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What Is State Continuation of Health Insurance?

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

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. This has been particularly important during the COVID-19 pandemic and the resulting wave of job losses.

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.

American Rescue Plan's Mini-COBRA Subsidies

The American Rescue Plan (ARP), enacted in March 2021, provides federal subsidies that pay 100% of the cost of COBRA or mini-COBRA. [see Section 9501 of the legislation; the provision to include mini-COBRA is stated in Section 9501(a)(9)(B).]

The federal subsidies to cover the cost of COBRA or mini-COBRA are available from April 1, 2021 through September 30, 2021, for people who involuntarily lost their jobs or experienced an involuntary reduction in hours that made them ineligible for health benefits (COBRA and mini-COBRA are available even if the job loss or reduction in hours was voluntary, but the subsidies are not available in that case).

The ARP's COBRA subsidies are available to people already enrolled in COBRA or mini-COBRA, or to those who enroll during that window. And the law also gives people another opportunity to enroll in COBRA or mini-COBRA if they rejected it initially or subsequently terminated it, but would otherwise still have been within the coverage window (for mini-COBRA, this can sometimes be much shorter than COBRA's standard 18 months, as we'll see below). The federal subsidies terminate on the earliest of:

The date the person's COBRA/mini-COBRA is scheduled to end.

September 30, 2021.

The date the person becomes eligible for another employer-sponsored plan or Medicare.

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.

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 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.