COBRA or not?
Q: My company is very shaky. The rumor is that we will file for bankruptcy in the summer or the fall due to lack of funding. I am very frightened about losing my job and my benefits. I think there are contract opportunities out there for me but I carry the benefits for my family. I know COBRA will be available but it is expensive. What are my options?
A: This is a difficult time for many venture-backed companies. Funding dollars are scarce and many company leaders are having difficulty securing additional rounds of venture capital.
You sound like you are optimistic about contract opportunities. You must have marketable skills – a huge plus. Think about beginning to network now. You don’t want to arrive at your company one morning and find a locked door. This has happened and it forces the former employee to conduct a job search in crisis mode, rather than in a more planful and thoughtful manner.
Also, I should warn you that you may not be offered COBRA. If a company files for bankruptcy and the company discontinues their operations, in many cases, their benefit plans are also discontinued. COBRA offers benefits continuation but if there are no benefits to continue, it does not apply. For more information, visit http://www.dol.gov/ebsa/faqs/faq_consumer_cobra.HTML.
I consulted Allen Nassif of Northern Benefits LTD. Nassif explains:
If your company does not survive and you are not offered COBRA, most carriers will allow a dependent (or dependents) to immediately qualify for medical and/or dental benefits if a spouse or partner loses coverage. This event would be considered a “qualifying event.” The definition and rules that apply to a qualifying event vary by insurance carrier so it is important to ask to be certain.
Also, remember that if you have any other benefits such as group life insurance and disability coverage, those benefits will likely end when and if you are terminated. Some policies permit conversions to individual policies upon separation from an employer, but often these individual plans are expensive.
He and I discussed a few options that might be available to you:
1. Do you have benefits options through another source? If your spouse or partner has group coverage through their employer, your company’s bankruptcy and subsequent loss of benefits would likely enable you and your family to become immediately eligible as Allen Nassif explained. It would be prudent to check on this option now to avoid scrambling later.
2. Individual plans are available through a number of sources. Most individual plans offer less generous plan benefits and can be pricey.
3. Mass Health Connector is a good resource. www.masshealthconnector.org. It might be worthwhile to visit the site to better understand their offerings and different plans available.
Remember, most Massachusetts residents are required to carry medical insurance. You could face a penalty at tax time if you choose to forego medical insurance.
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Not sure the answer here address the LW's situation. She/He says s/he carries benefits for the family, so individual plans are not helpful. And it may also be that s/he cannot simply go onto a spouse's plan; otherwise, I would assume s/he would just do that.
My best advice would be to check masshealthconnector.org to see if the LW qualifies and can get some state subsidized insurance if his/her coverage disappears. Also, if the LW goes the contractor route, there are some health plans available for self-employed people that mimic the group plans offered by employers. The caveat is such plans are more expensive with less comprehensive coverage, but they are far better than nothing!
When I was laid off I had a choice of COBRA but found that I could get the same Blue Cross Blue Shield Coverage through Blue Cross Direct for 1/2 the COBRA cost! It was a HUGE relief and might the way to go especially if you decide to contract!
Interesting that this article did not mention that the Stimulus plan now covers 65% of your monthly COBRA payment as well as the fact that there is a state (Massachusetts) program that will refund up to 80% of your remaining 35% if you qualify.
Chrystie,
There is NO reason for you to opt out of COBRA. The combined state and Federal Stimulus subsidies mean you will only pay 7% of the premiums. See http://www.mass.gov/eolwd/cobra for more information.
I don't know how you found BCBS for 1/2 the cost of COBRA. Make sure your health insurance meets Mass. minimum creditable standards or you will have to pay tax penalties for not having adequate coverage.
These days, as part of the Stimulus, you can get a huge chunk of your COBRA covered if you are unemployed. Up to 65% for 9 months.
#3 and #4 - are you talking about situations when a person is unemployed? I think this person wants to become a self-employed. Does your suggestion applies to self-employed persons?
Actually, emplyers have to cover 65% and then Mass will pay almost all the difference. 9 months and the net is a bout 9% of total...
An employee will be eligible for the 65% subsidy for COBRA if the employees leaves the company INVOLUNTARILY. If the employee leaves on their own, they will not be eligible for th subsidy.
My company went bankrupt last year on the 16th of the month. Health benefits completely ended on the 31st of the same month. I was offered no other option. Eventually Blue Cross sent me a letter inviting me to join their lowest-priced plan, which even as a single guy was way too much and paid for next to nothing. So now I'm being penalized $90 a month for not paying 4 times that much to Blue Cross for a plan that covers nothing. Good luck. You're going to need it.
Where;s the editing here? anyone who's unemployed, knows the government is paying for 2/3 of COBRA, now...I'd say that should've been in here, don't you?? ...you can buy liquor on Sundays now too, you know!!
If your company goes out of business, it's very likely that COBRA will not be an option. This happened to me (in NY) while I was pregnant and I didn't qualify for individual insurance because of this "pre-existing condition" (ie being pregnant). It is such a relief to be living in MA where you can find health insurance regardless of your job status. Check out www.masshealthconnector.com - it's an invaluable resource.
steveareno, others.
If you had read the article you would see that he will not be offered cobra as the company is going under. None of what you are saying applies.
But thanks for you input anyway.
This blogger might want to review your comment before posting it.
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Patricia Hunt Sinacole is president of First Beacon Group LLC, a human resources consulting firm in Hopkinton. Sheworks with clients across many industries including technology, biotech and medical devices, financial services, and healthcare, and has over 20 years of human resources experience.
Elaine Varelas is managing partner at Keystone Partners, a career management firm in Boston and serves on the board of Career Partners International.
Cindy Atoji Keene is a freelance journalist with more than 25 years experience. E-mail her directly here.
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