Letter of Continuation for Health Coverage

State continuation coverage refers to state laws that allow some people to extend their employer-sponsored health insurance even if they're not eligible for extension via COBRA.

This article will explain what state continuation is, how it differs from COBRA, and how it works in each state (some states do not offer state continuation protections).

As a federal law, COBRA applies nationwide, but only to employers with 20 or more employees. If you work for a smaller company and then lose your eligibility for coverage, there's no federal requirement that you be allowed to continue your coverage under the employer's plan.

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To address this, most states have enacted laws that allow employees—and their spouses and dependents—the option to continue their employer-sponsored coverage even if they work for a small business that's not subject to COBRA requirements.

State continuation is often referred to as "mini-COBRA" because it essentially brings some COBRA-style protections to people who work for very small employers.

In many cases, workers who lose their jobs also lose their employer-sponsored health coverage. That triggers a special enrollment period during which you can buy your own health insurance—through the exchange or directly from an insurance company.

But if your health plan is subject to state continuation, you also have an opportunity to simply keep the plan you already have, for at least a few months. For people who have already met their out-of-pocket maximum or who don't want to deal with having to figure out a new plan, provider network, etc., state continuation can help to ease the transition to whatever comes next.

How Does State Continuation Work?

COBRA is uniform nationwide—allowing coverage to be extended for up to 18-36 months, depending on the reason it would otherwise have been lost. But as with any regulations that are state-based, the rules for state continuation vary quite a bit from one state to another.

State continuation laws allow people to continue to purchase coverage through their employer's group health insurance plan after their eligibility for the coverage would otherwise have terminated.

Termination of eligibility for an employer's health plan can result from termination of employment (voluntary or involuntary) or a reduction in work hours to a part-time level. It can also happen when an employer stops offering group health coverage altogether or simply goes out of business.

(Note that in a scenario where the employer no longer offers coverage or is no longer in business, there is no longer a health plan available. In that case, neither COBRA nor state continuation rules would apply, since there is no health plan to continue.)

Dependents can become ineligible for coverage under an employer-sponsored plan when the covered employee dies or retires, or when the dependent reaches the age of 26 (in a few states, the age is higher). Spouses can become ineligible for coverage under an employer-sponsored plan when the employee dies or retires or transitions to Medicare, or due to a divorce.

Most of these scenarios are covered by COBRA (except involuntary termination of employment due to gross misconduct and termination of coverage due to the termination of the employer's entire group health plan). But state continuation laws vary in terms of the specific rules—some states take a narrower approach than others.

Eligibility for State Continuation of Coverage

In most states, mini-COBRA is only available if the person (who would otherwise be losing coverage) was covered under the employer's health plan for at least three consecutive months prior to the date the coverage would have terminated without state continuation. Exceptions to this are noted below, in the section that details the rules for each state.

In most cases, coverage under state continuation ends if the person becomes eligible for another employer's plan, or for Medicare. But some states have exceptions to this.

Employer Size

State continuation rules typically apply to groups with fewer than 20 employees, but some states apply their continuation rules to groups of all sizes, including those that are also subject to COBRA. In some cases, this allows people to continue their coverage with COBRA and then add an additional amount of continuation via state continuation.

Self-Insured Health Plans

State laws related to health insurance do not apply to self-insured health plans since those are regulated at the federal level instead. So state continuation rules apply to health plans in which the employer purchases coverage from an insurance company in order to cover its workers, but they do not apply to self-insured plans.

As a federal law, COBRA does apply to self-insured plans, although it does not apply to federal government health plans or plans sponsored by churches.

Most self-insured businesses do tend to have at least 20 employees, so it would be rare for a self-insured plan to not be subject to COBRA. But it is technically possible for a business with fewer then 20 employees to be self-insured. In that case, neither COBRA nor state continuation rules would apply to the group's coverage.

Premiums and Administrative Fees

People who continue their coverage via COBRA have to pay the full premium for their coverage (i.e., the portion they were paying via payroll deduction, plus the portion the employer was paying on their behalf), plus a 2% administrative fee.

