What health options would be available to employees if a company closes?
Category: Workplace Benefits Questions
Sub-Category: Health Benefits/Health Plans/Health Insurance
Answer:
There are several health coverage options available to employees:
Special Enrollment in Another Group Health Plan - If an employee or his/her dependents lose health coverage and other group health coverage is available (for example, the employee’s spouse’s employer offers a group health plan), the employee should consider requesting special enrollment in the other plan. Special enrollment gives an employee an opportunity to enroll in a plan for which he/she is otherwise eligible regardless of the plan’s applicable enrollment periods. However, to qualify, the employee must request enrollment 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 the request for enrollment. This type of coverage is usually less expensive because the employer often pays a part of the premium.
COBRA Continuation Coverage - If an employee is losing coverage through an employer that continues to offer a group health plan, the employee may want to consider electing COBRA continuation coverage. COBRA, which generally applies to employers with 20 or more employees, allows the employee and his or her family to continue the same group health coverage at group rates. The cost may be higher than what the employee was paying before, but depending on the age and health status of the employee, it is usually lower than what one would pay for private individual health insurance coverage. All affected employees, covered spouses and covered dependent children should get a notice from the plan regarding the availability of COBRA coverage. COBRA coverage should be offered and notice given to an employee, even if the employee has other coverage. After this notice is provided, an employee generally has 60 days to elect coverage and it is then retroactive to the date of loss of coverage. However, an employee is not required to wait until he/she receives the election notice to elect COBRA; he/she may elect earlier. (Note: Once an employee has elected COBRA, he/she won’t be eligible for a second special enrollment opportunity in another group health plan, such as a spouse’s plan, until all COBRA coverage is exhausted.) COBRA coverage typically lasts 18 months, but may last longer in certain circumstances – up to 36 months.
Health Coverage Through a Government Program - An employee and his/her family may be eligible for health coverage through the state government or the U.S. government. For information on Medicaid or other government programs for low-income individuals and individuals with disabilities, or the State Children’s Health Insurance Program for children of qualified families, contact the appropriate state government agency. For information on Medicare for people aged 65 and over, and for certain people with disabilities, end stage renal disease, or amyotrophic lateral sclerosis (ALS), contact the U.S. Department of Health and Human Services, Centers for Medicare & Medicaid Services at 1-877-267-2323, ext. 61565.
Private individual health insurance coverage - An employee may qualify for guaranteed access to such coverage if:
- He/she 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;
- Group coverage was not terminated because the employee committed fraud or did not pay premiums;
- The employee was either not offered COBRA continuation coverage (or coverage through a similar state program), or was offered COBRA coverage (or coverage through a similar state program), elected and then exhausted COBRA coverage; and
- The employee is not eligible for other health coverage.
If the employee meets these criteria, he/she may qualify for guaranteed access to individual health insurance coverage for self and family, without any preexisting condition exclusion. If the employee doesn’t meet these criteria, he/she still may be able to obtain individual health coverage. However, the cost of individual health insurance coverage is often higher than similar coverage under a group health plan obtained through special enrollment or COBRA. For more information on individual health coverage, contact the appropriate state insurance commissioner, or the U.S. Department of Health and Human Services, Centers for Medicare & Medicaid Services at 410-786-3000.
For information on the coverage through a particular group health plan, review the plan’s Summary Plan Description (SPD). (The SPD is often referred to as an insurance booklet that describes health coverage). The SPD is available from the plan administrator.
Note: As an overall matter, employers should be guided in their relationship with their employees not only by federal employment law, but by their own employee handbooks, manuals, and contracts (including bargaining agreements), and by any applicable state or local laws.
Not all of the employment laws referenced apply to all employers or all employees, particularly state and local government agencies. For information on whether a particular employer or employee is covered by a law, please use the links provided for more detailed information. This information is not intended for federal agencies or federal employees -- they should contact the U.S. Office of Personnel Management (OPM) for guidance.
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Last Updated: 01/25/2008
