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September 2008
The Department of Labor’s Employee Benefits Security
Administration (EBSA) administers the Employee Retirement Income Security
Act of 1974 (ERISA), which governs retirement plans (including
profit-sharing and 401(k) plans) and welfare plans (including health,
disability, and life insurance plans). ERISA also includes the health
coverage continuation and portability provisions of the Consolidated Omnibus
Budget Reconciliation Act (COBRA) and the Health Insurance Portability and
Accountability Act (HIPAA). This information sheet focuses on job loss and
its effect on workers’ health benefits.
When facing job loss or a reduction in hours, workers
need to know their options ahead of time to prevent loss of health coverage.
There may be several options available to individuals who
are losing their health coverage when they lose their jobs:
Special Enrollment in Another Group Plan. If other
group health coverage is available (for example through a spouse’s
employer provided plan), special enrollment in that plan should be
considered. It allows the individual and his/her family an opportunity to
enroll in a plan for which they are otherwise eligible, regardless of
enrollment periods. However, to qualify, enrollment must be requested within
30 days of losing eligibility for other coverage. After special enrollment
is requested, coverage is required to be made effective no later than the
first day of the first month following your request for enrollment. This
type of coverage is usually the most cost-effective of all the options.
COBRA Continuation Coverage. If the individual’s
employer continues to operate and offer a group health plan, COBRA
continuation coverage may be available. COBRA, which generally applies to
employers with 20 or more employees, allows the individual and his/her
family to continue the same group health coverage at group rates. An
individual’s cost for coverage may be higher than what the individual was
paying before (and is usually higher than the cost for coverage under
special enrollment in a spouse’s plan), but generally the cost is lower
than that for private, individual health insurance coverage. The plan should
send a notice regarding the availability of COBRA coverage. After this
notice is provided, the individual generally has 60 days to elect coverage
and it is then available retroactive to the loss of coverage. (Note: Once an
individual has elected COBRA, he/she won’t be eligible for special
enrollment in another group health plan, such as a spouse’s plan, until
all COBRA coverage available is exhausted. Therefore, it is important to
consider special enrollment in another plan promptly.) COBRA coverage
typically lasts 18 months, but may last longer in certain circumstances.
Health Coverage Through a Government Program.
Health coverage may be available to certain qualified individuals through
the State or Federal Governments. Information on government programs such as
Medicaid (for low-income individuals and individuals with special needs),
State Children’s Health Insurance Program (for children of qualified
families), or Medicare (for people aged 65 and over, and for certain people
who are disabled or have end-stage renal disease), is available through your
State insurance department or the U.S. Department of Health and Human
Services, Centers for Medicare and Medicaid Services at 1-800-MEDICARE.
Private, Individual Health Insurance. The last
option for an individual to consider is private individual health insurance
coverage. Individuals may qualify for guaranteed access to such coverage,
without any pre-existing condition exclusions, if:
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They had health coverage for at least
18 months without a significant break in coverage (generally a break in
coverage of 63 days or more) and the most recent period of coverage was
under a group health plan;
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Group coverage was not terminated
because of fraud or failure to pay premiums;
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They either were not eligible for
COBRA continuation coverage (or similar State program), or if eligible
for COBRA coverage (or similar State program), they both elected and
exhausted COBRA coverage; and
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They are not eligible for other health
coverage.
Even if they do not meet these criteria, they may still
be able to obtain coverage. The cost of individual coverage is often higher
than similar coverage under a group health plan obtained through special
enrollment in another group plan or COBRA. More information on individual
health coverage is available from your State insurance commissioner or the
Department of Health and Human Services, Centers for Medicare and Medicaid
Services at 410.786.1565 or www.cms.gov.
Note: When considering health coverage options,
individuals should examine the scope of the coverage (including benefit
coverage and limitations, visit limits, and dollar limits), premiums, cost
sharing (including co-payments and deductibles), and waiting periods for
coverage. For information on the coverage through a particular group health
plan, the worker should call the plan administrator and request a copy of
the plan’s summary plan description.
The free publications listed below provide more
information about options for coverage:
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Retirement and Health
Coverage…Questions and Answers for Dislocated Workers
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Your Health Plan and HIPAA…Making the Law Work for you
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An Employee's Guide to Health Benefits Under COBRA
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IRS Notice 98-12: Deciding Whether to
Elect COBRA Health Care Continuation Coverage After the Enactment of
HIPAA
They are available on the agency’s Web site or by
calling EBSA’s toll-free number at 1.866.444.EBSA (3272) to request
copies. If you have questions about these options, you can call the
toll-free number or contact EBSA electronically at www.askebsa.dol.gov.
This fact sheet has been developed by the U.S. Department
of Labor, Employee Benefits Security Administration, Washington, DC 20210.
It will be made available in alternate formats upon request: Voice phone:
202.693.8664; Text telephone: 202.501.3911. In addition, the information in this fact
sheet constitutes a small entity compliance guide for purposes of the Small
Business Regulatory Enforcement Fairness Act of 1996.
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