Question about COBRA and lay offs

One of my sons recently had his place of employment close. It’s something he saw coming but didn’t think it would happen until after the first of the year.

Thing is, the HR people told them that they had to decide right then and there if they wanted to sign up for COBRA coverage for their medical insurance, and were told if they didn’t their coverage expired at midnight that day.

This doesn’t seem right to me. For one thing, they had taken a deduction off his last check just a week before to pay for his share of the coverage. It seems to me he’d still be covered for at least the rest of the month. Secondly, I thought there were rules about notifications and such in the event of a shut down.

Thought maybe somebody here could steer me in the right direction on the web so I can pass some facts along to him. Thanks in advance.

Since you are talking about COBRA, assume the land of cheese is in the US.

The WARN Act applies to foreseeable layoffs of certain company size.
Employee rights under COBRA are extensive, but the sticker shock is paying the full monthly cost of the coverage* plus 2% admin fee if the employer chooses to charge it. Employee needs to give your son the official notice, and he has time to choose. Employer can choose to terminate a person who hasn’t given an affirmative choice off the group plan in accordance with the regular plan rules/insurance contract (usually end of month). If a person exercises their COBRA rights and pays the premium, they have no break in coverage.

*Stimulus Act (ARRA) will last a little longer subsidizing the COBRA payment

The model COBRA notice is here–your son should be getting a version of one of these: (Emphasis added.)

As far as I understand it, a company that closes is no longer obligated to carry insurance coverage, so COBRA disappears as well. Perhaps they were determining if they needed to keep their insurance coverage active. Otherwise, perhaps they’d contact their insurance company and say, “We’re closing. Shut down our account.”

COBRA allows an employee to buy insurance through their previous company, but if the previous company doesn’t exist any longer…

But what about the fact that he’s paid for 3 more weeks of coverage?

That’s right:

No idea.

I wonder if that conversion of an employer’s policy to individual policy is something the insurance company can require a really quick notification of. Or, like I said, perhaps they were going to continue to carry the coverage if and only if they had people choosing it up front. It would essentially be just a courtesy to the former employees, in that case.

When my employer closed, the insurance and COBRA went with it - ie no insurance (at all) available any more and just a few hours notice (coverage expired at midnight). No conversion possible.

I was then declined by every insurer licensed in the state and after a few months, sold most everything and moved out of the USA where I was easily able to obtain coverage.

You have three months to select COBRA coverage, and if you do, it can be retroactive back to the initial date of layoff. However, you have to pay for the previous coverage.

Most people wait until the three months and see if they get another job. If they do, they simply do not get the COBRA coverage. If in that three month period, they end up having some sort of major medical expense, they cat still elect for the COBRA coverage, and still be covered.

The company may terminate your son’s group insurance the day of the layoff because the company itself probably pays most of your son’s insurance coverage and can get a partial refund.

There are a lot of regulations about layoffs depending upon the size of the company, the scope, etc. Many companies have to give three months notice if they layoff a certain percentage of the workforce. The rules are quite complex, and your son can contact the EEOC, the DOL’s website (especially for COBRA reduction qualification) or your state’s workman’s compensation commission or employment commission for more information.

Are you sure that he actually has? In my company, we deduct after the bill comes for the first month of coverage. In other words, you are paying this month for last month. Is he certain he wasn’t covered before his deductions began? It is very possible he was and has forgotten.

If your son is young and healthy, he wouldn’t really want to take Cobra anyway. He could get a private policy a lot cheaper even if Cobra was applicable in the current situation.

He may have paid for it but the company may not have paid their share of the cost or forwarded his share. Enter lawsuit to recover money from a bankrupt company.

Do whatever it takes to keep COBRA and then look for outside insurance. It’s tough to get insurance if you don’t have any.

If he’s young and healthy then he needs to weigh the risk a $2,500 or $5,000 detuctable against COBRA payments of $5,000 or more a year.

Problem is his wife is pregnant* and needs to keep whatever coverage they have until he gets something else.

*That’s right folks: I’m going to be a Grandfather in February!!!:):cool::eek::slight_smile:

Congratulations. And good luck to your son with this issue.

Your son’s place of employeement is closing? What does that mean? If the company going to no longer exist? the company is closing one location where you son worked? The company is going bankrupt. Also in which state?

The location he was working at is closing. The company still exists in a couple other states. Also, it’s in Wisconsin.