Under state continuation rules, some states allow an administrative fee—often 2%, but sometimes more—while others do not (administrative fee caps are detailed below for states that allow them).

Why Is State Continuation Useful?

State continuation is admittedly less important now that the Affordable Care Act (ACA) has reformed the individual health insurance market to make it more closely resemble the employer-sponsored market.

Prior to 2014, people shopping for coverage in the individual market (i.e., not via an employer's plan) were subject to medical underwriting in most states, which meant that their premiums and eligibility for coverage could be based on their medical history.

This made the transition away from an employer-sponsored plan difficult or impossible for some people, which is why state continuation was such an important provision—it gave people several months to secure coverage from a new employer (as a result of HIPAA, employer-sponsored plans were not subject to medical underwriting for individual employees), during which time they could be covered by their old employer's plan, or by the plan that they previously had as a spouse or dependent of a covered employee.

Now that the ACA has banned medical underwriting in the individual health insurance market, it's easier to leave an employer-sponsored plan and transition to a plan in the individual market. But in some cases, state continuation still offers the best option.

This can be especially true for a person in the midst of an ongoing medical treatment if the plan options in the individual market are limited, don't include out-of-network coverage, or don't include the person's medical providers in-network. In some states, for example, there are no PPO options available in the individual market, whereas PPO options continue to be the most common form of coverage for employer-sponsored plans.

State continuation is also useful when a person has already met their out-of-pocket obligations for the year under the employer's plan. If they were to switch to an individual market plan, they'd have to start from scratch with a new deductible and out-of-pocket maximum. By continuing their coverage under the employer's plan, they won't have to duplicate those out-of-pocket expenses.

How Each State Approaches State Continuation

The rules for state continuation vary significantly from one state to another. In six states—Alabama, Alaska, Idaho, Indiana, Michigan, and Montana—there are no state continuation requirements. (Montana lawmakers considered a bill in 2021 that would have created a mini-COBRA requirement as of 2023; it passed the state House but did not advance in the Senate.)

Some other states have very limited state continuation availability, while others offer state continuation that's more robust than federal COBRA rules.

Here's a summary of how it works in each state (unless otherwise noted, continuation is only available to people who were already covered under the group's plan for at least three consecutive months prior to the date the coverage would have terminated without state continuation):

Alabama - No state continuation requirements

Alaska - No state continuation requirements

Arizona - State continuation law took effect in 2019, under the terms of legislation that was enacted in 2018 (S.B.1217). Enrollees may continue their coverage for up to 18 months (plus an additional 11 months if the enrollee is disabled). The enrollee is responsible for the full cost of the premiums plus an administrative fee that can be up to 5% of the premium.

Arkansas - Enrollees may continue their coverage for up to 120 days.

California - The state continuation rule in California is called Cal-COBRA. Enrollees may continue their coverage for up to 18 or 36 months, depending on the type of qualifying event that would otherwise have ended their coverage. Enrollees in plans that are subject to COBRA (with 20 or more employees) can get an extra 18 months of continuation via Cal-COBRA, after they exhaust 18 months of COBRA continuation. Coverage can be extended for one or more family members (as long as they were covered under the plan at the time of the initial qualifying event), even if the employee who was the primary plan member does not continue coverage via Cal-COBRA.

Colorado - Enrollees may continue their coverage for up to 18 months (or until they become eligible for another group health plan) as long as they had already had coverage under the group plan (or another group plan that provides similar benefits) for at least six months.

Connecticut - Enrollees may continue their coverage for up to 30 months. This applies to all state-regulated group plans in Connecticut, including those subject to federal COBRA as well as groups with fewer than 20 employees (note that self-insured plans are not state-regulated, so while Connecticut's state continuation law does apply to large group plans as well as small group plans, the majority of very large group plans are self-insured and thus not regulated under state law).

Delaware - Coverage can be continued for up to nine months.

District of Columbia - Coverage can be continued for up to three months.

