Massachusetts Employer Group and Small Employer Health Insurance
This chapter covers Massachusetts law on employer group health insurance (nondiscrimination, eligibility, coordination of benefits, COBRA and state continuation) and the small-employer rules.
Employer group health insurance
Nondiscrimination (Mass. Gen. Laws ch. 175, §§ 108C, 108G; ch. 176A, §§ 3A, 8E; ch. 176B, §§ 4E, 5A; ch. 176G, § 19)
Massachusetts bars two kinds of discrimination, each repeated for insurers (chapter 175), hospital service corporations (176A) and medical service corporations (176B), and the abuse rule also for HMOs (176G). Each section reaches practices that are fair in form but discriminatory in practice, not only overt discrimination (ch. 175, § 108C).
Exposure to DES. An accident and sickness policy (individual or group), a hospital service plan or a medical service plan may not be denied, cancelled, nonrenewed, excessively rated, limited in length or otherwise altered in a way that discriminates primarily because the insured person has had a suspected, alleged or confirmed exposure to DES (diethylstilbestrol) (Mass. Gen. Laws ch. 175, § 108C; ch. 176A, § 8E; ch. 176B, § 4E).
Victims of abuse. No insurer, agent or broker may cancel, refuse to issue or renew, or vary the premiums, length of coverage or other terms of an accident and sickness policy (individual or group) or a disability policy based on information that a person has been a victim of abuse, or seek that information; hospital service corporations, medical service corporations and HMOs are bound by the same rule (Mass. Gen. Laws ch. 175, § 108G; ch. 176A, § 3A; ch. 176B, § 5A; ch. 176G, § 19). The law creates no special class of insureds; a violation is an unfair or deceptive act or practice under chapters 93A and 176D (ch. 176G, § 19).
Eligibility for coverage (Mass. Gen. Laws ch. 175, § 110)
An insurer may also issue a general or blanket (group) policy. Eligible groups include an employer or the trustees of a fund the employer establishes, a trade union, the trustees of a fund set up by two or more employers in the same industry or by unions, and an association of employers or employees in the same or related industry, with a constitution and by-laws, formed in good faith for purposes other than obtaining insurance (Mass. Gen. Laws ch. 175, § 110(A)).
How many employees an employer group must insure depends on who pays (Mass. Gen. Laws ch. 175, § 110(A)):
| Who pays the premium | Who must be insured |
|---|---|
| The employer pays all of it (noncontributory) | All eligible employees |
| Employees pay part or all (contributory), in a policy that is creditable coverage under chapter 111M | Offered to all eligible employees, insuring at least 75 percent, or at least 8,000 principally employed in Massachusetts |
For example, a contributory creditable-coverage plan for 40 eligible employees needs at least 30 (75 percent) enrolled.
Employee eligibility (211 CMR 66.04(3))
In a small group, a carrier must cover all eligible employees and dependents, except as a closed-network HMO’s service-area rules allow and except a late enrollee, one who seeks to enroll significantly later than when first eligible (211 CMR 66.04(3)(a)).
A person is not a late enrollee who asks to enroll within 63 days after a previous qualifying health plan ends, or within 30 days after a court orders coverage for a spouse, former spouse or child under the employee’s plan (211 CMR 66.04(3)(a)) or after other coverage ended because of the spouse’s termination of employment or death (Mass. Gen. Laws ch. 176J, § 1). A qualifying health plan includes insured group and individual hospital, medical and surgical coverage and an employer’s or union health and welfare fund’s self-insured or self-funded health plan (211 CMR 66.03). Meeting either exception is enough.
A late enrollee turned away must be offered coverage at the group’s next renewal date (211 CMR 66.04(3)(b)). Requiring more than 90 days of work before a person qualifies as an eligible employee is unreasonable (211 CMR 66.04(3)(c)).
Coordination of benefits provision (COB) (211 CMR 38.01–38.08)
Massachusetts’s COB rule sets the order in which plans pay when a person has more than one plan. A plan with no COB provision may not consider another plan’s benefits (211 CMR 38.01).
