Severance includes 2 yrs healthcare. Should I use that instead of new company?

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tmhudg
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Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by tmhudg » Fri Oct 13, 2017 5:11 pm

I was laid off in August and, as part of my severance package, I got two years of healthcare coverage. They took the first year premiums out of my severance lump sum so I'm covered until next August when I would need to pay the next year's premium. I'm currently enrolled in a High Deductible Health Plan plus HSA but I can still take part in open enrollment this November and change things if I want. If I change things, I would have to pay or request the difference (depending on whether it is more or less than what was taken out).

I'm currently looking for a new job and I've got some good prospects. So, if I *do* find a new position (and this post assuming so doesn't jinx everything), what should I do about healthcare?

As I see it, I might have several options.

I could take New Company's coverage and then go through a process of requesting a pro rated refund of the premiums that were taken out of my severance. From the little information I have on that, there seems to be a review process to determine what that refund is. I have no specific reason to think they won't do the refund but it just seems a little vague in my severance docs.

One downside to this is if for some reason things don't work out at the new company and I'm let go in the first two years, I'm left without healthcare.

I could decline the new company's coverage and use what I currently have for up to two years. At least for the first year, since I've already paid the premiums, I would get more take home pay from New Company. I'm assuming from their perspective this would be the same as if I was just using my wife's coverage (she doesn't have any but it doesn't seem like it would matter to them). I'm also assuming that at New Company's next open enrollment, I could just sign up - as if my wife lost coverage and I need to switch to them. I think it's possible I could do this at any time since it's a "life event" (losing health insurance). The only hitch I can think of here is if there is something around not having to "qualify" if I take it on hire but I would have to qualify if I add it later.

At this point, it seems like I should take option 2 (use the coverage I've already paid for) but I wanted to seek the wisdom of the crowd in case there is anything I'm missing.

To be clear, I don't have an offer in hand so I don't know any specifics about this hypothetical new company nor its healthcare coverage. Those details could make this question moot but I wanted to be prepared in case I have to decide.

If it matters, I'm 56. I'm in pretty good shape with Retirement Funds but I can provide more details if that is a factor

Thanks

runner3081
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by runner3081 » Fri Oct 13, 2017 5:49 pm

Assuming coverage and rates are similar, I would ride out the old plan until your option to keep it expires.

It gives you some more flexibility if you next employer doesn't work out!

mega317
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by mega317 » Sat Oct 14, 2017 12:08 am

I'd use the old employers up to what you've already paid (to avoid the headache and uncertainty of getting your money back), and then just compare the rates of the two options after that. Keep in mind the new employers' premiums would not be taxed. I don't know how the old employers' would work.

I agree that you'd have flexibility in making changes since it should qualify as a life event. From my current experience I'd start the paperwork early. My wife lost her coverage so we added her to mine. We're coming up on two full months of "processing" during which we've had to pay out of pocket which has included a lump sum for all prenatal visits, the prenatal ultrasound, and some major dental work. I have slight anxiety about being reimbursed when the coverage is finally processed. I've been reassured multiple times, by an HR in which I already didn't have much faith, that it will be retroactive to the date of the life event.

denovo
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by denovo » Sat Oct 14, 2017 4:04 am

I would take whichever has better coverage/networks.

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celia
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by celia » Sat Oct 14, 2017 5:29 am

tmhudg wrote:
Fri Oct 13, 2017 5:11 pm
I was laid off in August and, as part of my severance package, I got two years of healthcare coverage. They took the first year premiums out of my severance lump sum so I'm covered until next August when I would need to pay the next year's premium.
They didn't give you anything. You are paying for it, probably as a COBRA continuation. Maybe they didn't want to have to keep processing monthly payments from former employees, so they grabbed them upfront. Why don't you call your old employer and understand your options better?

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Pajamas
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by Pajamas » Sat Oct 14, 2017 6:55 am

Under COBRA, you're paying the total cost of coverage (your usual payment while employed + the amount your employer contributed) + a small service fee. If you get new employment, presumably the new employer would probably contribute to the cost of coverage they provide.

There is no way to make a decision with 100% certainty without knowing what the new coverage is, how much it costs, and what the refund will be if you switch from COBRA. It is likely that you would get a full pro-rated refund and it is also likely that the coverage provided by a new employer would be cheaper. You should wait until you know what your choices are before making a decision.

Concentrate on finding employment and then worry about which health care coverage to choose.

Nothing in life is guaranteed, but paying full price for the old coverage just in case the new job you haven't gotten yet doesn't work out and you don't stay a full two years and then can't find new employment doesn't make any sense to me, especially since you could presumably get COBRA coverage from the new employer. I suppose keeping your old coverage until you qualify for COBRA from the new employer might make sense or keeping the old coverage if the new coverage is very poor quality might make sense.