Badger Care Plus It was expanded this year and his whole family may be eligible for coverage. He will just have to look and find out.

I would say this is just a scare tactic used by H/R so people realize they are without health insurance coverage.

When I worked in H/R and accounting in the 90s, it was common to pay each person’s insurance, per month. So if they let you go, you were still covered till the end of the month.

Then in the early 00’s I saw companies switch to paying it out every week. So when you left, you were covered till Saturday at 11:59pm.

Now with computers it’s very easy to set it up so the benefits are actually paid out on a daily basis. Because it’s all computers no one knows, but it helps the company as they can end benefits that day.

So let’s say the company pays $300/month for their employee. The company sends over a “fund” but it gets allocated by the insurance company each day for $10.00

A similar example is managers. In a lot of companies managers are paid out, via the payroll systems for 7 days a week. So if you make $40,000, you, the employee are thinking, I get 40,000/52 weeks/40 hours per week/Five days. (40,000/52/5 = 153.85 dollars per day)

So you are actually working Monday - Friday 8 hours a day and thnking you would get $153.85 per day.

But in the payroll system managers are paid over SEVEN days. So they don’t work 8 hours a day / 5 days a week in the payroll system; they work ALL SEVEN days at 5.714 hours per day.

This is done because different types of monies paid show up on different places on the balance sheet and it means different things to the company. For instance, vacation time is earned and must be paid out. This is a liability to the company and shows up on the balance sheet that way. Sick days are conditional benefits (you don’t get them unless you are sick, at least in some companies), so they don’t show on the balance sheet as a liablity. (This is a general rule, that’s lots of accounting tricks to put things in various places)

If your son feels he is being docked incorrectly, and some companies will do this, the best bet is to tell the company and ask for a payment of one day. They will say “no,” then you can say "If I don’t get it I’ll go to the wages and hours divison of the state labor dept. They’ll get your money.

It usually works, because when wages and hours looks at books, if anything is wrong not only does the employee get his money, but the company is fined. I’ve been through a wages and hours audit and it ain’t pretty. It’s a lot easier for the company to pay the one day and forget it.

Of course then you run the risk of getting a “bad” reference for being a trouble maker.

One thing everyone should do, when they leave a company ask for a letter of reference in writing.

I imagine it would be difficult to get a letter of reference in hieroglyphics. :wink:

If the employer is still in business, he has to be offered COBRA, regardless of whether the employer continues to maintain a Wisconsin insurance policy.

Oh, THAT’s a complication!

Have the couple contact the social services agencies in their state of residence TODAY (if not sooner). MANY states have special programs geared specifically towards pregnant women. They need to contact a social worker and explain the situation. Help may very well be available, but what and who to go through will vary by state.

Meanwhile, if they can’t extend COBRA and, for some reason, can’t get private insurance (this will be difficult for a woman already pregnant) there are a couple of things you can do. I hope they won’t need to know this, but consider it a worst-scenario back up plan.

**1) Whenever you have contact with a medical provider state very clearly up front that you have no insurance and ask for discount if you are able to pay up front for a visit. ** Last year when my husband and I went “bare” for 8 months I was rountinely negotiating 40-50% discounts on medical visits simply by stating I had no insurance but was willing to pay for services in full and up front. Obviously, that is not always possible, but if you go in making your situation clear and are willing to work with the billing entities for a payment plan this can make an enormous difference.

**2) When you get a prescription filled take advantage of pharmacies that offer things like free antibiotics or low-cost generics. ** In my area Meijer’s offers a list of common medications and antibiotics free, and Walgreen’s has $4 and $10 deals on many common medicaitons.

**3) Let your pharmacist know you lost your insurance. ** My husband is diabetic, among other problems, and MUST have daily medication which, without insurance, is definitely a burdern. I told our usual pharmacist and she clued us into a county level program that provides assistance for obtaining prescription drugs to residents without insurance. This made an enormous difference to us.

**4) Don’t be afraid to talk to state agencies. **Even if you don’t qualify for certain programs now, talking to people is how you find out what you DO qualify for. I was able to get into a state-sponsored, subsidized insurance program that, despite a poverty-level income, we could afford AND fully covered my husband and all his pre-existing conditions. I’d give you more details, but the program is limited to Indiana residents. That’s why you - or rather the young couple - need to contact their state.

Good luck to all.