- The primary plan pays as if the secondary plan did not exist (211 CMR 38.04(1)(a)).
- The secondary plan may reduce its payment so all plans together pay no more than 100% of the total allowable expenses for the claim, crediting its deductible as if there were no other coverage (211 CMR 38.06).
- A plan whose order-of-benefit rules are not consistent with the regulation is always primary, unless both plans say the complying plan is primary (211 CMR 38.04(2)(a)).
- A COB provision may not reduce benefits because another plan exists that the person did not enroll in, or because the person could have been covered elsewhere (Medicare Part B excepted) (211 CMR 38.03(2)).
Some coverage never coordinates: hospital indemnity and other fixed indemnity coverage, accident-only coverage, specified disease coverage, Medicare supplement policies and a state Medicaid plan (211 CMR 38.02).
Each plan uses the first rule that decides the order (211 CMR 38.05):
| Situation | Primary plan |
|---|---|
| Auto accident | Personal injury protection (PIP) pays the first $2,000; auto medical payments coverage is always secondary to a health plan (38.05(1)) |
| Covered as employee and as dependent | The plan covering the person other than as a dependent, unless Medicare rules reverse the order (38.05(2)) |
| Child of parents married or living together | The parent whose birthday falls earlier in the calendar year (month and day only); with the same birthday, the plan that has covered that parent longer (38.05(3)(a); 38.02) |
| Child of divorced or separated parents | A court decree making one parent responsible, once that parent’s plan knows of it; otherwise the custodial parent, that parent’s spouse, the non-custodial parent, then that parent’s spouse (38.05(3)(b)) |
| Active employee and laid-off or retired employee | The plan covering the person as an active employee (38.05(4)(a)) |
| Active coverage and continuation coverage | The plan covering the person as an employee, member, subscriber or retiree; COBRA or state continuation is secondary (38.05(5)(a)) |
| None of the above decides | The plan that has covered the person longer; if that does not decide, the plans share the allowable expenses equally (38.05(6), (7)) |
For example, if a child’s married mother was born March 4 and father July 19, the mother’s plan is primary, whoever is older.
Every explanation of benefits must say: “If you are covered by more than one health benefit plan, you should file all your claims with each plan.” (211 CMR 38.07).
Continuation of coverage under COBRA and Massachusetts specific rules (29 U.S.C. §§ 1161–1166; Mass. Gen. Laws ch. 175, §§ 110D, 110G, 110I)
Federal COBRA. COBRA does not apply to a group health plan for a year in which all employers maintaining it normally employed fewer than 20 employees on a typical business day in the preceding calendar year (29 U.S.C. § 1161(b)). For larger employers:
| COBRA rule | Federal requirement |
|---|---|
| Qualifying events | The employee’s death; termination (except for gross misconduct) or reduction of hours; divorce or legal separation; Medicare entitlement; a child ceasing to be a dependent; a retiree’s former employer’s bankruptcy (§ 1163) |
| How long | 18 months after a termination or reduction of hours; 36 months after the other events or a second event within the 18 months (after a bankruptcy, a retiree’s coverage runs until death); 29 months for a beneficiary Social Security finds disabled in the first 60 days, with notice before the 18 months end (§ 1162(2)(A)) |
| Premium | Up to 102% (150% in disability-extension months after the 18th); nothing due before 45 days after the election; payment is timely within 30 days of the due date (§ 1162(2)(C), (3)) |
| Election period | At least 60 days, ending no earlier than 60 days after the later of the loss of coverage or the election notice (§ 1165(a)(1)) |
| Notices | The employer tells the plan administrator of a death, termination or reduction of hours, Medicare entitlement or bankruptcy within 30 days; the employee or beneficiary reports a divorce, separation or a child’s loss of dependent status within 60 days (§ 1166(a)) |
Massachusetts continuation rules.
- Leaving the group. A group policy issued under section 110 must keep an insured who leaves the group insured for 31 days, unless entitled to similar benefits in that time (Mass. Gen. Laws ch. 175, § 110D).
