Health Insurance Calncellation

[LoriDo]

What is the name of your state? Texas

Here we go....On March 31st our group health insurance plan cancelled us due to non payment of premium. We actually didn't find out about this until June 31st. In those months in between, I went to the doctor thinking I was covered because the deductions were still being taken out of my check. I received a claim in the mail telling me to pay because the insurance company wasn't. Here is what my employer is going to do.... Say they took 153.00 out of my check for the months we were not covered. I get a claim for 165.00 He says he is going to pay our claims out of our Deductions taken out of our check. So, in other words, I would not be getting any money back. My way of thinking is that since he took the money out of our checks to pay those premiums, is he not liable to pay us back in full our decuctions and pay our claims? In other words, should I be getting the 153.00 in deductions taken out plus the 165.00 to pay for the bill? There is no bankruptcy, he just didn't pay the bills due to lack of money. this is very confusing, and I would like to know how to go about handeling this, so I don't get jipped out of my money!

Thanks,

Lori Dodson

 

[cbg]

I don't see that he owes you both. If he wants to pay the claim out of the money taken out of your check for insurance premiums, I don't see a problem with that.

 

[CIAA]

Sounds to me like some employment and/or ERISA laws may have been violated. Sounds like the most your going to loose is perhaps $10-15; however,

What about the employees that that had claims for hundreds or thousands of dollars; or those that may have developed an illness within the past 3-4 months that now won't be able to get coverage for what is now a pre-existing condition?

 

[LoriDo]

Health Insurance Cancellation

So, what you guys are telling me is that it is perfectly legal for him to withhold money from our checks for no reason. He was not doing with the money what he was supposed to, and now we have bills coming in, that the insurance company would have had to pay. I am just not seeing how this could possibly be the correct way to handle things. As for the employees who have thousands of dollars in claims, the employer is paying for that, but I can garuntee you that this company will never have group health insurance again, so they will probably have to get individual, which will cost them thousands!!

The company was intitled to pay for 75% of the premium, the employee 25%. We paid our 25%, he didn't pay his share. So, because of him, we get ripped off....it is just not fair and I refuse to beleive that his way of sorting through this mess is the right way.

Lori Dodson

 

[cbg]

No, that's not in the least what we're saying. He is not entitled to hold back insurance premiums without providing insurance. What I'm saying is that you're not necessarily entitled to get your premiums back AND have him pay the bill too.

I have some experience with this from both the employer and the insurance carrier side of things. Payments are only due to the insurance carrier once a month, not each time you are paid. So payments are withheld from your pay and held back until the premiums are due. This way of doing it is ABSOLUTELY LEGAL and done by just about every company that provides group insurance to their employees.

When the premiums are due to the carrier, he sends one check covering his portion and the premiums withheld from the employee's pay. If a company is having cash flow problems, (or is just plain lazy!) they sometimes are late making payments. The insurance carrier knows that this is going to happen to everyone occasionally. Particularly in the current economy.

If the last date that your coverage was in effect was March 31, then the coverage was not cancelled until at LEAST May, and it might even have been as late as June before the insurance carrier actually cancelled the coverage, depending on how long a grace period they permit. It would have been done retroactively to the last date that premiums had been received for.

Unless the owner has made a habit of doing this, you are really jumping the gun to assume that he will never be able to get group coverage again. If this is the first time he's had the coverage cancelled, he can get it reinstated with the original company by paying all the premiums currently due. When I was working for a national insurance carrier, we would always permit an employer to make up back premiums and get coverage reinstated unless this was the third cancellation in a 12 month period, and even then we'd make exceptions if the employer had a good reason for being late. Most carriers have similar plans.

The fact that he was cancelled for non-payment does NOT ban him from ever getting group coverage with another carrier.

Yes, he needs to do something. He cannot just keep the money that was withheld for insurance coverage. But that money was withheld for the purpose of seeing that your medical bills were paid, right? It's not the way I'd handle it, but I really can't find anything in the law that states he can't deal with the situation the way he proposes.

 

[LoriDo]

I understand what you are saying. Our last payment date was in March, that is why we were cancelled effective March 31st. I went to the doctor in April. Does that mean that the insurance would have still covered me? If, so, then why did I receive a demand for payment via mail? I have another question as well. We are still receiving bills for those premiums via mail to our place of employment. Does this mean that we are not cancelled? If we are still getting bills from them, they are obviously still charging us for our monthly premiums, even though our rep over there states we are cancelled. We have talked to the Texas Labor board as well about this, and the guy over there we talked to stated that he couldn't help us because he had never heard of a case like this one. ??? Obviously it is not unheard of, so I guess he didn't know what he was talking about. I don't know if you will be able to answer this one or not..we have an employee who is going to sue the company for all that is due to him. Does he have a leg to stand on? Can he sue the company and the president independantly? Thank you for your help with this, I am going to print this out and give your responses to my boss, because she was wondering as well.

Lori

 

[cbg]

Okay, now I'm getting into the realm of guesses, but I'll give you the best guesses I can based on five years working for a national insurance carrier and more years than I want to tell you working as a Human Resources Manager.

