Health Insurance Benefits After Termination: Obamacare and COBRA Problems

Employers may offer severance packages to employees upon termination or layoff, sometimes in exchange for an employee waiving any claims or liability against the employer.  In the past, these severance packages frequently included payment of one or more months of COBRA. COBRA allows an employee to stay on an employer’s health insurance for as long as 18 months, provided that the employee pays 100 percent of the insurance premium costs. thanks-srb-1121690-m

While an employer agreeing to pay COBRA premiums used to be a major advantage, it can now create some problems for workers because of provisions in the Patient Protection and Affordable Care Act (PPACA).  Maintaining health insurance after a termination is essential for employees and you need to ensure you make an informed choice regarding whether you should take COBRA benefits.

Because your severance package can have a strong impact on your future financial situation, it is advisable to speak with an Orange County employment law attorney for assistance before entering into an agreement with an employer.  Your attorney can help you to understand the impact of employer-paid COBRA premiums on your right to obtain coverage under the PPACA.


When an employee leaves a job, his employer will generally cut off his insurance at that time. COBRA paperwork is sent approximately 45 days later and when an employee elects COBRA and the premium is paid by the employer as part of the severance package, the coverage begins retroactively.

COBRA premiums can sometimes total $1,000 or more, and can be very costly and burdensome for workers who are affected.  The Patient Protection and Affordable Care Act can provide an alternative method of obtaining health insurance coverage, which is often less expensive for an unemployed worker as a result of government subsidies.

To qualify for PPACA subsidies, an employee must purchase insurance through a state or federal healthcare exchange. Like all insurance policies, there is a period of open enrollment. In this case, it extended through March 31, 2014.   The next open enrollment does not begin until November of 2014.

To protect individuals who lose their jobs and ensure they are able to obtain insurance, the PPACA allows individuals to qualify for a special enrollment period based on a change of circumstances.

However, while loss of employment is a special circumstance that allows you to enroll in a health plan outside of open enrollment, an individual who was on COBRA for even a one month period of time will not qualify for the special enrollment until the COBRA period ends

As AOL Jobs explains, this means you could be forced to stay on the more costly COBRA plan until either November enrollment or for the entire 18 months, which quickly becomes expensive once your employer is no longer paying.

Issues like this are one of many reasons why it is always advisable to have an employment attorney review any type of severance agreement to ensure your rights are protected and that you are making an informed choice. It is also best to ensure that you do not waive any claims against your employer as part of a severance agreement until you have had an attorney review the circumstances of your departure from the company.

Costa Mesa employment lawsuits can be filed with assistance from the Nassiri Law Group, practicing in Los Angeles, Riverside, and Orange County. Call 949.375.4734.

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