- Plant closing. An employee who loses group coverage through a plant closing or covered partial closing keeps it for 90 days, or until entitled to similar benefits or eligible under another group plan if sooner, paying only the employee’s usual share of the premium (ch. 175, §§ 110D, 110G).
- Involuntary layoff or death. When a member of a group hospital, surgical or medical plan loses eligibility through involuntary layoff or death, coverage for the member, spouse and dependents may continue for 39 weeks or until eligible under another group plan, whichever comes first, but never longer than the member was most recently covered. The employer must notify the member or surviving spouse, who elects by giving at least 30 days’ written notice and pays the whole premium, including the employer’s usual share (ch. 175, § 110G).
- Divorce or separation. After a divorce or separate support judgment, unless it says otherwise, the former spouse remains eligible under the member’s group plan without additional premium or examination, while the member stays in the plan, until either one remarries or the time the judgment sets, whichever is earlier (ch. 175, § 110I(a)). If the member remarries, the former spouse may continue, if the judgment so provides, by a family-plan rider or an individual plan, which may carry an additional premium the Commissioner finds reasonable (§ 110I(b)).
Small employer and individual medical plans
Definition of small employer (Mass. Gen. Laws ch. 176J, § 1)
An eligible small business is a sole proprietorship, firm, corporation, partnership or association actively engaged in business that, on at least half its working days in the preceding year, employed from one to not more than 50 eligible employees, the majority of whom worked in Massachusetts (Mass. Gen. Laws ch. 176J, § 1). Businesses count as one if eligible to file a combined state tax return or affiliated through the same corporate parent. A carrier may also offer small-group coverage to a business of more than 50 (ch. 176J, § 1).
Availability and eligibility rating rules (Mass. Gen. Laws ch. 176J, § 4; 211 CMR 66.04, 66.06)
Small-group coverage is guaranteed issue: every carrier must offer each of its plans to every eligible small business, enroll any that seeks to enroll, and let it enroll all eligible employees and dependents (Mass. Gen. Laws ch. 176J, § 4(a)(1)). Coverage must take effect within 30 days of the carrier’s receipt of a completed application (211 CMR 66.04(1)(b)).
- Participation. A carrier may require participation of up to 100% for groups of five or fewer eligible persons and up to 75% for groups of six or more, applied uniformly to groups of the same size (ch. 176J, § 1; 211 CMR 66.04(1)(l)).
- Very small groups. A carrier may require a business with 5 or fewer eligible employees to enroll through an intermediary or the Connector, but may not refuse one that does (ch. 176J, § 4(b)(4)).
- When a carrier may decline. A carrier need not issue a plan to a business if it shows the Commissioner that, within the prior 12 months, the business repeatedly paid late, committed fraud or misrepresentation, or failed materially to comply with plan provisions such as employer contribution rules, or that it fails the participation requirement (ch. 176J, § 4(b)(2), (3)). A denial must give the specific reasons in writing (211 CMR 66.04(1)(m)).
- No health underwriting. No carrier may exclude an employee or dependent for age, occupation, actual or expected health condition, claims experience, duration of coverage or medical condition, and no plan may have pre-existing condition exclusions or waiting periods (211 CMR 66.06).
Restrictions relating to premiums (Mass. Gen. Laws ch. 176J, § 3; 211 CMR 66.07)
Small groups and individuals form one merged market: a carrier’s group base premium rate is the same for eligible individuals and eligible small groups (Mass. Gen. Laws ch. 176J, § 3(a)(1)). It may be adjusted only by the listed factors; every other adjustment is prohibited (§ 3(a)(7)):
- Age: the highest age factor for adults over 20 may be no more than twice the lowest (2-to-1) (§ 3(a)(2))
- Area: up to 7 regions, each with a factor from 0.8 to 1.2, based on the group’s head office (§ 3(a)(3); 211 CMR 66.07(1)(b)2.)
- Tobacco use: only if the Commissioner expressly permits it, applied alike to groups and individuals, with members certifying no tobacco use in the prior 12 months (211 CMR 66.07(1)(b)3.)