As far as the April doctor bill goes, my best guess is that EITHER your doctor did not submit the bill until after the coverage was cancelled, OR the insurance company paid it initially, but withdrew payment when the cancellation transpired. This is unusual - the company I worked for would have eaten any payments already made but refused to make any additional payments - but it is not forbidden by law, and I know some carriers do handle it this way.

I'm not clear on the billings for insurance premiums. Are you saying that the carrier is still billing the company, or that individual employees are being billed? Please explain.

The reason the guy at the DOL didn't know what you were talking about is that the DOL doesn't handle insurance issues. You need to talk to the Texas Insurance Commission (might have a different name) rather than the Labor Board.

I don't know whether Texas law will permit the employee to sue the company OR the president over this - my guess, if I had to make one, would be the company yes, the president no. That is only a guess and I could be wrong either way. But it sounds as if this issue is not settled yet, and I would recommend that he wait till it is before attempting any suit. He might not only end up hurting his own case by jumping in prematurely, but damaging any possibility of the insurance carrier agreeing to 1.) reinstatement 2.) covering bills incurred in April before the cancellation took place.

 

[LoriDo]

The carrier is still billing the company. My boss is standing here stating that if the company pays the claims, it is the equilvalent of having the insurance coverage. Is this correct? Is this the way we should handle it? I am thinking in the way of child support...we take deductions from the employees checks to pay for their child support, if we don't pay the child support, is that illegal? Isn't it the equivalent of taking deductions out for insurance we didn't have? I am so sorry, but I cannot seem to wrap my head around this, I see points from both sides, and I can't seem to get either one!!

 

[cbg]

The likelihood is that the insurance carrier did pay out certain bills before the coverage was cancelled (leaning me to think that in your case, your doctor did not bill the insurance carrier for your April visit until the policy was already cancelled) and is therefore trying to collect at the very least April's premium, if not May's. It's also possible that there is simply a clerical error at the insurance carrier's - once my company was billed for over six months for a policy that we had cancelled (in favor of a different policy with the same carrier) because they neglected to cross-reference the old policy and the new policy.

It is absolutely legal for an employer to self-insure. Many large companies do it. It's not recommended for small companies because it requires a steady cash flow, but there's no legal reason why a two-employee company couldn't self-insure. Most of the time they have an insurance carrier administrate it, and if self insurance is the way the owner wants to go, that's the way I'd recommend he handle it. But there is absolutely no reason why he can't work it out that way. He should talk with an insurance broker about setting up a formal plan if he wants to continue this for the long haul.

 

[LoriDo]

We are a small company with a not so good outlook on the future, that is the main reason why the insurance premiums were not paid at all...we simply could not afford them. And, the self-insurance thing is just a way for them to pay off any claims that are hanging out. We are not going to continue to pay claims, only the ones that came in between the months of March 31st through June 31st. As of now, we don't have an insurance policy. What it all boils down to then, is that he has every right to withhold our money for 25% of the premium and pay our claims out of that, correct? I also sent an email to the texas insurance committee to see what they say too. I do not want to get anyone into any trouble until I have all my ducks in a row, plus, I am trying to get info for my employees who are stuck with calls from doctors and hospitals. Tell me...if you can...Is there a certain time period the employer has to pay these claims, because we are looking at 2 months now these haven't been paid with no hope for future payments as of now.

 

[cbg]

Lori, you're not going to like this, but the fact of the matter is, he's not required to offer health insurance at all. With the sole exception of the state of Hawaii (and only sometimes there) no state requires any employer to offer health insurance. It is strictly a voluntary benefit. Because it is a voluntary benefit, there is no time requirement under which he has to make payments.

As a one-time thing, no, I'm not aware of any law forbidding him to take the premiums already taken and using them to pay claims already incurred. But I'm not real happy about that being done as an ongoing thing. Self-insurance generally means that he has to put out some of his own funds, as well. Tell me, is this premium money being taken pre-tax or post tax? That can make a difference as to whether it's going to be all right for him to do this as a long term thing, and is a question I should have asked you in my first response. Depending on the answer, it might change my feelings about whether it's even okay in the short term.

 

[LoriDo]

The money was taken out post tax. This is only going to be a one time thing, after we pay all of the claims for the three months we were not covered, he is not going to offer any insurance at all, which we ahve looked into as well, and are aware that he does not ahve to offer it. Actually, I think it is better that we don't because we can't pay for it. We had only a typical PPO/HMO plan...no caferteria plan or anyhting like that. I think that he should at least put up the 75% and we should only have to pay the 25% of the claim. That is the way he paid the premiums, so why should it be different now?

 

[cbg]

If the money was taken out post tax, it's okay. There are strict limitations on how pre-tax money can be used.

What he should do ethically and morally is quite different from what he is legally required to do.

 

[LoriDo]

Thank You cbg, for all of your help with this. I guess that his morals are not what we should expect. I have alwasy known that he was a little messed up, but never to this point...it is all for the company he says, but, it should be all for the emplouees, cause without them, you're gonna get burned! But, again, thanks for all the info, you have been very helpful.


Lori