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dm200
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by dm200 » Sat Oct 14, 2017 8:49 am

What I might be concerned about (with the turmoil currently with health insurance) delaying going on the new employer plan would be "pre-existing" conditions. I do not believe they are excluded now, but might they be in two years?

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dm200
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by dm200 » Sat Oct 14, 2017 8:52 am

celia wrote:
Sat Oct 14, 2017 5:29 am
tmhudg wrote:
Fri Oct 13, 2017 5:11 pm
I was laid off in August and, as part of my severance package, I got two years of healthcare coverage. They took the first year premiums out of my severance lump sum so I'm covered until next August when I would need to pay the next year's premium.
They didn't give you anything. You are paying for it, probably as a COBRA continuation. Maybe they didn't want to have to keep processing monthly payments from former employees, so they grabbed them upfront. Why don't you call your old employer and understand your options better?
I would read ALL the fine printabout whether the eligibility continues if you can get employer coverage with a new job.

You are also paying for this (part of the employer costs) - so I suspect there would be only (if any) small savings to continue under the old plan.

When you have coverage with the current employer, you have a "connection" if there are problems; your current employer has an incentive to keep you "happy". Your former employer has none. the plan can also change, perhaps a little - perhaps a lot.

tmhudg
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by tmhudg » Sat Oct 14, 2017 10:44 am

dm200 wrote:
Sat Oct 14, 2017 8:52 am
celia wrote:
Sat Oct 14, 2017 5:29 am
tmhudg wrote:
Fri Oct 13, 2017 5:11 pm
I was laid off in August and, as part of my severance package, I got two years of healthcare coverage. They took the first year premiums out of my severance lump sum so I'm covered until next August when I would need to pay the next year's premium.
They didn't give you anything. You are paying for it, probably as a COBRA continuation. Maybe they didn't want to have to keep processing monthly payments from former employees, so they grabbed them upfront. Why don't you call your old employer and understand your options better?
I would read ALL the fine printabout whether the eligibility continues if you can get employer coverage with a new job.

You are also paying for this (part of the employer costs) - so I suspect there would be only (if any) small savings to continue under the old plan.
I guess I wasn't clear. I'm not paying COBRA rates. They took out 26 X my normal bi-weekly, pre-tax contribution for healthcare (and insurance).

I looked a bit closer at the docs and the refund of the premium is a little less vague than I originally thought. In one doc it says "...You may be eligible, if applicable, to receive a partial refund of your employee portion of contributions" and that sounded a little weak to me. In another doc though, it says more clearly that reimbursement will be made and just that I would be taxed on the amount (since it was taken out pre-tax). So I'm less worried about losing that money.
When you have coverage with the current employer, you have a "connection" if there are problems; your current employer has an incentive to keep you "happy". Your former employer has none. the plan can also change, perhaps a little - perhaps a lot.
That's a good point. That could make a difference although I've never needed that kind of intervention thus far and, as near as I can tell, I'm still almost (?) like an active employee in terms of healthcare coverage (and from the perspective of the insurance company) so I'm not sure how much this matters.

Thanks for the responses so far. I appreciate the replies.

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dm200
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by dm200 » Sat Oct 14, 2017 10:48 am

tmhudg wrote:
Sat Oct 14, 2017 10:44 am
dm200 wrote:
Sat Oct 14, 2017 8:52 am
celia wrote:
Sat Oct 14, 2017 5:29 am
tmhudg wrote:
Fri Oct 13, 2017 5:11 pm
I was laid off in August and, as part of my severance package, I got two years of healthcare coverage. They took the first year premiums out of my severance lump sum so I'm covered until next August when I would need to pay the next year's premium.
They didn't give you anything. You are paying for it, probably as a COBRA continuation. Maybe they didn't want to have to keep processing monthly payments from former employees, so they grabbed them upfront. Why don't you call your old employer and understand your options better?
I would read ALL the fine printabout whether the eligibility continues if you can get employer coverage with a new job.
You are also paying for this (part of the employer costs) - so I suspect there would be only (if any) small savings to continue under the old plan.
I guess I wasn't clear. I'm not paying COBRA rates. They took out 26 X my normal bi-weekly, pre-tax contribution for healthcare (and insurance).
I looked a bit closer at the docs and the refund of the premium is a little less vague than I originally thought. In one doc it says "...You may be eligible, if applicable, to receive a partial refund of your employee portion of contributions" and that sounded a little weak to me. In another doc though, it says more clearly that reimbursement will be made and just that I would be taxed on the amount (since it was taken out pre-tax). So I'm less worried about losing that money.
When you have coverage with the current employer, you have a "connection" if there are problems; your current employer has an incentive to keep you "happy". Your former employer has none. the plan can also change, perhaps a little - perhaps a lot.
That's a good point. That could make a difference although I've never needed that kind of intervention thus far and, as near as I can tell, I'm still almost (?) like an active employee in terms of healthcare coverage (and from the perspective of the insurance company) so I'm not sure how much this matters.
Thanks for the responses so far. I appreciate the replies.
No matter what the relationship, it is also a fact that the coverage could change (perhaps a lot) when the company decides to make changes each year. I had a former employer who, while I was employed for about 9 years, changed whole plans three times while I worked there - chasing lower company costs.

