Imagine visiting your doctor for a routine check-up, only to discover your health insurance has been canceled by your employer, even though you’re still working. This unexpected situation can leave you feeling vulnerable and unsure about your next steps. Health insurance is a vital benefit many rely on, and its sudden loss can impact your health and finances.
This article explains when an employer can cancel your health insurance while you’re still employed, your legal rights, and the options available to maintain coverage. Whether you’re facing reduced hours or other changes, understanding your protections is crucial.
Can My Employer Cancel My Health Insurance While I’m Still Employed?
Employers can cancel your health insurance under specific circumstances, but they must follow legal guidelines. Eligibility for employer-sponsored health insurance often depends on your employment status, such as being a full-time employee.
Legal Requirements for Employers
The Affordable Care Act (ACA) requires employers with 50 or more full-time employees to offer health insurance to those working 30 or more hours per week. If you’re full-time at such a company, your employer generally cannot cancel your coverage without a valid reason, like a change in your status or non-payment of premiums.
Smaller employers with fewer than 50 employees aren’t required to offer health insurance. If they do, they must comply with the Employee Retirement Income Security Act (ERISA), which governs benefit plans.
Common Reasons for Cancellation
Your employer may cancel your insurance if you no longer meet eligibility criteria. For example:
- Reduced Hours: If your hours drop below 30 per week, you may no longer qualify as full-time.
- Change in Employment Status: Switching to part-time or contract work can affect eligibility.
- Plan Termination: Employers may end their group health plan due to financial issues, but they must notify you.
Even in these cases, employers must provide notice and, if applicable, offer continuation coverage.
Understanding COBRA and Continuation Coverage
If your employer cancels your health insurance due to a qualifying event, you may be eligible for COBRA continuation coverage. COBRA allows you to keep your employer-sponsored plan temporarily.
What Is COBRA?
COBRA, or the Consolidated Omnibus Budget Reconciliation Act, lets employees and their families maintain group health coverage after certain events. It applies to employers with 20 or more employees.
Qualifying Events for COBRA
You may qualify for COBRA if you experience:
- Termination of employment (voluntary or involuntary, except for gross misconduct).
- Reduction in work hours below the threshold for plan eligibility.
- Divorce or legal separation from a covered employee.
- Death of the covered employee.
- A dependent child losing dependent status.
Duration of COBRA Coverage
The length of COBRA coverage depends on the event:
| Qualifying Event | Coverage Period |
|---|---|
| Termination of Employment | 18 months |
| Reduction in Hours | 18 months |
| Divorce or Legal Separation | 36 months |
| Death of Employee | 36 months |
| Dependent Child Losing Status | 36 months |
In some cases, coverage can extend to 29 months if a beneficiary is disabled.
State Continuation Coverage
For employers with fewer than 20 employees, COBRA doesn’t apply, but state laws may offer similar protections. For example, California’s Cal-COBRA covers employers with 2-19 employees. Check your state’s insurance department for details.
Notice Requirements for Plan Changes
Employers cannot cancel your health insurance without proper notification. Federal laws ensure you’re informed of changes to your benefits.
ERISA Notice Obligations
Under ERISA, employers must provide a Summary of Material Modification (SMM) for significant plan changes, such as cancellation.
For group health plans, if there’s a material reduction in benefits, a Summary of Material Reduction (SMR) must be provided within 60 days after the change is adopted.
In practice, employers often give advance notice to allow you time to prepare. If your insurance is canceled due to reduced hours, your employer must also provide a COBRA election notice within 44 days of the event.
Importance of Timely Notification
Proper notice gives you time to explore other coverage options and avoid gaps in insurance. Lack of notice may violate ERISA, giving you grounds to take action.
Employee Rights and Protections
You have specific rights when your employer cancels your health insurance while you’re still employed. Knowing these protections can help you respond effectively.
Right to Notice
You’re entitled to receive timely notice of any material changes to your health plan. This includes cancellations or reductions in benefits.
Right to Continuation Coverage
If your employer has 20 or more employees, you have the right to COBRA coverage if you lose insurance due to a qualifying event. Smaller employers may offer state continuation coverage.
Steps to Take If Rights Are Violated
If your employer cancels your insurance without notice or fails to offer COBRA, you can:
- Contact your HR department for clarification and documentation.
- Request a written explanation of the cancellation.
- File a complaint with the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) at dol.gov.
- Consult an employment lawyer to explore legal options.
Potential Legal Recourse
Violations of ERISA or COBRA can lead to penalties for your employer. The Department of Labor may investigate and seek compliance on your behalf.
Finding Alternative Health Insurance
If COBRA is too costly or unavailable, you have other options to maintain health coverage.
Exploring Other Coverage Options
Consider these alternatives:
- Spouse’s Plan: If your spouse has employer-sponsored insurance, you may join their plan during a special enrollment period.
- Health Insurance Marketplace: Purchase a plan through HealthCare.gov. Losing employer coverage qualifies you for a Special Enrollment Period (SEP).
- Medicaid or CHIP: If your income is low, you may qualify for these government programs. Check eligibility at HealthCare.gov.
- Short-Term Plans: These provide temporary coverage but may offer limited benefits.
Special Enrollment Period (SEP)
Losing employer-sponsored insurance triggers a 60-day SEP to enroll in a Marketplace plan. Apply promptly to avoid coverage gaps.
Avoiding Coverage Gaps
To prevent lapses in coverage:
- Confirm the exact date your current coverage ends.
- Secure new insurance before that date.
- Verify that your new plan is active to avoid billing issues.
Conclusion
Having your health insurance canceled while still employed is unsettling, but you have rights and options.
Employers can cancel coverage under certain conditions, like reduced hours, but they must provide notice and offer COBRA or state continuation coverage if applicable.
By understanding ERISA, COBRA, and alternative insurance options, you can protect your health and finances. Act quickly to explore new coverage and, if necessary, seek assistance from the Department of Labor or legal professionals.
FAQ
Can my employer cancel my health insurance without telling me?
No, employers must provide notice of material changes, such as cancellation, under ERISA. For group health plans, notice is required within 60 days of adopting a material reduction.
What is COBRA and how does it help me?
COBRA allows you to continue your employer-sponsored health insurance for a limited time after events like reduced hours or job loss. It ensures access to the same benefits, though you pay the full premium.
How long does COBRA coverage last?
COBRA typically lasts 18 months for reduced hours or termination, but can extend to 36 months for events like divorce or a dependent losing status.
What if my employer has fewer than 20 employees?
COBRA doesn’t apply, but state laws may offer continuation coverage. Contact your state’s insurance department to learn about local protections.