Florida - Enrollees may continue their coverage for up to 18 months (plus up to 11 additional months if the person is disabled). When coverage is continued under this rule, an administrative fee of up to 15% of the total premium (ie, the portion the employee was paying plus the portion the employer was paying), so the total premium during the continuation period can be as high as 115% of the normal total premium.

Georgia - Enrollees may continue their coverage for the remainder of the month in which it would otherwise terminate, plus up to three additional months, as long as they had continuous coverage under the group plan for at least six months before it would otherwise have terminated. Georgia also has a separate law that allows people who are at least 60 years old and eligible for Georgia state continuation or COBRA to continue their coverage (after the COBRA or state continuation would have expired) until they're either eligible for another group health plan or Medicare. But the premiums can be up to 120% of the total premiums that would otherwise have applied (i.e., 120% of the total amount that would have otherwise been paid by both the employee and the employer)

Hawaii - There is no general state continuation rule in Hawaii, although there are some benefits provided to workers who become unable to work due to health reasons. Hawaii does have strict rules regarding employer-sponsored coverage under the state's Prepaid Health Care Law (employers must provide coverage to employees who work 20 or more hours per week, and employees can't be required to pay more than 1.5% of their wages for self-only coverage under the plan ). Hawaii law states that if a worker is unable to continue working due to a health issue, the employer must allow the worker's health coverage to continue for up to three months (assuming the employee is hospitalized or otherwise unable to work during that time), and must continue to pay the employer's share of the premiums under the Prepaid Health Care Law during that time. This differs from most state continuation laws in terms of its narrow focus (only employees who are unable to work due to health issues) and also the requirement that the employer must continue to pay the bulk of the premiums (state continuation and COBRA require the employee/spouse/dependents to pay the full premiums).

Idaho - No state continuation requirements

Illinois - Coverage can be extended for up to 12 months. The employee's spouse and/or dependents can also remain on the plan, but Illinois also has separate provisions for spouses and dependents who lose coverage due to death or retirement of the employee, or due to aging off of a parent's policy. In those circumstances, coverage can be continued for up to two years. And in the case of a spouse who is 55 or older, coverage can be extended until the spouse becomes eligible for Medicare, although a monthly administrative fee (equal to as much as 20% of the premium) can be added after the first two years of continuation coverage. Other than this, there are no administrative fees for state continuation in Illinois—the enrollee is only responsible for paying the full premium for the group plan, including the portion the employer used to pay.

Indiana - No state continuation requirements. There is a state continuation law in Indiana, but it includes a provision noting that it will only become effective if and when the legislature takes action to make sure that Indiana's small employers and small group health insurers would not bear any additional cost associated with a state continuation requirement. This has not yet happened, so Indiana does not have a state continuation provision. There is a conversion requirement in Indiana, but that's different; it refers to allowing people with group health insurance to convert their coverage to an individual plan—at a higher premium; in this case up to 150% of the group plan rate—if they lose access to the employer-sponsored plan. Conversion requirements were much more important prior to the Affordable Care Act, since insurers used to be able to base eligibility for individual market coverage on a person's medical history.

Iowa - Coverage can be continued for up to nine months. Continuation does not apply if the person is eligible for Medicare, and ends for a former spouse if and when they remarry, even if the continuation coverage has been in effect for under nine months.

Kansas - Coverage can be continued for up to 18 months, as long as the employee was already covered under the group plan (or a group plan providing similar benefits) for at least three months.

Kentucky - Coverage can be continued for up to 18 months.

Louisiana - Coverage can be continued for up to 12 months.

Maine - Coverage can be continued for up to 12 months if the employee was temporarily laid off or had to stop working due to an illness or injury that's covered by workers' compensation (note that the statute also allows for state continuation if the employee is permanently laid off and eligible for federal premium assistance, but that refers to assistance under the American Recovery and Reinvestment Act, which ended in 2010 ). The employer can require that the person was employed by the business for at least six months prior to ceasing work due to a temporary lay-off or work-related injury/illness.