tmhudg
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by tmhudg » Sat Oct 14, 2017 10:52 am

dm200 wrote:
Sat Oct 14, 2017 10:48 am
No matter what the relationship, it is also a fact that the coverage could change (perhaps a lot) when the company decides to make changes each year. I had a former employer who, while I was employed for about 9 years, changed whole plans three times while I worked there - chasing lower company costs.
Right but if that happens, and the change is worse than the new company's plan, I just drop the plan, claim a life event, and switch to new company's plan. What's the risk?

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dm200
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by dm200 » Sat Oct 14, 2017 10:54 am

What's the risk?
Probably small, but are you 100% sure this would be called a "life event"?

Since you are paying the employee share for the old company plan, I see little, if any, net benefit of making things more complicated.

cherijoh
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by cherijoh » Sat Oct 14, 2017 11:03 am

celia wrote:
Sat Oct 14, 2017 5:29 am
tmhudg wrote:
Fri Oct 13, 2017 5:11 pm
I was laid off in August and, as part of my severance package, I got two years of healthcare coverage. They took the first year premiums out of my severance lump sum so I'm covered until next August when I would need to pay the next year's premium.
They didn't give you anything. You are paying for it, probably as a COBRA continuation. Maybe they didn't want to have to keep processing monthly payments from former employees, so they grabbed them upfront. Why don't you call your old employer and understand your options better?
It depends. I have a friend whose separation package was paid out semi-monthly just like a paycheck. She had continuation of her healthcare at the subsidized employee rate for the length of her severance. She was then eligible for the full 18 months of COBRA coverage.

tmhudg
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by tmhudg » Sat Oct 14, 2017 11:14 am

dm200 wrote:
Sat Oct 14, 2017 10:54 am
What's the risk?
Probably small, but are you 100% sure this would be called a "life event"?

Since you are paying the employee share for the old company plan, I see little, if any, net benefit of making things more complicated.
No I'm not 100% sure. I would definitely ask the new company (that I'll probably never find now that I'm assuming I will in all these posts) how that would work.

Yep, how much more complicated this would be in exchange for the benefits (guaranteed healthcare for two years and the option to pick the best from two plans) is the reason I posed the question.

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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by niceguy7376 » Sat Oct 14, 2017 1:56 pm

To me, the main concern is that old employer insurance ends in August month while new enrollment at companies are on calendar month of jan to dec.
Would this be considered an event that you can enroll at new employer next august (2018) or 2019 august?

runner3081
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by runner3081 » Sat Oct 14, 2017 2:05 pm

niceguy7376 wrote:
Sat Oct 14, 2017 1:56 pm
To me, the main concern is that old employer insurance ends in August month while new enrollment at companies are on calendar month of jan to dec.
Would this be considered an event that you can enroll at new employer next august (2018) or 2019 august?
Yes, former HR manager here. Losing other coverage is a qualifying event.

tmhudg
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by tmhudg » Sat Oct 14, 2017 3:36 pm

runner3081 wrote:
Sat Oct 14, 2017 2:05 pm
niceguy7376 wrote:
Sat Oct 14, 2017 1:56 pm
To me, the main concern is that old employer insurance ends in August month while new enrollment at companies are on calendar month of jan to dec.
Would this be considered an event that you can enroll at new employer next august (2018) or 2019 august?
Yes, former HR manager here. Losing other coverage is a qualifying event.
Thanks runner. Let's say for argument that my current plan is better than the new plan. Can you think of any reason (aside from what dm200 wrote about having the backing of your current company should a dispute arise) not to stick with the current plan for the two years and then switch?

Would I have to have a medical exam when switching that I would not have to have if signing up when hired? I'm in good health but anything can happen in two years.

runner3081
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by runner3081 » Sat Oct 14, 2017 3:39 pm

tmhudg wrote:
Sat Oct 14, 2017 3:36 pm
runner3081 wrote:
Sat Oct 14, 2017 2:05 pm
niceguy7376 wrote:
Sat Oct 14, 2017 1:56 pm
To me, the main concern is that old employer insurance ends in August month while new enrollment at companies are on calendar month of jan to dec.
Would this be considered an event that you can enroll at new employer next august (2018) or 2019 august?
Yes, former HR manager here. Losing other coverage is a qualifying event.
Thanks runner. Let's say for argument that my current plan is better than the new plan. Can you think of any reason (aside from what dm200 wrote about having the backing of your current company should a dispute arise) not to stick with the current plan for the two years and then switch?

