When an employee leaves your company, whether voluntarily or involuntarily, there are several important group health insurance responsibilities that need your attention. Handling the process correctly helps protect the departing employee while keeping your company’s benefits administration accurate and compliant.
Determine When Coverage Ends
First, confirm the employee’s last day of group health coverage. Depending on your insurance carrier and plan rules, coverage may end on the employee’s final day of employment or continue through the end of that month. Do not assume you know the termination date. Verify it according to your plan documents and carrier requirements.
You will also need to notify your insurance carrier or benefits administrator promptly so the employee can be removed from the active group plan at the appropriate time. Make sure any covered dependents are addressed as well.
Address COBRA or Continuation Coverage
For employers subject to federal COBRA, termination of employment or a reduction in hours that causes a loss of coverage generally constitutes a qualifying event, unless the termination is for gross misconduct. COBRA generally applies to private-sector group health plans maintained by employers with at least 20 employees, although specific rules apply when determining whether an employer meets that threshold.
Employers subject to COBRA generally must notify the plan administrator within 30 days of an employee’s termination or reduction in hours. The plan administrator then has notification responsibilities to the qualified beneficiaries. When the employer is also the plan administrator, it generally has up to 44 days to provide the COBRA election notice.
Smaller employers should not simply assume there are no continuation requirements. State continuation laws and other rules may apply depending on the employer, insurance arrangement, and circumstances.
Coordinate the Administrative Details
Employers should also review payroll deductions and employer contributions, making sure the final paycheck and benefits records are handled appropriately. If the employee participated in other benefits, such as dental, vision, an FSA, HSA, or life insurance, those benefits may require separate action.
Good recordkeeping is equally important. Document the termination date, coverage end date, carrier notification, COBRA or continuation notices, and other relevant communications.
Get Help Before Problems Develop
Employee departures are routine, but benefits administration mistakes can create unnecessary complications. Deadlines, notification requirements, plan provisions, and continuation coverage rules can vary.
If an employee is leaving your company and you have questions about what to do with their group health insurance, contact Bay Area Health Insurance. We can help you understand your responsibilities, coordinate the appropriate next steps, and keep your group health benefits administration on track.
