Many Businesses Canceling Employee Health Insurance Coverage Without Warning

Published: Thu 04 Mar 2010

Perry Begay

As if having to deal with rising health insurance rates every year weren't enough trouble, workers now have yet another concern: businesses that drop their medical coverage without telling their employees.

It's a rapidly growing trend according to state Department of Insurance employee Kristin Milam. State law forces businesses to provider their employees with 45 days' notice if they choose to drop health coverage. Milam explains that the employees of companies that break that law typically don't find out their coverage has expired until they visit their doctor's office.

Small Businesses in Trouble

Many small business owners are hurting currently, and those who have kept group coverage for their employees in spite of rising premium costs should be applauded. But it's also easy to understand why some companies can no longer afford to do so. It is also possible that some business owners may not understand the implications of the advance-notice law. However, as a matter of common decency, employers owe it to their workers to let them know in advance that they will become uninsured.

Ms. Milam explains that when the insurance department receives such a complaint, regulators give the company a chance to reinstate the coverage and pay for the previous premiums so there isn't a gap in coverage. If the employer chooses not to, the state can pursue a legal case against the company. One famous example of a violation occurred last fall when Charles Rodgers, the CEO of Pace Airlines, ended health insurance coverage for his over 300 employees without notifying them.

The department of insurance will also work with employees whose coverage has been terminated to help them explore their options.

In many cases, Milam says, the insurer that provided the group coverage will extend an individual plan to the employees. Workers can also shop elsewhere for an individual plan or rely on the state's high-risk insurance pool if they have a preexisting condition.

Watch Out for Scams

Sadly, there are other ways consumers are being taken advantage of with regard to health insurance expenses.

Every natural disaster encourages con artists who target the victims or the people who are trying to help those victims. For the last 18 months, the economic crisis has brought out a number of scammers who promise employment, ways to avoid foreclosure, and ways to reduce health care costs.

Two health insurance scams you should be aware of include unauthorized insurance, or nonexistent insurance policies, and discount health cards. Remember that discount cards are not the same as health insurance coverage, and they are not licensed by the state. Before you take any discount card, verify that your health care provider and pharmacy accept the card.

You can stay abreast of the latest health insurance scams by regularly checking the department of insurance website for your state. The site should list warning signs of possible health insurance scams, such as outlandish claims of savings, outrageous up-front fees, and/or high-pressure sales techniques.