Layoff healthcare rules - is this legal?
June 25, 2024 11:31 AM   Subscribe

Asking for a friend: She just got laid off today from her multiyear part-time job for a largish US retail corporation. Friend was offered X weeks of severance plus a gift card. Today is the last shift for laid-off workers and they were told their healthcare stops tomorrow. Is that legit?

This was not a gigantic surprise because business was down. Friend had worked there for several years, first in person, then remotely starting during Covid. Apparently the corporation recently designated approx. 6 regional US hubs as their local headquarters and laid off anyone who lived more than 60 miles away. (If it matters, Friend's job was entirely based online; there is literally no reason for her to be in an office. She believe everyone else in her cohort was a full-timer.)

At any rate - this all sucks, but of course (AMERICA!) the biggest blow by far is losing her healthcare immediately. Is that allowable? I'll try to refrain from stating the name of the employer, but it's a retailer you've heard of. According to Wikipedia it's a $1.5B corporation with 1000 employees.
posted by BlahLaLa to Law & Government (13 answers total) 3 users marked this as a favorite
 
The answer to this question may depend on differing laws state by state. If you're able to say what state she lives in that could be helpful.
posted by anastasiav at 11:38 AM on June 25, 2024


Response by poster: She lives in California. The corporation's headquarters are in California but I mean that on the level of "this is where the big building is, where the CEO works" -- I don't know if they are incorporated elsewhere.
posted by BlahLaLa at 11:51 AM on June 25, 2024


Best answer: This sort of thing may be influenced by state laws but is typically controlled federally by ERISA, and coverage periods will be specified in her (former) employer's plan. Some plans go to the end of the month, but it is not unusual at all to have coverage terminate at the same time employment does.

Your friend should have 60 days to elect COBRA continuation coverage, which is expensive but which at least provides for uninterrupted coverage back to the last day of employer-sponsored coverage if she chooses to enroll.
posted by AgentRocket at 12:16 PM on June 25, 2024 [6 favorites]


Best answer: There's no time based requirement in the US* for when a termed employee's employer-sponsored health coverage ends. Last day of the month in which you worked is most typical but it's based entirely on the plan design, and on last day of employment is also allowed and common.

The only thing an employer of that size is required to do is allow you to continue your benefits with COBRA, where you would be responsible for paying the full premium (employee+employer) plus an admin fee (typically 2%). This isn't a sustainable cost for anyone without an income and the only reason to get on a COBRA plan instead of Marketplace insurance would be if you're in the middle of a high cost pre approved plan of care and have already met your deductible. CA should hopefully have good Marketplace options.

*In CA you have to provide 15 days written notice if the plan is terminating for an active employee (like the company changes carriers or something), but that's not a thing for individual terminated employees.

Long story short this sucks a lot and the employer is making some decisions that my employer would think are déclassé, but they are allowed to do this based on my understanding of benefit policies. Sorry.
posted by phunniemee at 12:18 PM on June 25, 2024 [7 favorites]


Given the info here, it seems like she has enough uncertainty to at least reach out to the California EDD to ask, especially pursuant to WARN and CalWARN. The answer is going to have a lot of "it depends" here, but assuming there wasn't a WARN notice generated and there's >50 people (full-time employees) affected, they likely owe her at least 60 days of pay & possibly of benefits, but again it depends, and how exactly that's implemented varies (and depends on if she's signed anything yet).

Either way, she definitely will have access to COBRA, as well as this being a qualifying event for going on a new plan through Covered California.
posted by brainmouse at 12:19 PM on June 25, 2024 [7 favorites]


Most healthcare providers go by the month, with benefits ending on the 30th / last day of June. But maybe they've found a way to be especially cheap and screw workers by a few days. HR is often wrongity wrong, so cal the Dept. of Labor or whatever it's called in Calif, as above.
posted by theora55 at 12:40 PM on June 25, 2024


She can also sign up for a plan at healthcare.gov outside of the regular enrollment period, since she's experienced a "major life event" (getting laid off).
posted by adamrice at 1:31 PM on June 25, 2024 [8 favorites]


It is entirely normal for employer-provided healthcare to stop immediately when employment ends. Similarly, it is entirely normal for healthcare to run through the end of the month with some employers.

It is entirely normal for healthcare to end short of the end of severance for someone who has been laid off.

If your friend has reason to believe that their specific circumstances might somehow be unique and in violation of the law, they should consult an employment lawyer in their jurisdiction.

