480 / Do COBRA continuation coverage requirements apply to long-term care insurance?

The COBRA continuation coverage requirements applicable to group health plans do not apply to plans under which substantially all of the coverage is for long-term care services.¹ This provision is effective for contracts issued after 1996.² A plan may use any reasonable method to determine whether substantially all of the coverage under the plan is for qualified long-term care services ( Q 356).³

Planning Point: After a qualifying event at work (e.g. the employer’s failure to pay premiums), group health plans generally require that each qualified plan beneficiary be given the election to continue identical coverage. This is not the case with qualified long-term care insurance (QLTCI).

As a practical matter, most QLTCI sold through the worksite, or sponsored by an employer, are individual policies. They are the exact same contracts sold on the retail market. However, by meeting certain participation thresholds, the insurer may extend premium discounts and underwriting concessions. But since they are individual policies, they are completely “portable” and not tied to employment in any meaningful way.

There are some “true group” QLTCI plans—many of which have existed for some time, and some that are newly sold. These policies do operate under group regulations, where employees receive “certificates” (not policies), and an employee who works in Oregon, for example, might be covered by an Idaho policy form if that is where his employer’s “situs” is located. Although COBRA does not apply, one will find conversion privileges in group long-term care which, for instance, give certificate holders the right to continue making premium payments (and keep coverage in-force) in the event their employer discontinues the plan.

1.     IRC § 4980B(g)(2).

2.     HIPAA ’96, § 321(f)(1).