Topic:
HEALTH INSURANCE;
Location:
INSURANCE - HEALTH;

OLR Research Report


January 7, 2004

 

2004-R-0004

CONTINUATION OF COVERAGE FOR INDIVIDUALS AGE 62 AND OVER

By: Janet Brierton, Associate Legislative Attorney

You asked for information concerning the applicability of PA 03-77, “An Act Concerning the Extension of Group of Health Insurance Benefits for Individuals Age 62 and Over.”

This office is not authorized to issue legal opinions and this memorandum should not be considered as such.

SUMMARY

PA 03-77 amended CGS 38a-554 regarding continuation of coverage. State law previously mirrored federal law with respect to the length of time coverage is continued after a person loses eligibility for group health insurance. Federal law requires continuation of coverage for 18 months or 36 months depending on the qualifying event and possibly longer if the person is disabled. However, for group health insurance policies issued, renewed, or continued in Connecticut on or after October 1, 2003, an employee and his covered dependents are entitled to continue coverage until midnight of the day preceding the employee's eligibility for Medicare if his reduced hours, leave of absence, or termination of employment results from his eligibility for Social Security income.

Although the title of PA 03-77 refers to “individuals age sixty-two and over,” the statute makes no mention of age as a requirement for an individual to qualify for the continuation of coverage. The statute also makes no distinction between the types of Social Security income (e.g., retirement, disability, survivor). The Connecticut Insurance Department interprets the act as applying without regard to age and without regard to the type of Social Security income. As a result, the provision that coverage continues until an employee's eligibility for Medicare applies to employees and their dependents when the employee's reduction of hours, leave of absence, or termination of employment results from his eligibility for Social Security income, whether due to retirement, disability or family member's death, regardless of his age.

Under PA 03-77, therefore, continuation of coverage would extend for a maximum of three years if Social Security benefits begin due to retirement (early retirement at age 62 to Medicare eligibility at age 65) and two years if due to disability (the 24 month waiting period from when he is entitled to receive Social Security disability benefits before he is automatically enrolled in Medicare).

However, if the employee becomes eligible for Social Security income because of a family member's death, the period of coverage is less definite, as it will depend upon the employee's age. It is possible that coverage could extend for a period of time greater than three years. The longest period of continuation appears to be for an employee who is a young widow(er) taking care of the decedent's children who are under age 16.

FEDERAL LAW: COBRA

COBRA, the Consolidated Omnibus Budget Reconciliation Act of 1985 (PL 99-272), as amended from time to time, amends ERISA, the Employee Retirement Income Security Act, to provide continuation of group health coverage that might otherwise be terminated. COBRA applies to employers with 20 or more employees.

COBRA provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage under the employer's group health plan, so long as the insured pays the required premiums. The premium for COBRA coverage cannot exceed 102% of the plan's group rate for coverage, plus 2% for administrative costs. (Costs may increase if coverage is further extended because of disability.)

However, the continuation coverage is only available when coverage is lost due to certain “qualifying events.” Qualifying events for COBRA include voluntary or involuntary termination of the covered employee's employment for any reason other than gross misconduct, reduction in the hours worked by the covered employee, divorce or legal separation of the covered employee, the covered employee's eligibility for Medicare, a loss of dependent child status under the plan, and death of the covered employee.

COBRA establishes required periods of coverage for continuation of health benefits. A plan may, however, provide longer periods of coverage beyond those required by COBRA. COBRA coverage extends for 18 months when the qualifying event is an employment termination or a reduction of hours worked. Other qualifying events, or a second qualifying event during the initial period of coverage, may extend the coverage for a maximum of 36 months. Longer periods of coverage may be available for a person who is disabled (e.g., 18 months becomes 29 months).

COBRA continuation coverage begins on the date that coverage under the group health plan ends due to a qualifying event and will terminate after the maximum period of coverage allowed. However, COBRA coverage may end earlier if premiums are not paid on a timely basis, the employer ceases to maintain any group health plan, after the COBRA election, coverage is obtained through another group health plan, or after the COBRA election, the insured becomes eligible for Medicare.

CT STATE LAW

Connecticut law requires employers to comply with COBRA (CGS 38a-538). It also requires each group health insurance policy, regardless of the number of insureds, to provide continuation benefits as found in CGS 38a-554(b) (CGS 38a-546).

Section 38a-554(b) requires each group health insurance policy to provide the option to continue coverage under certain circumstances until the individual is eligible for other group insurance. Continuation of coverage is available to an employee and the employee's covered dependents if he is laid-off, works reduced hours, takes a leave of absence, or terminates employment, other than as a result of gross misconduct. The employee's spouse and dependent children are entitled to continue coverage under a group health plan if the employee dies, there is a divorce, court ordered annulment or legal separation, or the child loses dependent status through marriage or by reaching age 19 (age 23 if a full-time student at an accredited institution of higher learning). Continuation of coverage may be subject to the requirement that the individual pay the premium for the coverage, up to 102% of the group rate.

Continuation of coverage generally extends for the periods of coverage set forth in COBRA. This means that coverage will extend for 18 months or 36 months depending on the qualifying event. However, for group health insurance policies issued, renewed, or continued in Connecticut on or after October 1, 2003, an employee and his covered dependents are entitled to continue coverage until midnight of the day preceding the employee's eligibility for Medicare if his reduced hours, leave of absence, or termination of employment results from his eligibility for Social Security income (PA 03-77). Depending on the employee's age when social security payments begin, continuation coverage could extend beyond the periods of coverage set forth in COBRA.