- Benefit level (relative actuarial value) and individual or family coverage; a family premium counts at most the 3 oldest children under 21 (ch. 176J, § 3(a)(4), (6))
No premium may be based on health status, duration of coverage, or actual or expected claims experience (211 CMR 66.07(2)).
Small group continuation (Mass. Gen. Laws ch. 176J, § 9)
Small group continuation (“mini-COBRA”) covers small-group plans with 2 to 19 eligible employees, not a plan with only one or more than 19 (Mass. Gen. Laws ch. 176J, § 9(k)(iii)).
The carrier, not the employer, must offer it to a qualified beneficiary losing coverage through a qualifying event who elects in writing; coverage is identical to similarly situated members’ (§ 9(a), (b)(1)). The rest tracks federal COBRA:
- The same six qualifying events as COBRA (§ 9(f))
- 18 months after a termination or reduction of hours (29 months for a beneficiary disabled at the time who gives notice before the 18 months end), 36 months after other events (after a bankruptcy, the retiree’s coverage runs until death) (§ 9(b)(2))
- Up to 102% of the applicable premium (150% in the disability extension), payable monthly, with nothing due until 45 days after the election (§ 9(c))
- An election period of at least 60 days; the carrier notifies beneficiaries within 14 days of learning of a qualifying event, and the employee or beneficiary reports a divorce, separation or a child’s loss of dependent status within 60 days (§ 9(h), (j))
- No evidence of insurability, and in the 180 days before continuation ends the carrier must offer a conversion nongroup plan (§ 9(d), (e))
Renewability (Mass. Gen. Laws ch. 176J, § 4(c); 211 CMR 66.05)
Every small-group plan is renewable as HIPAA requires (Mass. Gen. Laws ch. 176J, § 4(c)(1); 211 CMR 66.05(1)). A carrier need not renew a business that has not paid premiums, committed fraud or misrepresentation, or failed materially to comply with plan provisions (including employer contribution rules), that at renewal fails the participation requirement or the small-business definition, that ignores reasonable requests to verify its information, or that is no longer actively engaged in business (ch. 176J, § 4(c)(2); 211 CMR 66.05(2)).
| Carrier action | Notice required |
|---|---|
| Nonrenewing one business | At least 60 days, with the specific reasons (211 CMR 66.05(5)) |
| Discontinuing a type of plan | At least 90 days (211 CMR 66.05(5)) |
| Leaving the individual and small group market | 180 days; no new business in that market for five years from its notice to the Commissioner (211 CMR 66.05(6)) |
A carrier that stops selling a plan to new groups must still renew it for existing groups and may not sell it to new groups again for at least three years (211 CMR 66.04(4)).
Lesson summary
- No denial, nonrenewal or different rating for DES exposure or for being a victim of abuse, and no asking about abuse (ch. 175, §§ 108C, 108G and parallel sections).
- Noncontributory plans insure all eligible employees; contributory creditable-coverage plans 75% or 8,000 (ch. 175, § 110). Not late enrollees: 63 days after other coverage, 30 days after a court order; a wait over 90 days is unreasonable (211 CMR 66.04(3)).
- COB: at most 100% of allowable expenses in all; PIP pays the first $2,000; the birthday rule for parents (211 CMR 38.00).
- COBRA (20+ employees) and mini-COBRA (2 to 19, by the carrier): 18/29/36 months, 102%, 60-day election (29 U.S.C. §§ 1161–1166; ch. 176J, § 9).
- Massachusetts: 31 days after leaving the group, 90 days after a plant closing, 39 weeks after layoff or death; a divorced spouse is covered until either remarries (ch. 175, §§ 110D, 110G, 110I).
- Small employer: 1 to 50 eligible employees; guaranteed issue; participation up to 100% / 75%; rates vary only by age (2-to-1), area (0.8–1.2), tobacco, benefit level, family size (ch. 176J, §§ 1, 3, 4).
- Notice: 60 days to nonrenew, 90 to drop a plan type, 180 to leave the market, then a five-year bar (211 CMR 66.05).