Pensions and Health Care Coverage for Dislocated Workers

You can get pension and health coverage after you're laid off.

To be eligible for COBRA coverage, you must have been enrolled in your employer's health plan when you worked and the health plan must continue to be in effect for active employees. In addition, you must take steps to enroll for COBRA continuation benefits.

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Which employers are required to offer COBRA coverage?

Employers with 20 or more employees are usually required to offer COBRA coverage and to notify their employees of the availability of such coverage. COBRA applies to private-sector employees and to most state and local government workers. In addition, many states have laws similar to smaller companies. You should check with your State Insurance Commissioners's Office to see if such coverage is available in your state.

What if the company closed or went bankrupt and there is no health plan?

If there is no longer a health plan, there is no COBRA coverage available. If, however, there is another plan offered by the company, you may be covered under that plan. Union members who are covered by a collective bargaining agreement that provides for a medical plan also may be entitled to continued coverage.

How do I find out about COBRA coverage and how do I elect to take it?

Employers or health plan administrators must provide an initial general notice if you are entitled to COBRA benefits. You probably received the initial notice about COBRA coverage when you were hired.

When you are no longer eligible for health coverage, your employer has to provide you with a specific notice regarding your rights to COBRA continuation benefits. Here is the sequence of events: First, employers must notify their plan administrators within 30 days after an employee's termination or after a reduction in hours that causes an employee to lose health benefits.

Next, the plan administrator must provide notice to individual employees of their right to elect COBRA coverage within 14 days after the administrator has received notice from the employer.

Finally, you must respond to this notice and elect COBRA coverage by the 60th day after the written notice is sent or the day health care coverage ceased, whichever is later. Otherwise, you will lose all rights to COBRA benefits.

Spouses and dependent children covered under your health plan have an independent right to elect COBRA coverage upon your termination or reduction in hours. If, for instance, you have a family member with an illness at the time you are laid off, that person alone can elect coverage.

If I elect COBRA, how much do I pay?

When you were an active employee, your employer may have paid all or part of your group health premiums. Under COBRA, as a former employee no longer receiving benefits, you will usually pay the entire premium amount--that is, the premium that you paid as an active employee plus the amount of the contribution made by your employer. In addition, there may be a 2 percent administrative fee.

While COBRA rates may seem high, you will be paying group premium rates, which are usually lower than individual rates.

Since it is likely that there will be a lapse of a month or more between the date of layoff and the time you make the COBRA election decision, you may have to pay health premiums retroactively--from the time of separation from the company. The first premium, for instance, will cover the entire time since your last day of employment with your former employer.

You should also be aware that it is your responsibility to pay for COBRA coverage even if you do not receive a monthly statement.

Although they are not required to do so, some employers may subsidize COBRA coverage.

When does COBRA coverage begin?

Once you elect coverage and pay for it, COBRA coverage begins on the date that health care coverage ceased. It is, essentially, retroactive. In addition, the health care coverage you receive is the same as it is for active employees.

How long does COBRA coverage last?

Generally, individuals who qualify initially are covered for a maximum of 18 months, but coverage may end earlier under certain circumstances. Those circumstances include:Premiums are not paid on time;Your former employer decides to discontinue a health plan altogether;You obtain coverage with another employer's group health plan; (There may be some exception if your new employer's health plan excludes or limits benefits for a "preexisting" condition--basically a medical condition present before you enrolled in the plan. Please see the discussion on HIPAA that follows.)You become entitled to Medicare benefits.

Employers may offer longer periods of COBRA coverage but are only required to do so under special circumstances, such as disability (yours or a family member's), your death or divorce, or when your child ceases to meet the definition of a dependent child under the health plan.

Who can answer other COBRA questions?

COBRA administration is shared by three federal agencies. The Department of Labor (DOL) handles questions about notification rights under COBRA for private-sector employees. The Department of Health and Human Services (HHS) handles questions relating to state and local government workers. The Internal Revenue Service (IRS), Department of the Treasury, has other COBRA jurisdiction.

