How to Handle Health Insurance Options When an Employee Leaves Your Company
When an employee decides o leave your company, the law places requirements on your actions regarding health care coverage for former employees. This legal procedure can be daunting for new business owners. However, the process is made easier when you know what's required of you under COBRA and Cal-COBRA laws should an employee leave your company.
Classification
If the person has been terminated due to negligence or for not fulfilling their job duties, you may not have to provide coverage until they are gainfully employed or insured once again. But you must continue to provide COBRA coverage for a period if they were laid-off due to staffing or economic reasons, or if the employee left on their own. This is considered a “qualifying event” and must be reported to the health plan administrator by the employee.
First notice
If an employee falls into the latter category, such as being laid-off or leaving on their own, you need to send the employee what is called the "first notice," which will inform them of their rights under COBRA to continue their health insurance COBRA coverage comes at a higher cost to the employee, since they are paying their regular monthly premiums in addition to the portion formerly paid by their employer.
This notice is most often sent when the employee is originally accepted into the health plan, but it should be sent upon their departure from the company too. It must also be sent to any dependants the employee may also have under the plan.
Second notice
The second notice will inform your employee of the steps they need to take to inform the health care provider of the qualifying event that led to their unemployment. Again, this is often included in the original health plan policy, but most employers choose to send out a notice after the qualifying event that outlines the steps that the former employee must take to obtain COBRA coverage, should they choose to do so.
Third notice
Within 14 days of the employee's departure from the company you must send the third notice, which will inform them of their coverage and the options they are responsible for. This detailed notice is often sent out by the health plan administrator instead of the employer. If this is the case with your health insurance provider, the health plan administrator has 44 days to deliver the third notice.
Notify Your Health Plan Administrator
You will need to inform the administrator of your health care plan of the change in your employee's status, and when coverage will expire for them. It will be up to your employee to pursue further coverage or make other arrangements at that point. Be sure to provide a copy of HIPPA regulations for your employee to review, so that they will be aware of what they are entitled to by law, and what's required of them.
Other Health Plan Considerations
Keep in mind that it's important for you to adhere to these requirements, or you may be held accountable if an employee complains that you did not provide information in a timely manner, according to the law. Keeping a record of what you sent out and when you sent it is essential. Compliance with COBRA laws is a serious issue and should not be taken lightly. This law is intended to provide greater accessibility to health care for America’s workers and is every employee’s right in California under the Cal-COBRA law.
Your company should have a policy in place for providing COBRA coverage to employee who leave your company and a documentation system to prove your compliance with the health care laws in California.