in the policy;

(c) Policies or contracts issued on an expense-incurred basis include but are not limited to:

(i) Health maintenance organization coverage,

(ii) A policy which provides for the cost of a semiprivate hospital room,

(iii) A policy which provides coverage for a semiprivate hospital room subject to a daily deductible,

(iv) A policy which provides coverage for a semiprivate hospital room but which is subject to a copayment,

(v) A policy which provides a daily hospital benefit of more than $100,

(vi) A policy which pays medical-surgical benefits on a usual and customary basis;

(d) Following policies or contracts are not to be regarded as being on an expense-incurred basis:

(i) A policy which provides a daily hospital benefit of a fixed dollar amount not in excess of $100 per day,

(ii) A policy which provides medical-surgical benefits in accordance with a fixed schedule of fees.

(4) “Group policy” or “group contract” means an insurance contract issued or delivered in this State which provides hospital, surgical, medical, or major medical coverage issued to an employer for the benefit of its employees by:

(a) An authorized insurer in accordance with Insurance Article, §15-302, Annotated Code of Maryland;

(b) A nonprofit health service plan authorized under Insurance Article, §§14-108—14-111, Annotated Code of Maryland; or

(c) A health maintenance organization authorized under Health-General Article, Title 19, Subtitle 7, Annotated Code of Maryland.

(5) “Insured” means an employee who is a resident of this State and covered under a group policy for a period of not less than 3 months.

(6) “Self-insured group health benefit program or plan” means a program or plan furnished by an employer for the benefit of its employees providing hospital, surgical, medical, or major medical benefits on an expense-incurred basis similar to benefits which could be provided under a group health insurance policy.

(7) “Termination statement” means a written notice of an event specified in Regulation .07 of this chapter provided to an employer on a form containing language prescribed by the Commissioner, or in substantially similar language, which is signed by the insured.

31.11.04.03

.03 Applicability.

A. These regulations shall be applicable to all group health insurance policies or contracts issued or delivered in this State to the employer of the insured which provide hospital, surgical, medical, or major medical benefits on an expense-incurred basis whether issued by a nonprofit health service plan or by any other insurer and to all group policies or contracts issued or delivered in this State to an employer by a health maintenance organization certified under Health-General Article, Title 19, Subtitle 7, Annotated Code of Maryland.

B. These regulations shall be applicable to any policy or contract issued on or after the effective date of these regulations, beginning with the date of issue of the policy or contract.

C. These regulations shall be applicable to any policy or contract issued before the effective date of these regulations, beginning on the first annual renewal date or the first anniversary of the date of issue of the policy or contract occurring on or next following the effective date of this chapter.

Agency Note: Federal statutes and regulations may provide broader or additional benefits for persons to whom this chapter is applicable.

.04 Eligibility.

Entitlement to continuation benefits shall begin with an applicable change in status and last until the occurrence of an event described in Regulation .06 of this chapter.

.05 Coverage Provided.

A. The coverage provided shall be identical to the coverage offered under the group contract to similarly situated individuals for whom there has been no applicable change in status.

B. If the group policy provides benefits for spouses and dependent children, the coverage provided shall be available to the insured’s:

(1) Spouse if the spouse was covered under the group policy before the applicable change in status; and

(2) Dependent children if the insured had coverage for dependent children before the applicable change in status.

C. If the employer transfers from one group contract to another, the coverage provided the insured will be transferred to that coverage provided under the new group contract.

D. If the employer provides various hospital, surgical, medical, or major medical coverages under one or more group contracts, an insured may not elect to choose less than all of the benefits provided unless the insured would have had the option of making such a choice if there had been no applicable change in status.

E. The benefits to be provided under the group contract shall be in no respect less favorable than those required by these regulations.

31.11.04.06

.06 Conditions of Coverage.

A. In order to receive the benefits provided under the group contract, an insured shall elect coverage not later than 45 days after the applicable change in status.

B. The coverage shall be retroactive to the applicable change in status.

C. The request to the employer under §A of this regulation shall be in writing and signed by the insured.

D. Continuation coverage shall be provided without evidence of insurability or additional waiting periods.

E. Costs to Insured.

(1) The insured shall pay to the employer the employer’s entire cost for the coverage to be provided.

(2) The entire cost to the employer includes the employer’s customary contribution as well as the contribution customarily required of an employee if there were no applicable change in status.

(3) The entire cost to the employer may include a reasonable administrative fee not to exceed 2 percent of the amount permitted under §E(2) of this regulation.

F. The insured may elect to pay the employer the amount due for the cost of the coverage in monthly installments.

G. In addition to the allowable cost provided for under §E of this regulation, the first payment to the employer by the insured shall include the cost for the coverage provided after the change in status and until the end of the month in which the insured makes an election.

31.11.04.07

.07 Termination.

