Severance Agreement Cobra
Often, when an employer separates from an employee, they can offer to pay for a few months the coverage of the continuation of COBRA, so that the employee can remain insured without having to pay the substantial premiums related to COBRA. Historically, this has always seemed like a solid gesture by the employer and a “breeze” from the worker`s point of view. With the implementation of the Affordable Care Act (“ACA”), employees who part ways with their jobs now have another option – taking out insurance through the ACA`s “marketplace,” which can be less expensive. Because of the interdependence of potential time issues between choosing and maintaining cobra coverage and the ability to purchase insurance on the ACA`s “marketplace,” employers also need to think about typical employee separation and offering a severance package. In both situations, the lack of a clear reference to COBRA could likely extend the coverage period beyond what the employer had in mind (and beyond what an insurer will cover). Therefore, the conditions for redundancy payments should be clearly formulated in the event of confusion. I think the easiest way is to demonstrate it with an example. So let`s just say that the termination date is May 1, 2020. And as an employer, you offer five (5) months of COBRA coverage and one (1) month of severance pay. Employers often want to offer subsidized health insurance as part of a worker`s severance pay or force reduction.
In a classic case that proves the maxim “No good deed goes unpunished,” failure to address the cobra implications of the agreement may pose a compliance risk.