Will I Still Be Able to Keep My Insurance Coverage If I Am Fired?

Federal labor benefit laws protect employees terminated with or without cause. In most cases, employers who fire employees for gross misconduct do not have to provide employees with optional continuing COBRA coverage. Employers must offer terminated employees optional health care coverage through their existing group health care plan for 18 months after severance. Employers are not required to contribute to the optional health care coverage after the last date of employment.

COBRA Basics

• Under the Consolidated Omnibus Budget Reconciliation Act of 1986, or COBRA, terminated employees have a legal right to receive continuing health care coverage through their former employer's group plan for a limited time. Employees may have to pay the entire premium to obtain the continuing coverage. The U.S. Department of Labor Employee Benefits Security Administration regulates COBRA coverage. COBRA's laws apply to most private-sector employees with employers that hire more than 20 employees and local or state governments that provide health insurance.

No Gross Misconduct

• Federal law requires COBRA coverage for employees terminated voluntarily or involuntarily if the employee's termination was not for gross misconduct. Thus, employees fired for violating existing laws or company policies may not be able to participate in COBRA's optional continuing coverage. These employees may have to purchase insurance through an individual plan within the plan's coverage windows.

COBRA Notice and Electing COBRA Coverage

• The employer's health care plan provider sends notices to employees when eligibility begins. These notices inform employees of COBRA and their legal rights. To participate in continuing health care coverage, employees must elect continuing coverage when offered by the health care plan. The health care plan can disqualify employees from participation if they fail to elect the optional COBRA coverage within the prescribed time allowance. Typically, employees have a limited amount of time to choose coverage. COBRA provides a few exceptions where employees' dependents may be covered for longer than 18 months.

COBRA Premium Assistance and ARRA

• The American Recovery and Reinvestment Act of 2009 allows some terminated employees with COBRA coverage at a reduced cost. Employees who were eligible for coverage after Feb. 17, 2009, may receive a reduction for coverage limited to 15 months and ending on May 31, 2010. The reduction laws allow employees to pay for 35 percent of the health care premiums while the other 65 percent is covered through tax credits.

COBRA's Costs

• Employers may charge a 2 percent administration fee to maintain the health care plan on the employee's behalf. Employees may have to cover 102 percent of the plan's cost including the premium and administrative charges. COBRA also covers employees who aren't fired but experience a different employment or life change, which triggers COBRA's coverage. Additionally, employers may cover their eligible dependents and spouse with the health care coverage but usually pay increased premiums.

Considerations

• Since employment and labor laws frequently change, you should not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your jurisdiction.