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You’ve always treated your employees fairly, even when the relationship doesn’t work out and you have to let the employee go or when you’ve had to terminate employees due to downsizing. Often, you agree to continue the employee’s benefits for a few months during a severance period. You know how important it is to have good insurance coverage and you feel content knowing that you’ve given something “extra” as you ushered the employee out the door.
But will that feeling of contentment turn to shock and anger if the insurance carrier denies the former employee’s claim and then the claimant demands payment directly from you, the former employer?
Here’s the problem: all benefit plans, whether insurance-based or otherwise, have “eligibility” rules. The employee is eligible if he or she “regularly works 30 or more hours per week” or similar wording based on the employee’s active work schedule. Insurance policies typically don’t extend eligibility to “a former employee who used to work 30 or more hours per week,” except as required by COBRA. So, if you promise to continue benefits coverage after active employment ends, you risk having the insurance carrier deny the claim, with the former employee then looking to you to “self-insure” the payment, meaning it comes out of your pocket.