Coverage for the insured shall terminate on the earliest of any of the following:

A. 18 months after the date of the applicable change in status;

B. The date on which the insured becomes eligible for hospital, surgical, medical, or major medical benefits under any insured group contract or any health maintenance organization group contract or any self-insured group health benefit program or plan provided:

(1) The group contract or the self-insured program or plan is on an expense-incurred basis, and

(2) The eligibility does not result from the provisions of this chapter;

C. The date on which the insured becomes entitled to benefits under Title XVIII of the Social Security Act;

D. The date on which the insured becomes covered under a non-group policy or under a non-group health maintenance organization contract which provides coverage for hospital, surgical, medical, or major medical benefits on an expense-incurred basis;

E. The premium due date on which the insured does not make timely payment in the amount required for the provided coverage;

F. The date on which the insured elects not to be covered under the group contract;

G. The date on which the employer ceases to provide hospital, surgical, medical, or major medical benefits to its employees under a group contract.

31.11.04.08

.08 Conversion and Continuation.

A. At any time that an insured is entitled to benefits under a group contract in accordance with the terms of this chapter, or at the time of termination of coverage under this chapter, the insured may elect the conversion privilege provided under COMAR 31.11.01 in accordance with the requirements of that chapter.

B. An insured continuing coverage under a group contract in accordance with this chapter may not elect to continue coverage under COMAR 31.11.01.14.

31.11.04.09

.09 Notification Requirements.

A. Every group contract to which this chapter is applicable shall include a statement as provided in §B of this regulation.

B. The statement shall disclose the availability of the benefits provided under this chapter and shall provide a summary of the eligibility requirements, the duration, and general description of the benefits.

C. Every group contract issued before the effective date of this chapter, to which this chapter is applicable, shall be amended in accordance with this chapter not later than the date of applicability stated in Regulation .03C of this chapter.

All copyrights and other rights to statutory text are reserved by the State of Maryland.

 Summary of Maryland’s Cobra law

Maryland’s mini-Cobra provides many rights concerning continuation of health coverage. The law sets a minimum coverage requirement, notification guidelines, and insurer provisions. The law also ends continuation coverage when members obtain non-group policies. Another provision in the law requires that handicapped grandchildren can continue coverage despite cessation of dependent status upon attaining certain age.

Death and Conclusion of Employment

Group coverage must be allowed to continue without evidence of insurability or waiting periods for 18 months for covered employees, spouses, and dependents in the case of voluntary or involuntary termination from employment or employee’s death.

To qualify as eligible:

Surviving related members must have been covered for 30 days preceding employee’s death.

If employee was dismissed they must have been covered by group plan for at least three months preceding date of termination.

Notification and Premiums

• Employers should notify employees and family members about their rights to continuation coverage.

• Employees should have at least 45 days from termination date to elect continuation of coverage.

• Spouses must apply for continuation coverage and pay the premium within 45 days of employee’s death.

• The premium may not exceed the sum of the employee and employer’s coverage and a reasonable administrative fee, subject to approval from the state commissioner.

• Employers are required to provide election notices within 14 days of receiving a request for such notices. However, they are not liable for any benefits or damages that employee incurs resulting from the notice failure.

Coverage must be allowed to continue until the group plan is terminated or when the individual:

• Does not pay premiums
• Gains eligibility under a different group plan
• Becomes entitled for Medicare
• Accepts coverage under a group policy
• Withdraws from the group coverage contract
• Loss of eligibility as a dependent

Divorce:

In case of divorce, the spouse and dependent children are also subjected to similar provisions.

The law does not provide conditions for termination of health insurance continuation when:

• The plan ends
• Individual fails to pay premiums
• 18 months have passed

Further divorce provisions

• Divorced spouses lose their continuation coverage if they remarry.
• Also, no administrative fee is applied when coverage is continued post divorce.

When divorce decree is presented:

• Group insurance plan can reimburse spouse and dependent children for hospital, medical, or surgical expenses.

• The group plan is not liable to pay another party for the same services.

• The employee continues to pay premium payments between the time that employee gives notice for divorce and until the divorce becomes final.

• The divorcing parties can decide who will pay premiums, or a court decision will be issued.

Conversion Rights

Group health insurance policies must allow anyone whose coverage is terminated under the policy for any reason except:

• Failure to pay the required premiums to convert to an individual policy without evidence of insurability.

• The provision states that continuation of coverage at the individual’s expense may not exceed six months.

Group policies that allow employees or members conversion privileges upon termination of their group coverage must provide the same rights to covered spouses without proof insurability if:

• The spouse loses eligibility as a qualified family member due to marriage dissolution or the death of a covered employee.

• Continuation privileges do not affect conversion rights that are guaranteed by Maryland law.

Employers who offer group health plans to a minimum of 20 employees need to comply with the Employee Retirement Income Security Act of 1974(ERISA). The amendment, the Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA), requires that most group health plans provide temporary continuation of coverage.

You can find the COBRA regulation in the Federal Code section and the Official Employer’s Guide to COBRA in the Guides section.