Maryland - Enrollees may continue their coverage for up to 18 months.

Massachusetts - Coverage can be extended for up to 18 or 36 months, depending on the qualifying event that would otherwise have resulted in a termination of coverage (this mirrors COBRA provisions). Premiums are capped at 102% of the total premium that would have applied if the person had not lost eligibility for coverage, but this can increase to 150% for disabled individuals who opt to continue their coverage beyond 18 months.

Michigan - No state continuation requirements.

Minnesota - Coverage can be extended for up to 18 months, regardless of how long the employee previously had coverage under the group's plan. Minnesota's state continuation applies to all fully-insured (as opposed to self-insured) health plans with two or more employees, but also to self-insured local government plans, such as cities, counties, schools, etc. (but not to self-insured non-government plans, which are regulated at the federal level instead). An employee who becomes totally disabled while employed and covered by the employer's group health plan can continue coverage in the group plan indefinitely.

Mississippi - Coverage can be extended for up to 12 months. The continued coverage must cover all dependents who were covered under the plan prior to the termination. There is no administration fee; the premium is equal to the full cost of the group plan.

Missouri - State continuation provides the same continuation options as COBRA, but for employees of groups with fewer than 20 employees.

Montana - No state continuation requirements (there are limited continuation rights for people with group disability policies). Montana House Bill 378 passed in the Montana House of Representatives in March 2021 and was sent to the Senate for further consideration. If enacted, it would provide for 18 months of mini-COBRA coverage, starting in 2023.

Nebraska - Coverage can be extended for up to six months, as long as the reason for the coverage loss is involuntary termination of employment (but not due to misconduct).

Nevada - Employees are only eligible for state continuation if they were enrolled in the group health plan for at least 12 months prior to the date the plan would otherwise terminate. Eligible enrollees can continue their coverage for up to 18 months (or 36 months for dependents in certain circumstances).

New Hampshire - Coverage can be extended for up to 18-36 months, depending on the qualifying event that triggers the continuation (this mirrors COBRA). The employee and/or the employee's spouse or dependents can continue coverage. The administrative fee can be up to 2% of the premiums, in addition to the full-price premium for the plan. New Hampshire also has a provision that allows people to continue group coverage for up to 39 weeks if their group plan is terminated altogether (ie, the company closes or stops offering health insurance to its workers; this differs from COBRA, in that COBRA no longer applies if the employer terminates its group plan altogether).

New Jersey - Coverage can be extended for up to 18-36 months (this mirrors COBRA), as long as the employee was either laid off (ie, terminated due to no fault of their own) or had their hours reduced such that they no longer qualified for coverage under the group plan. Premiums can be up to 102% of the full-price premium for the coverage.

New Mexico - Coverage can be extended for up to six months.

New York - Coverage can be extended for up to 36 months. This applies to plans that aren't subject to COBRA, but it also allows people in plans that are subject to COBRA to add an additional amount of coverage continuation after they exhaust COBRA, for up to 36 months of total continuation of coverage. Premiums are capped at 102% of the total premium that would have applied (employer + employee portions) if the employee hadn't lost eligibility for the coverage. Although COBRA is not available to employees who are terminated for gross misconduct, there is no such exemption in New York's state continuation law, so it applies regardless of the reason the employee loses access to coverage under the group's plan.

North Carolina - Coverage can be extended for up to 18 months.

North Dakota - Coverage can be extended for up to 39 weeks.

Ohio - Coverage can be extended for up to 12 months, as long as the employee was involuntarily terminated from employment (but not for gross misconduct), resulting in a loss of eligibility for the group plan.

Oklahoma - Coverage can be extended for at least 63 days. When the American Recovery and Reinvestment Act (ARRA) was providing a federal subsidy for COBRA/continuation premiums, Oklahoma enacted legislation adding a four-month continuation period for small group plans, but that provision (Section 5409(d) of Oklahoma insurance law ) is no longer part of the state statute.

Oregon - Coverage can be extended for up to nine months, as long as the employee had coverage (not necessarily from the same employer) for at least three months prior to loss of eligibility for the employer-sponsored plan.