More details about COBRA coverage are included in the booklet Health Benefits under the Consolidated Omnibus Budget Reconciliation Act. Information on how to obtain a copy and telephone numbers for the DOL office nearest you are located at the back of this booklet. You may obtain telephone numbers for the nearest HHS and IRS offices by calling the Federal Information Center at: 1-800-688-9889.

HIPAA - Health Insurance Portability

HIPAA--the Health Insurance Portability and Accountability Act of 1996--recently amended the Employee Retirement Income Security Act to provide new rights and protections for participants and beneficiaries in group health plans. Understanding this amendment is important to your decisions about future health coverage. HIPAA contains protections both for health coverage offered in connection with employment ("group health plans") and for individual insurance policies sold by insurance companies ("individual policies").

If you find a new job that offers health coverage, or if you are eligible for coverage under a family member's employment-based plan, HIPAA includes protections for coverage under group health plans that:limit exclusions for preexisting conditions;prohibit discrimination against employees and dependents based on their health status; andallow a special opportunity to enroll in a new plan to individuals in certain circumstances.

If you choose to apply for an individual policy for yourself or your family, HIPAA includes protections for individual policies that:guarantee access to individual policies for people who qualify; andguarantee renewability of individual policies.

What is a "preexisting" condition?

A "preexisting condition" is a condition present before your enrollment date in any new group health plan.

Under HIPAA, the only preexisting conditions that may be excluded under a preexisting condition exclusion are those for which medical advise, diagnosis, care or treatment was recommended or received within the 6-month period before your enrollment date. (Your enrollment date is your first day of coverage, or if there is a waiting period to get into the plan, the first day of the waiting period.)

If you had a medical condition in the past, but have not received any medical advise, diagnosis, care or treatment within the 6 months prior to your enrollment date in the plan, your old condition is not a "preexisting condition" to which an exclusion can be applied. Moreover, under HIPAA, preexisting condition exclusions cannot be applied to pregnancy, regardless of whether the woman had previous health coverage.

Finally, a preexisting condition exclusion cannot be applied to a newborn, adopted child or child placed for adoption as long as the child enrolls for health coverage with 30 days of the birth, adoption or placement for adoption and provided that the child does not incur a subsequent 63-day break in coverage.

I have a preexisting condition that may be excluded under HIPAA. How does my new plan determine the length of my preexisting condition exclusion period?

The maximum length of a preexisting condition exclusion period is 12 months after your enrollment date (18 months in the case of a "late enrollee"). A late enrollee is an individual who enrolls in a plan other than on the earliest date on which coverage can become effective under the terms of the plan and other than on a "special enrollment date" (see below).

plan must reduce an individual's preexisting condition exclusion period by the number of days of an individual's "creditable coverage." Most health coverage is creditable coverage, such as coverage under a group health plan (including COBRA continuation coverage), HMO, individual insurance policy, Medicaid or Medicare. However, a plan is not required to take into account any days of creditable coverage that precede a significant break in coverage (generally, a break in coverage of 63 days or more).

plan generally receives information about an individual's creditable coverage from a certificate furnished by a prior plan or health insurance issuer (e.g., an insurance company or HMO). You should receive a certificate of creditable coverage automatically when you lose coverage under your old plan or when you become entitled to COBRA continuation coverage and when your COBRA continuation coverage ceases. You also have a right to receive a certificate when you request one from your previous plan or issuer within 24 months of when your coverage ceases (including before your coverage ceases).

I received my certificate from my former plan. What do I do now?

You should:ensure that the information is accurate; (Contact the plan administrator of your former plan if any information is wrong.)keep the certificate in case you need it; (You will need the certificate if you enroll in a new group health plan that applies a preexisting condition exclusion period or if you purchase an individual policy from an insurance company.)

What if I have trouble getting a certificate from my former employer's group health plan?

Under HIPAA, group health plans and health insurance issuers are required to provide documentation that certifies the creditable coverage you have earned. Plans and issuers that fail or refuse to provide such certificates are subject to penalties under HIPAA.

