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Many Illinois Employers Not Compliant with State Continuation Laws

Posted on August 15th, 2017

Several states have continuation coverage laws in place, and Illinois is no different. In fact, the state of Illinois has three different continuation coverage laws: Illinois Continuation, Illinois Spousal Continuation, and Dependent Continuation. Each law applies to fully-insured group health plans and HMOs that are issued in the state of Illinois. The length of continuation coverage and the persons eligible for coverage vary depending on which law is in play. 
 
There is also the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) which imposes a continuation coverage requirement under federal law. COBRA only applies to employers with 20 or more employees whereas Illinois continuation coverage laws apply to employers regardless of size, and this is where much of the non-compliance with Illinois state law occurs.
 
Many employers have mistakenly assumed they don’t have to comply with Illinois continuation coverage laws if they are subject to COBRA. There has been an assumption that COBRA rules supersede Illinois continuation coverage rules, and simply put, that assumption is inaccurate.
 
In fact, Illinois employers with 20 or more employees, offering a fully-insured group health plan or HMO, must offer eligible individuals the ability to continue coverage under COBRA and the applicable Illinois continuation coverage law. The person then must choose to continue coverage under one law or the other. There are different rights, protections and requirements under each law.
 
For example, Illinois Continuation generally requires coverage to be offered to employees and their covered dependents for up to 12 months after a reduction in hours or termination of employment that results in a loss of coverage. Additionally, Illinois Continuation does not allow the premium to exceed the group rate.  
 
On the other hand, COBRA generally requires coverage to be offered to employees and their covered dependents for up to 18 months after a reduction in hours or termination of employment that results in a loss of coverage. COBRA also allows the employer to set the premium at 102% of the group rate to account for administrative expenses. 
 
Based on unique circumstances, a person could be inclined to choose to continue coverage under one law over the other based on the length of coverage that can be elected and/or the maximum premium that can be charged, among other things. 
 
Each state has its own continuation coverage laws, and not all of them work the same way as Illinois. However, it’s important to understand which continuation coverage laws apply, and whether an employer must offer continuation coverage under one, the other, or both.