Group health coverage must be offered to qualified beneficiaries after certain qualifying events, for defined periods.
Qualifying events. Termination other than for gross misconduct, reduction in hours, death, divorce or legal separation, a dependent ceasing to qualify, and for some plans the employer’s bankruptcy.
Notice chain. A general notice on becoming covered; the employer’s notice to the administrator of employment-related events within a short period; the administrator’s election notice to beneficiaries; and the beneficiary’s election within sixty days, with payment within forty-five days of election.
Duration. Eighteen months for employment-related events, extendable for disability and for second qualifying events, and thirty-six months for others.
Cost. Up to the full premium plus an administrative percentage.
Penalties. Statutory per-day penalties for notice failures, plus liability for medical claims that would have been covered. Notice failures are the most common and most avoidable exposure.
State continuation laws extend similar rights to smaller employers not covered federally.
In transactions. Which party retains the obligation for existing qualified beneficiaries depends on the structure and on whether the seller maintains any group health plan, and it should be allocated expressly in the agreement.