Health Care Insurance for Terminated Employees

Federal regulations under the COBRA law require employers with 20 or more employees to offer the option of continued health care insurance to employees who lose coverage under their group health insurance due to a reduction in hours of work or employees who are terminated due to resignation or discharge (with the exception of gross misconduct).

For businesses in Virginia with less than 20 employees, there are also certain requirements related to health care insurance. Each group medical policy issued in the Commonwealth must contain one of the two options described below.

One of the options is that the employer's group health policy may allow the terminated employee to convert, without evidence of insurability, to an individual accident and sickness insurance policy. The policy will extend coverage to the same family members that were insured under the group policy. The first premium for the converted policy must be paid within thirty-one days after the termination, and the conversion must be implemented in such a way that there is continuous coverage during the thirty-one day period.

The second option provides for a limited continuation of the insurance coverage provided under the group plan. Continuation coverage is only available to an employee who has been continuously insured under the group policy during the entire three-month period immediately preceding the termination. The person's present coverage is continued, without evidence of insurability, for a period of ninety days following the date of termination of the person's eligibility for the current group plan. Application for the extended coverage is made to the group policyholder, and the total premium for the ninety-day period is paid to the group policyholder prior to the termination of current coverage.

It is recommended that those businesses employing less than 20 employees that have a group health insurance plan check with their insurance carrier regarding these options for separated employees.

SESCO Management Consultants is available for assistance should you have questions about health insurance continuation. You may contact us by phone at 423-764-4127 or by email at sesco@sescomgt.com .