However, if you have trouble obtaining a certificate, your new group health plan is required to accept other evidence of creditable coverage, if you have it. It is important, therefore, to keep accurate records (e.g., pay stubs, copies of premium payments or other evidence of health care coverage) that can be used to establish periods of creditable coverage in the event a certification cannot be obtained.

When I enroll in a new group health plan that contains a preexisting condition exclusion period, how does "crediting" for prior coverage work under HIPAA?

Most plans will use what is known as the "standard method" of crediting coverage. Under this method, you will receive credit for your previous coverage that occurred without a break in coverage of 63 days or more. Any coverage you had prior to a break in coverage of 63 days or more may not be credited against a preexisting condition period. However, if your health coverage is offered through an HMO or an insurance policy issued by an insurance company, you should check with your State Insurance Commissioner's office to find out if this break in coverage period is longer in your state.

To illustrate: Suppose an individual had health insurance coverage for 2 years followed by a break in coverage of 70 days and then resumed coverage for 8 months. That individual would only receive credit for 8 months of coverage. No credit would be given for the 2 years of coverage prior to the break in coverage of 70 days.

HIPAA also permits an "alternative method" for crediting coverage for all employees. Under the alternative method of calculating creditable coverage, the plan or issuer separately determines the amount of an individual's creditable coverage for any of the five following categories of benefits: mental health, substance abuse treatment, prescription drugs, dental care and vision care. Your new plan must notify you if it is using the alternative method for any of these benefits.

What are my new group health plan's obligations with respect to "special enrollment opportunities"?

A group health plan is required to allow special enrollment for certain individuals to enroll in the plan without having to wait until the plan's next regular enrollment season.

special enrollment opportunity occurs if an individual with other health insurance loses that coverage. A special enrollment opportunity also occurs if a person has (or becomes) a new dependent through marriage, birth, adoption or placement for adoption. However, you must notify the plan of your request for special enrollment within 30 days after losing your other coverage or within 30 days of having (or becoming) a new dependent.

If you enroll as a special enrollee, you may not be treated as a late enrollee for purposes of any pre- existing condition exclusion period. Therefore, the maximum preexisting condition exclusion period that may be applied is 12 months, reduced by your creditable coverage (rather than 18 months, reduced by creditable coverage).

Can I be denied coverage or charged more for coverage by my new group health plan based on my health status?

No. First, group health plans and health insurance issuers may not establish rules for eligibility (including continued eligibility) of any individual to enroll under the terms of the plan based on "health status-related factors." These factors include: health status, medical condition (physical or mental), claims experience, receipt of health care, medical history, genetic information, evidence of insurability and disability. However, plans may establish limits or restrictions on benefits or coverage for all similarly situated individuals.

Second, plans generally may not require an individual to pay a premium or contribution that is greater than that for a similarly situated individual based on a health status-related factor.

What if I am unable to obtain new group health plan coverage?

You may be able to purchase an individual insurance policy. HIPAA guarantees access to individual policies to "eligible individuals." Eligible individuals are those who:have had coverage for at least 18 months where the most recent period of coverage was under a group health plan;did not have their group coverage terminated because of fraud or nonpayment of premiums;are ineligible for COBRA continuation coverage or have exhausted their COBRA benefits (or continuation coverage under a similar state provision); and are not eligible for coverage under another group health plan, Medicare or Medicaid or have any other health insurance coverage.

The chance to buy an individual policy is the same, whether you are laid off, fired or quit your job. However, the type of coverage you are guaranteed may differ across states. Therefore, it is important to check with your State Insurance Commissioner's Office if you are interested in obtaining individual iTherefore, it is im

In addition, individuals in a family whose income is temporarily reduced (for example, due to loss of a job) may be eligible for low-cost or no-cost health insurance through public programs. For example, in many instances, children will be eligible for low-cost coverage. Eligibility for these programs varies by state and sometime within a state. You can contact state government officials to find out if you are eligible.

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