State Health Insurance Continuation Obligations to Terminated Employees

Continuing our discussion from last week here regarding federal health insurance continuation obligations to terminated employees, this week we discuss certain state health insurance continuation obligations.? Typically, when employers are too small to be covered under the federal Consolidated Omnibus Budget Reconciliation Act (COBRA), there are state laws that potentially cover terminated employees. ?While different states have different laws, in Illinois, there are three different laws – Illinois Continuation Law, Illinois Spousal Continuation Law and Illinois Dependent Child Continuation Law.?

Illinois Continuation Law

The Illinois Continuation Law protects individuals who lose their group health insurance coverage with an employer group of any size due to termination of employment. The Illinois Continuation Law applies to employees who have been covered by a group insurance plan for at least three months before termination. Coverage is available whether termination is voluntary or involuntary. The continuation benefits must be offered upon termination of employment unless termination is due to theft or commission of work-related felony.

Terminated employees are not eligible for continuation benefits under the Illinois Continuation Law if the employee is covered by Medicare or any other group health plan. Further, continuation benefits will terminate if the former employee becomes eligible for Medicare while such employee is receiving benefits under the Illinois Continuation Law.

Unlike COBRA, the employee must be given written notice of this option at the time of termination, or by mail to the employee's last known address. The employee must elect the option within 10 days after the later of: (1) termination, or (2) receiving notice of the right to continued health insurance. In no event, however, may the employee elect continuation of coverage more than 60 days after termination.?

Illinois Spousal Continuation Law

The Illinois Spousal Continuation Law protects a covered spouse and dependent children who lose health insurance coverage due to death or retirement of the employee. The spousal continuation benefits apply to employer groups of any size, insurance companies and HMOs.

The Illinois Spousal Continuation Law covers divorced or widowed spouses and covered dependent children, spouses (age 55 or older) of retired employees, and covered dependents. Spouse and dependents must be covered on the day prior to the qualifying event. The qualifying events only include death, retirement of or divorce from the employee. Medicare entitlement is not included as the qualifying event.

Illinois Dependent Child Continuation Law

The Illinois Dependent Child Continuation Law protects dependent children who lose their group health insurance coverage with an employer group of any size due to the attainment of the limiting age under the policy or the death of the insured parent Medicare entitlement of the insured parent is not included. The Illinois Dependent Child Continuation Law applies to employers offering fully insured group and accident health plans and to employers offering fully insured HMO coverage. The law does not apply to self-insured employers, self-insured health and welfare benefit plans and insurance policies or trusts written in other states.

Next week, we will switch gears and discuss properly handling employee references for terminated employees.

* This is one of a series of weekly articles containing helpful tips and “best practices” for employers to keep in mind when managing their workforce.? These articles are partially adapted from my book, Employment Law Toolkit for Employers.? If you would like a copy of my book, please reach out to me at 312-876-6676 or [email protected]. Nothing contained in this article shall be construed as legal advice and this article does not create an attorney-client relationship between Saul Ewing LLP and any reader.?