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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.

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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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