When clients lose their medical coverage because an employer has financial problems, the clients often ask their insurance advisors for assistance.
Unfortunately, there may not be much that can be done to secure continued medical insurance through the employer’s plan. Sometimes even when an employee or beneficiary thinks there is medical insurance, if it turns out that there is none, there may not be an effective remedy.
Still, practical considerations do come up that advisors should know about. The following questions and answers discuss these issues in general.
(Note: A full discussion of requirements for continuation coverage under COBRA, the Consolidated Omnibus Reconciliation Act of 1985, is beyond the scope of this article. Such information is readily available elsewhere.)
In reading through the following Q&As, keep in mind that each situation is different. In addition, the rules under COBRA are complicated. So employees and plan beneficiaries should seek independent legal advice about their particular situations. This is just a general discussion of some of the issues, and it is not intended as legal advice, nor as a comprehensive discussion.
1. Are all employees entitled to COBRA benefits?
No. Small employers, churches and governments are excluded. In general, a small employer employs fewer than 20 employees.
2. My employer just went out of business. Am I entitled to COBRA?
No. Your employer must have a health plan for you to have COBRA benefits. Since your employer is out of business, there is no longer a health plan, and you cannot elect COBRA benefits.