If I were your friend, I would not feel as though a legal consultation was necessary.
posted by NotMyselfRightNow at 2:23 PM on June 25, 2024 [1 favorite]


I would have said this is normal but it looks like it depends on the magnitude of the severance. Assuming no WARN act notice was issued, and one was required (both should be checked, not all employers are required to issue them - it depends on size of the layoff and company. California WARN act information) the company not giving notice is considered liable for medical expenses as well as for the pay covering the mandatory period, but their liability is reduced by the amount they pay the employee. So if they gave her more than the 60 day's severance required, that would count against owing her the medical coverage.
posted by Lady Li at 4:03 PM on June 25, 2024


Unless your friend has something extraordinary going on in the next 3 weeks or so (major surgery, etc), they should be getting on the federal insurance marketplace for their state and applying for plans right now.

COBRA is a way to continue with your current insurance company for a while, but it is almost always wildly expensive.

Losing a job, and the insurance friend had through that job, is definitely a qualifying event to apply for Obamacare mid-year.

Being unemployed/no income and previously only part-time employed almost certainly means Obamacare premiums will be relatively reasonable. Even at worst they are likely to be 1/2 or 1/4 similar compared with COBRA premiums.

Of course, explore all available options, including COBRA, if available. But as a generality, Obamacare starting right now is the way to go.

(And you might not be able to actually start right now but if friend gets a move on it could almost certainly start at the first day of next month. And there won't be any pre-existing conditions or the like as long as you move to apply for Obamacare quickly. One downside is friend will likely start over with deductibles and such for the year. They could look at low-deductible plans as an option, because there will only be half a year to use any deductible amount. We got a plan like that this year and I really like it - all regular doctors and specialists are like $20 or $40/visit even before meeting deductible. You still have to think about the deductible for things like ER and hospital visits, but most years we completely avoid those.

Or, just factor in paying full price for all care until the deductible is satisfied, and calculate the full cost of that vs paying for a lower deductible plan. Then go with whichever is cheapest overall.)
posted by flug at 4:08 PM on June 25, 2024 [1 favorite]


Best answer: California does indeed have good marketplace options, and the website is coveredca.com. She has a 60 day "special enrollment period" to enroll there. It's almost always cheaper to enroll in a Marketplace plan than in COBRA. Covered California asks for your annual income, and the costs/subsidies are based on her income as reported on her tax return at the end of the year (so it'll take into account her period of employment when considering how much she's paying for her premiums). If you apply for Covered CA, they legally have 45 days to process the application; in my actual experience it's pretty fast and I'd expect her to be able to select a plan effective August 1 or even July 1.

Or, she can estimate her current monthly income, which I imagine to be $0, and instead apply for Medi-Cal at least until unemployment kicks in (if it does). Medi-Cal for has no asset limit and no immigration status requirement, so it's all based on income. If she goes that route, the county has 45 days to process her application, and it really does take that long most of the time; sometimes the county breaks the law and takes longer, in which case she has the right to appeal. She also has the legal right to request "accelerated enrollment" i.e. Medi-Cal while they confirm she's eligible for Medi-Cal. Applications can be done on benefitscal.com or in person at the county, which is more effective will depend on what county she's in. She'll need to report her change in income when she gets on UI or if she gets a new job within 10 days. When her income increases once again, she can switch back over to Covered California. Theoretically it's seamless; in really it's very irritating sometimes. But it all generally works eventually.

Oh, finally-- even without insurance, she can still receive treatment at virtually any hospital in California; income below 200% FPL and no insurance guarantees that all the bills from the hospital itself must be written off, although people do end up with ambulance bills, e.g., after those stays as the law has some loopholes. The hospital will also apply for short-term Medi-Cal for her while she's there if she qualifies, that's called hospital presumptive eligibility.

Feel free to MeMail me with more questions.
posted by peppercorn at 5:03 PM on June 25, 2024 [3 favorites]


Response by poster: Okay back again just to say that the employees got an email from headquarters toward the end of the day stating that their insurance would run through the end of July. Don't know if this was a decision made out of kindness, or was inspired by legal requirements, or if it was just a miscommunication in the original 10-minute layoff zoom, during which most employees seem to have been blindsided and shellshocked, and therefore were not fully processing the corporate message.
posted by BlahLaLa at 7:19 PM on June 25, 2024 [4 favorites]


If she no longer has income, she should qualify for free Healthcare through Medicaid and she can apply directly foe that (healthcare.gov is for people who do have some form of income; I think some states count assests and some don't)
posted by bearette at 4:31 AM on June 26, 2024


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