Health Insurance Benefits for a Terminated Employee

Employment separation, whether voluntary or involuntary, can have several adverse affects on an employee's health insurance coverage. Loss of coverage can cause catastrophic family hardships, especially if a pre-existing condition is present. As a result, several laws govern the continuation and availability of health insurance benefits for a terminated employee.

Laws Governing Health Insurance

• The Health Insurance Portability and Accountability Act (HIPAA) and the Consolidated Omnibus Budget Reconciliation Act (COBRA) both have some bearing on employee benefits after termination. HIPAA offers employees protection when they lose their health coverage by providing special enrollment options. The law also limits the ability of a new employer to restrict new health coverage. COBRA allows a terminated employee to continue their existing health insurance after separation from the employer.

Enrolling in Another Plan

• Special enrollment allows a terminated employee to obtain health coverage on a family member's plan. The request for special enrollment must be completed within 30 days of losing employer-sponsored health coverage. Coverage begins the first day of the following month. Family members requesting special enrollment should receive the same benefits at the same price as if they were enrolling for the first time.

Consolidated Omnibus Budget Reconciliation (COBRA)

• COBRA applies to workers who have been displaced, switched jobs or subject to a reduction in hours that causes them to lose health coverage. Employers with at least 20 employees are required to offer COBRA and an employee must have been covered by the employer's health plan. When the separation occurs, the employer is required to provide a COBRA notice within 44 days. In order to continue receiving benefits, the employee must respond to the notice in writing and assume payment for the plan. As a result, COBRA health coverage can become an expensive insurance option.

Medical Assistance

• The federal government's medical assistance, or Medicaid, program offers coverage to individuals and families that meet specific criteria. The program is administered by each state, which sets the eligibility requirements. Several factors impact eligibility including income and resources, age and disabilities, for example. Typically, a family or individual must meet the state and federal definition of low-income. Even if an adult family member is ineligible, children in the family may qualify for the program.