Employer Cancelled PEO Health Insurance

[somarco]

Employer offered group insurance through a PEO. Cancelled coverage end of February (but did not tell employees).

Master group still in force for the PEO and participating employers.

Do employees of this employer have COBRA rights?

I am thinking they do but then maybe not since their employer is no longer participating.

 

[leevena]

My sense is they may not be eligible for COBRA. Today is the 11th and it appears that no one has received a cobra packet in the mail...is that correct? Is the group under-20, without state continuation? Or, if the Employer cancelled coverage, they would not be eligible.

 

[Ann H]

Employer offered group insurance through a PEO. Cancelled coverage end of February (but did not tell employees).

Master group still in force for the PEO and participating employers.

Do employees of this employer have COBRA rights?

I am thinking they do but then maybe not since their employer is no longer participating.

Most likely the employees have COBRA rights. PEO's were once called employee leasing organizations, and they are the actual employer under IRS rules, as they issue the W-2 and cover the employee for unemployment and workers compensation.

One sentence you wrote above concerns me, though. It says, "Cancelled coverage end of February (but did not tell employees)." Did the Employer cancel the insurance coverage only, or did the Employer cancel the contract with the PEO? The reason I ask is because the PEO might look at it differently than thought. If the employer is allowed to cancel the insurance coverage but still continue leasing the employees through the PEO, they might not have COBRA rights because there is no qualifying event (i.e. termination of employment or reduction in hours, etc.). If the Employer canceled the contract with the PEO, which triggered a cancellation of insurance coverage, and which also triggered a termination of active employment for all those employees through the PEO, then the "termination of employment" is most likely a qualifying event for COBRA. most likely... gets complicated... hope this helps, though.

 

[somarco]

Lee, I have the same suspicion but can't say with certainty. The lady who called only found out on Tuesday when she went to the doc that she had no coverage.

Ann, can't say if the employer cancelled the PEO or just the health insurance. Good question. Haven't dealt with these critters in at least 15 years when they were called staff leasing or employee leasing.

 

[leevena]

Lee, I have the same suspicion but can't say with certainty. The lady who called only found out on Tuesday when she went to the doc that she had no coverage.

Ann, can't say if the employer cancelled the PEO or just the health insurance. Good question. Haven't dealt with these critters in at least 15 years when they were called staff leasing or employee leasing.

Key would be if the PEO was the employer/contract holder, or if the PEO acted as a broker and got the group a plan on it's own. If it got the plan on it's own, and the employer canceled, there is no cobra rights.

 

[DS4]

What does the certificate of insurance issued by the PEO say about, "Continuation Coverage?".

 

[somarco]

I have no idea to either of those questions.

This lady called today. I spent about 30 minutes on the phone. I had more questions than she had answers but was able to get enough to know she isn't going anywhere in the IFP market.

 

[AndreaSti]

I have no idea to either of those questions.

This lady called today. I spent about 30 minutes on the phone. I had more questions than she had answers but was able to get enough to know she isn't going anywhere in the IFP market.

Don't you just wish you could get those 30 minutes back? We took a call yesterday where the woman says "my husband is in the hospital with unexplained pain so we need insurance for him now". Not sure why our agent was working the phone on a Sunday (needs the $$), but he did spend about 10 minutes explaining why she and her children should really consider getting insurance for themselves NOW, instead of when they are already in the hospital. Had to go back to Insurance 101 on this one.

He also wished her luck on the hospital bills.

 

[somarco]

Never can figure out why some folks believe they can buy insurance after the fact.

Lady callled a little earlier looking for coverage on her husband.

Is he insured now?

No.

How long has he been uninsured?

About 5 years.

Why are you looking now?

I took him to the doctor last week and he has diabetes, so we need to get insurance on him.

Go to PCIPlan.com

Aren't you having an open enrollment like those other people I talked to?

No, there is no such thing as an open enrollment for individual insurance. Your husband needs to get on an employer group health plan or PCIP. Anything else is a waste of your time and money.

 

[ABC]

I had this exact situation pop up this morning. The PEO was canceled by the employer. A former employee had Cobra coverage and now is being told that coverage will end.

I could not answer the question.

If the employees are being leased back to the company then I would think the PEO plan would have to honor Cobra. technically the employee was a working for the PEO.