Estimated Reading Time: 4 minutes
By the NRMC Team
Resource Type: Risk eNews
Topic: HR Risk and Employment Practices, Insurance and Risk Financing
Eligibility of health insurance coverage under an employer’s group plan terminates when an employee is separated from employment. However, due to the health insurance benefit continuation requirements under COBRA (Consolidated Omnibus Budget Reconciliation Act) and many similar state laws, most employees can elect to continue their health insurance coverage for a certain period of time post employment, as long as they pay the premiums. This process generally works smoothly, assuming the employer has notified a departing employee about his or her right to continue their health insurance coverage. But did you know that if an employer does not give the proper notifications to a departing employee, the employee may end up uninsured and the employer may end up with the former employee’s medical bills?
That’s why COBRA notices are so important. Employers should provide their employees with written notice of their right to continuation coverage both at the beginning of employment and as the employee is going out the door—generally a separate letter dealing with health insurance benefits is best. The notice must instruct the departing employee how to inform the health insurance carrier of the employee’s desire to continue coverage. If the employer fails to notify the departing employee of these details, the employee may fail to notify the insurance company to request continuation coverage and the employer may end up paying for any medical bills the employee submits to the insurance company.
Leaves of absence are another danger zone in the health insurance world. When an employee is taking an unpaid leave of absence, paying premiums for health care coverage can get confusing. When an employee is not receiving compensation, how will premiums be paid? Should an employee’s health insurance be suspended while she or he is on leave? Most employers decide that it’s safer to continue an employee’s coverage than to drop the employee from the plan, especially if there is a chance that the employee will return to work after the leave of absence. But—to be fiscally prudent—the nonprofit should require an employee on unpaid leave to make the premium payments.
To avoid the risk that the employer will end up with the medical bills, follow these tips for dealing with health insurance continuation coverage:
The Nonprofit Risk Management Center welcomes your questions and comments at 703.777.3504 or info@nonprofitrisk.org.
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