SOCIAL SECURITY

Title II of the federal Social Security Act pertains to Federal Old-Age, Survivors, and Disability Insurance benefits. The Social Security program pays benefits to retired or disabled workers and their families, and to the families of deceased workers, as described below. For more information, see the following Social Security Administration (SSA) publications: “Social Security Retirement Benefits,” Publication No. 05-10035, “Social Security Survivors Benefits,” Publication No. 05-10084, and “Social Security Disability Benefits,” Publication No. 05-10029. These are available on SSA's website at: http://www.ssa.gov/pubs/englist.html.

Retirement Benefits

To be eligible for Social Security retirement benefits, an individual must be at least 62 years old, have worked, paid Social Security taxes, and earned at least 40 Social Security credits (10 years of work).

Disability Benefits

To be eligible for Social Security disability benefits, an individual must be disabled (unable to engage in substantial gainful activity) and earned a minimum number of credits from work covered under Social Security. Generally, a person needs 20 credits earned in the last 10 years, ending with the year he became disabled. However, younger workers may qualify with fewer credits.

The disabled person is automatically eligible for Medicare after receiving Social Security disability benefits for 24 months. The 24 months is counted from the month he is entitled to receive Social Security disability benefits, not from when he receives his first check. A person with Lou Gherig's disease (amyotrophic lateral sclerosis) is eligible for Medicare the same month in which he becomes entitled to receive Social Security disability benefits.

Survivors Benefits

When a person dies, certain members of the family may be eligible for Social Security survivors benefits if the decedent worked, paid Social Security taxes, and earned enough credits. The number of credits necessary depends on the person's age at the time of death. The younger a person is when he dies, the fewer credits are needed for family members to be eligible for survivors' benefits.

Social Security survivors benefits can be paid to:

● Widow(er): full benefits at age 65 or older (if born before 1940) or reduced benefits as early as age 60. (The age for receiving full benefits gradually increases for persons born after 1939 until it reaches age 67 for persons born in 1962 and later.)

● Disabled widow(er) age 50 or older.

● Widow(er) at any age if she takes care of the decedent's children who are under age 16 or who are disabled and receiving Social Security benefits.

● Unmarried children under age 18 (or up to age 19 if they are attending elementary or secondary school full time).

● Disabled child if he became disabled before age 22 and remained disabled.

● Dependent parents age 62 or older.

● Former spouse under the same circumstances as a widow(er) if the marriage lasted 10 years or more.

MEDICARE

Medicare is a health insurance plan for people who are age 65 or older. People who are disabled or have permanent kidney failure are eligible for Medicare at any age. As noted above, a person is automatically eligible for Medicare after receiving Social Security disability benefits for 24 months. If he has Lou Gherig's disease, he is eligible for Medicare the same month in which he is entitled to receive Social Security disability benefits.

Medicare has two parts - hospital insurance and medical insurance. Hospital insurance, sometimes called Part A, covers inpatient hospital care and certain follow-up care. A person prepays for this hospital insurance, as it is part of the Social Security taxes paid while working. Medical insurance, sometimes called Part B, pays for physicians' services and some other services not covered by hospital insurance. Medical insurance is optional and a person must pay monthly premiums for the coverage.

If a person is already receiving Social Security benefits when he turns 65, he will automatically be enrolled in Medicare Parts A and B. However, because monthly premiums apply for Part B, one has the option of turning down this coverage. If a person is not receiving Social Security benefits, he must sign up for Medicare close to his 65th birthday, even if full retirement age has not been reached. For more information about Medicare, see the SSA's publication, “Medicare,” Publication No. 05-10043. This is available on SSA's website at: http://www.ssa.gov/pubs/englist.html.

APPLICATION OF PA 03-77

Although the title of PA 03-77 refers to “individuals age sixty-two and over,” the statute makes no mention of age as a requirement for an individual to qualify for the continuation of coverage. Rather, the statute speaks in terms of an employee's eligibility for Social Security income and does so without referencing a particular type of Social Security income (e.g., retirement, disability, survivors).

On October 31, 2003 and in response to questions from the public, the Connecticut Insurance Department issued an informal opinion that offers guidance on the applicability of PA 03-77. The department interprets the act as applying without regard to age and without regard to the type of social security income. As a result, the continuation of coverage until an employee's eligibility for Medicare applies to employees and their dependents when the employee's reduction of hours, leave of absence, or termination of employment results from his eligibility for Social Security income, whether due to retirement, disability or family member's death, and regardless of his age.

If the employee becomes eligible for Social Security income because of retirement, the maximum period of continuation under PA 03-77 is three years (early retirement at age 62 to Medicare eligibility at age 65).

If the employee becomes eligible for Social Security income because of disability, the maximum period of continuation under PA 03-77 is two years (the 24 month waiting period from when he is entitled to receive Social Security disability benefits before he is automatically enrolled in Medicare).

If the employee becomes eligible for Social Security income because of a family member's death, the period of coverage is less definite, as it will depend upon the employee's age (see Survivors Benefits on page 5). It is possible that coverage could extend for a period of time greater than three years. The longest period of continuation appears to be for an employee who is a young widow(er) taking care of the decedent's children who are under age 16.

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