When an employee leaves: ending coverage, COBRA and Texas continuation
When someone leaves, the paperwork on the benefits side has a clock on it. You have to tell the carrier when coverage ends, and you have to tell the employee about continuing that coverage. Which continuation rules apply depends mostly on how many people you employ.
When does coverage end?
Most small-group policies end coverage on the last day of the month the employee leaves. Some end it on the termination date. Your carrier contract says which. Send the termination to the carrier right away, because a late termination usually means paying premium for someone who isn’t there anymore (see how to check your group health bill).
20 or more employees: federal COBRA
COBRA generally applies if you had 20 or more employees on more than half of your typical business days in the prior calendar year. When a covered employee leaves, the employer has 30 days to notify the plan administrator, and the administrator then has 14 days to send the election notice. If you’re the employer and the administrator, you have 44 days in total from the qualifying event.
The former employee has at least 60 days to elect. For a job loss or a cut in hours, coverage can last up to 18 months, and the plan can charge up to 102% of the full premium.
Under 20 employees in Texas: state continuation
Small employers aren’t off the hook. Texas has its own continuation law for insured group plans that COBRA doesn’t cover. In most cases an employee who was covered for three consecutive months before leaving can keep coverage for up to nine months, as long as they ask in writing within 60 days. It doesn’t apply to someone fired for cause, and the carrier handles much of the process, so check your carrier’s forms and deadlines.
What to do the week someone leaves
- Record the last day worked and the date coverage ends.
- Send the termination to every carrier the person was on: medical, dental, vision and life.
- Start the continuation notice: COBRA if you have 20 or more employees, Texas continuation if you’re under 20.
- Check that the person drops off the next invoice.
- Keep a copy of the notice and the date you sent it.
When you enter a termination in BenefitsDock it sets the coverage end date, opens the carrier task, and adds a dated continuation-notice task based on your group size. Nothing gets closed until someone confirms it was done.
General information, not legal advice. COBRA and Texas continuation have exceptions and details not covered here. Check with your carrier or a benefits attorney about your situation.