Insurance Options for People When an Employer Goes Out of Business

In times of recession or depression, many businesses go bankrupt, leaving their employees without income and insurance. If that happens with the company you work for or retire from, you do have some options. The first thing you need to know in such a situation is what type of bankruptcy your company filed for.

Chapter 11 Bankruptcy

• If your company filed for chapter 11 bankruptcy, there is still hope that it can reorganize and recover. Companies in chapter 11 generally stay open. This being the case, there may a reduction in benefits, temporarily or permanent. Once the company comes out of bankruptcy, it may be willing to improve its health insurance for its employees.

Chapter 7 Bankruptcy

• A company in chapter 7 bankruptcy is one that is closing down and liquidating its assets. In this case, your health insurance will be terminated. While the Employee Retirement Insurance Security Act protects your retirement benefits if the company closes, it won't protect your insurance coverage. If a company is closing and ending its health care coverage, the company is required to give covered employees 60 days notice that their insurance is ending. If this happens to you, begin your search for alternative health care coverage right away.

COBRA

• If your company is closing down permanently, you won't be able to continue your health care coverage through the Consolidated Omnibus Budget Reconciliation Act, commonly called COBRA. This option is only available to employees who lose their jobs and health care coverage, but the company stays in business. The bankruptcy court terminates the company's obligation to continue any employee benefits.

Options

• The two options you face for finding health care if your are under 65 years old are: getting added to your spouse's health care plan or purchasing a private plan. Becoming a part of your spouse's employer-offered plan should be cheaper than private coverage, because you are joining a group health care plan that the employer is most likely subsidizing to some extent.

Seniors

• If you are nearing 65 years old when your company goes out of business, you can try and wait until you reach that golden age and are eligible for Medicare coverage. While Medicare covers many of your health care needs in an affordable way, you may also want to purchase a supplemental policy to cover expenses Medicare doesn't cover.