What to Do When an Employee Leaves:

If one of your employees has found a new job, or they are simply leaving your company, you will need to make sure that you handle their departure correctly for your group health plan. The departure of this employee can be far reaching, particularly for small businesses. It is important to understand your obligations ahead of time, before this happens to your company.

First, it is important to classify how and why your employee is leaving. If they are being fired for gross negligence, you may not have to provide them with COBRA coverage until they find a new job or a new health plan. However, if they are being fired or let-go due to staffing cut-backs or if they are leaving on their own, you will need to provide COBRA coverage.

If an employee has not been fired for gross negligence, you will need to send out what is called the COBRA first notice. This must be sent after a "qualifying event" occurs, such as being fired or when you are informed that an employee is leaving. This notice must contain information on an employee's rights under COBRA. In addition to sending this notice to your employee, if they have dependants in your group health plan, a notice will also need to be sent to them as well.

Typically, this letter is sent out within 90 days of acceptance into the group health plan, but it is a good idea to send another one, just to make sure you have covered your bases.

Next, a second notice must be sent out which informs your employee of their obligations under COBRA and what they can expect. This notice will inform your employees of the steps they need to take to inform the group health care plan administrator of their "qualifying event."

After the second notice, a third notice must be sent out. This notice must be sent out within 14 days of a "qualifying event" and serves to inform them of what they can expect for coverage and what their responsibilities will be. You are absolutely required to send this notice within 14 days, or you could face harsh penalties.

Once these COBRA steps have been taken care of, you will need to notify your group health care plan administrator that your employee is leaving the group health plan. You may have already taken care of this through the required COBRA notices, but it is a good idea to do it once again, to make sure that everyone is aware of the upcoming change. You will need to provide the administrator with the last day that your employee will be with your company at this time to further assist them.

At this point, your employee will be in control of their future options. They will be able to get a new insurance plan that offers the same benefits as your plan under HIPPA regulations. If they are not aware of their rights under HIPPA, you will need to provide them with some information to assist them.

They will need to be aware of any exclusion periods and how their old policy may take care of this problem, as well as the typical three-month waiting period that exists before a new employee can join a group health plan. This information will assist them in determining if they need to opt for COBRA coverage with your business before they leave.

Losing an employee can be complicated, but by following the right steps, you can ensure that the transition will be as painless for all parties affected by the change.

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