Pennsylvania - Coverage can be extended for up to nine months.

Rhode Island - State continuation applies to workers who are involuntarily laid off, or who lose their jobs due to a permanent reduction in the size of the company's workforce. It also applies to coverage for a spouse/dependents in the event of the worker's death. Coverage can be extended for up to 18 months, or the same amount of time that the person worked for the employer immediately preceding the date the coverage would otherwise have terminated, whichever is longer. So for example, a person who has worked for company ABC for seven months would be able to continue their coverage for up to seven months after being laid off.

South Carolina - Coverage can be extended for the remainder of the month in which it would have terminated, plus six additional months, as long as the person already had coverage under the group's plan for at least six months.

South Dakota - Coverage can be extended for up to 12 months, as long as the employee already had coverage under the group plan for at least six months. If the employer ceases operations altogether during that 12-month period, the coverage can still be continued (directly through the insurer) for the duration of the 12 months (this differs from COBRA, in that COBRA no longer applies if the employer terminates its group plan altogether).

Tennessee - Coverage can be extended for the remainder of the month in which it would have terminated, plus up to three additional months. An individual who loses access to group coverage during pregnancy can continue their coverage for at least the duration of the pregnancy plus six months.

Texas - Coverage can be extended for up to nine months. For plans that are subject to COBRA, the Texas continuation law also allows people to extend their coverage for up to six additional months after COBRA is exhausted (this does not apply to COBRA coverage offered under a self-insured group plan, since state laws don't apply to self-insured plans).

Utah - Coverage can be extended for up to 12 months, and premiums can't exceed 102% of the full-price (employee plus employer share) premium that would have applied if eligibility under the group plan hadn't ended.

Vermont - Coverage can be extended for up to 18 months as long as the employee was insured under the group plan on the date the coverage would otherwise have terminated. Vermont's state continuation is similar to COBRA, but does have some differences in terms of eligibility and provisions.

Virginia - Coverage can be extended for up to 12 months.

Washington - State continuation is an option for employers in Washington, but they are not required to offer it to employees. Instead, insurers that provide small-group coverage must allow their covered employers the option to include a continuation provision in the policy. The premium and the length of available continuation are negotiated between the employer and the insurer, so they will vary from one employer to another. Washington does have a provision that workers who are on strike—and thus not working—can pay their group's insurer directly for coverage for up to six months.

West Virginia - Employees who would otherwise lose coverage due to an involuntary layoff must be allowed to continue their group coverage for up to 18 months.

Wisconsin - Coverage can be continued for up to 18 months.

Wyoming - Coverage can be continued for up to 12 months.

State Continuation: The Logistics

Employers subject to state continuation rules must notify eligible employees of the option to continue their coverage. The deadlines for doing this vary from state to state, but it's generally within a month of the qualifying event that would otherwise have caused coverage to end.

The employee (or spouse and/or dependents) then has a certain amount of time to decide whether to continue their coverage. This also varies by state, although it's generally in the range of 30-60 days. If state continuation is chosen, the employee (or spouse and/or dependents) is responsible for paying the necessary premiums (and administrative fee, if applicable) to the employer, or, in some cases, to the insurance company.

Summary

State continuation laws give workers at small companies an option to continue their group health insurance when they would otherwise lose it. Federal COBRA protections only apply to businesses with 20 or more workers, so state continuation rules are needed to ensure that workers (and their families) at smaller businesses can continue their group coverage for at least a few months after leaving their job or losing access to the employer's plan. Not all states have state continuation laws, although most do. But unlike COBRA, which is uniform nationwide, state continuation rules vary considerably from one state to another.

A Word From Verywell

The decision to extend coverage is a personal one, and there's no right answer. One employee might be better off with state continuation for at least a few months, while another might be better off with an individual market plan. But state continuation laws give employees in most states the ability to pick the option that will best meet their needs.

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Source: https://www.verywellhealth.com/state-continuation-coverage-4773045

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