Employers often agree to maintain a worker`s health insurance coverage under a separation agreement. While this seems like a good idea, it can cause significant unwanted liability. In general, yes, although employers involved in this practice should be careful. In particular, if the health plan is self-insured and the subsidy is not generalized, such a scheme could be considered discriminatory under the internal income code. In addition, if the employer agrees to cover all or part of the costs of COBRA coverage, it should be clear (for example. B in the former employee`s severance agreement) that the obligation to pay depends on the timely choice and the merits of the employee for COBRA coverage. The agreement should also specify the subsidized plans and the extension of the subsidy to purely salary or family insurance. This type of agreement also compromises the employee`s ability to continue coverage under COBRA. As you know, COBRA has certain reporting and election deadlines caused by qualifying events such as reduced working time or separation of employment for reasons other than gross misconduct. If you and your former employee do not meet the registration and voting deadlines because you both felt that you could agree to continue with their health insurance coverage, your insurance agency could argue that COBRA no longer applies because you missed the deadlines and refused to cover the employee.
In this case, the employee would probably argue that you have to insure them yourself, which would have been the time of the cobra cover. What should an employer do? If you wish to make additional health insurance part of the separation agreement, you agree to reimburse staff for the costs of their COBRA premiums. I say refund, because you do not want to be responsible for transmitting the COBRA payment from the employee to the carrier in a timely manner. It will be safer for you to bear this burden on the employee and to charge the employee the refund of his COBRA premiums after payment. In this case, the obligation to pay in a timely manner and the risk of not paying the onus is on the former employee, not your company. Often, when an employer turns away from a worker, it may offer to pay COBRA continuity coverage for a few months, so that the worker can remain insured without having to pay the large premiums associated with COBRA. Historically, this has always seemed to be a solid gesture by the employer and a “no-brain” from the worker`s point of view. However, with the implementation of the Affordable Care Act (“ACA”), employees who separate from their workplace now have another option: purchasing insurance through the ACA`s “marketplace,” which could be less expensive. Because of the interdependence of potential time problems between choosing and maintaining cobra supplemental coverage and the ability to purchase insurance in the ACA`s “market place,” employers should also consider the typical separation of employees and the offer of a redundancy package. The risk is usually highlighted in this direction. Most performance plans have eligibility rules. These rules often require a worker to work a certain number of hours or maintain his or her job in order to participate in the plan.