Health Insurance: Group to Individual

[cyberay]

Michigan—My employer has informed employees that, to significantly save money, it will be discontinuing group health insurance coverage under Michigan Blue Cross and having everybody buy individual health coverage under Michigan Blue Cross, which apparently Blue Cross can’t deny under these circumstances. (Several employees—out of 20+ total—have dependents with major medical conditions such as cancer.) The company will give everyone the money for the premiums (not through payroll deduction).

Question: Would this then mean that COBRA no longer covers the employees? Are there other regulatory issues that employees should be concerned about? Unfortunately, although the company says it is instituting this change, nothing in writing and only limited details have been provided.

 

[cbg]

Nothing in Michigan law or the law of any state except Hawaii requires an employer to provide health insurance at all for their employees, so there is nothing illegal about their discontinuing health insurance.

Under the COBRA law, former employees have the rights to continue the coverage (with certain restrictions not applicable here) as long as it is available to active employees, but if the coverage is cancelled for active employees then the employees on COBRA are cancelled as well. They are not entitled to keep a policy that the active employees have no access to.

There would be no right of COBRA when an employee left because there would be no group plan to continue. From your description I doubt that the individual plan would be cancelled but the cost would then fall entirely on the employee. (This is no different from COBRA, where the employee pays the full cost anyway.)

If the premium costs are being given to you as additional income, it may well be taxable.

 

[cyberay]

Is Employer Satisfying Regulatory Requirements?

Thank you. More: Some employees are restricted to a BCBS conversion plan, which decreases their benefits, while others can select from other plans, usually with greater benefits. (Eligibility is determined by the insurance companies, not by the employer.) Employees can get any coverage from any source, but most think they can only select options shown to them by an insurance representative with whom the employer is setting up individual employee meetings.

For premium payment, employer is offering an allowance, which has 4 dollar-amount levels. The first 3 levels are set by whether the employee is single, a couple, or a family. The 4th level (the lowest amount) is given to those who choose not to have insurance at all or who become covered under their spouse’s plan (either by choice or by that being the only option for coverage under this change).

Is the employer legally covering itself? While it is legal to not offer any insurance or ‘medical allowance’, are any regulatory requirements regarding same/equal access to anything that is offered being met? Is the employer doing anything that jeopardizes its compliance with any employment benefits laws?

 

[cbg]

The employer does not have to do anything AT ALL to see that the individual plans are all equitable. In offering the allowance for premium payment, they are doing MORE than they are required to do by law.

I am not an expert on Michigan insurance law. To the best of my knowledge, the employer is legally covered, is not in violation of any regulatory issues, and is in no immediate danger of violating any mandatory benefit regulations.

 

[cyberay]

Thank you. This has been very helpful.