COBRA Laws in Illinois

Facts for Illinois employers with more than 20 employees.

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) applies to employers who had 20 or more employees on more than 50% of its business days in the preceding year. Both full -time and part-time employees are counted to determine whether a group health plan offered by an employer is subject to COBRA. Each part-time employee counts as a fraction of a full-time employee, with the fraction equal to the number of hours that the part-time employee worked divided by the hours an employee must work to be considered full time.

Unlike Illinois State Continuation which is a requirement to offer continuation coverage under state law, COBRA is a continuation coverage requirement under federal law.  Under the COBRA law, “qualified beneficiaries” must be given the right to continue coverage for a pre-determined maximum length of time in certain situations when the group health plan would otherwise be terminated. To be considered a qualified beneficiary, a person must be covered by a group health plan on the day before a “qualifying event” occurred that would otherwise cause him or her to lose coverage.  In addition, a qualified beneficiary must be a covered employee, the employee’s spouse or former spouse, or the employee’s dependent child.  A domestic partner covered under the plan is an example of a type of person who is not considered a qualified beneficiary under the COBRA law.

Below is a chart explaining the continuation coverage requirements of COBRA:

In certain situations, the bankruptcy of an employer sponsoring a group health plan will be a qualifying life event for the retired employee, the retired employee’s spouse or former spouse, and the retired employee’s dependent children.

It is relatively simple to understand COBRA at a high level, but the administrative requirements can be burdensome. Specific notices must be provided at certain times, such as within 90 days of a participant first enrolling in a plan and within 14 days of a qualifying event (or receiving notice of a qualifying event). Additionally, there are administrative challenges with the billing and collection of premiums. As a result, employers who are subject to COBRA often find it easiest to comply with this law by outsourcing the service to a third-party company who specializes in COBRA administration.

It should be noted that if an employer is subject to both Illinois State Continuation and COBRA, the employer must offer both options when applicable, and the individual(s) eligible for both options are only able to choose one of the options. The maximum premium that can be charged and the length of continuation coverage varies between the two laws, so it may make sense for a person to choose continuation coverage under one law and not the other. 

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