Would I have to have a medical exam when switching that I would not have to have if signing up when hired? I'm in good health but anything can happen in two years.
No issue whatsoever, I was the first response with the same point. Assuming rates/coverage are similar, I would keep it. May even be able to get an opt-out credit with the new employer.

tmhudg
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by tmhudg » Sat Oct 14, 2017 3:43 pm

runner3081 wrote:
Sat Oct 14, 2017 3:39 pm
tmhudg wrote:
Sat Oct 14, 2017 3:36 pm
runner3081 wrote:
Sat Oct 14, 2017 2:05 pm
niceguy7376 wrote:
Sat Oct 14, 2017 1:56 pm
To me, the main concern is that old employer insurance ends in August month while new enrollment at companies are on calendar month of jan to dec.
Would this be considered an event that you can enroll at new employer next august (2018) or 2019 august?
Yes, former HR manager here. Losing other coverage is a qualifying event.
Thanks runner. Let's say for argument that my current plan is better than the new plan. Can you think of any reason (aside from what dm200 wrote about having the backing of your current company should a dispute arise) not to stick with the current plan for the two years and then switch?

Would I have to have a medical exam when switching that I would not have to have if signing up when hired? I'm in good health but anything can happen in two years.
No issue whatsoever, I was the first response with the same point. Assuming rates/coverage are similar, I would keep it. May even be able to get an opt-out credit with the new employer.
Ah, apologies for not paying attention. Thanks for the confirmation.

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celia
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by celia » Sat Oct 14, 2017 5:32 pm

runner3081 wrote:
Sat Oct 14, 2017 2:05 pm
niceguy7376 wrote:
Sat Oct 14, 2017 1:56 pm
To me, the main concern is that old employer insurance ends in August month while new enrollment at companies are on calendar month of jan to dec.
Would this be considered an event that you can enroll at new employer next august (2018) or 2019 august?
Yes, former HR manager here. Losing other coverage is a qualifying event.
But the OP is NOT losing coverage in Aug 2018, so he may not be able to get on the new insurance at that time. If he doesn't want to continue paying the premiums, that is his choice, not something out of his control.

But, he IS losing coverage in Aug 2019, so then he should be able to get on the new plan.

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celia
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by celia » Sat Oct 14, 2017 5:42 pm

tmhudg wrote:
Sat Oct 14, 2017 3:36 pm
Let's say for argument that my current plan is better than the new plan. Can you think of any reason (aside from what dm200 wrote about having the backing of your current company should a dispute arise) not to stick with the current plan for the two years and then switch?

Would I have to have a medical exam when switching that I would not have to have if signing up when hired? I'm in good health but anything can happen in two years.
One potential problem is that if you satisfied the deductible in early 2019 on the old plan, you may have to satisfy it again in 2019 on the new plan. That's something worth looking into once you have an option for a new insurance plan.

If either plan is a high-deductible plan that qualifies you for a HSA or enables you to have a Flexible Spending Account, that is another thing to consider.

There are no longer any pre-existing medical exclusions for medical insurance. Feel free to have an accident on the last day of your old insurance. :D

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dm200
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by dm200 » Sat Oct 14, 2017 6:38 pm

One potential problem is that if you satisfied the deductible in early 2019 on the old plan, you may have to satisfy it again in 2019 on the new plan. That's something worth looking into once you have an option for a new insurance plan
.

Yes - depending on the details, this could become an issue. Of course, that could happen in 2017 if you have satisfied the deductible on the old plan and go to the new company plan.

If my memory is correct (cannot recall details), I think some employer plans "coverage year" and "deductible year" may not be the same as calendar year. That might be something to investigate.

avalpert
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by avalpert » Sat Oct 14, 2017 6:49 pm

celia wrote:
Sat Oct 14, 2017 5:32 pm
runner3081 wrote:
Sat Oct 14, 2017 2:05 pm
niceguy7376 wrote:
Sat Oct 14, 2017 1:56 pm
To me, the main concern is that old employer insurance ends in August month while new enrollment at companies are on calendar month of jan to dec.
Would this be considered an event that you can enroll at new employer next august (2018) or 2019 august?
Yes, former HR manager here. Losing other coverage is a qualifying event.
But the OP is NOT losing coverage in Aug 2018, so he may not be able to get on the new insurance at that time. If he doesn't want to continue paying the premiums, that is his choice, not something out of his control.
Choosing not to renew your employer-based plan during their annual enrollment period is a qualifying event.

runner3081
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by runner3081 » Sat Oct 14, 2017 6:59 pm

Exactly... as I stated, losing coverage (your fault or now) is a qualifying event.

avalpert
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by avalpert » Sat Oct 14, 2017 7:25 pm

runner3081 wrote:
Sat Oct 14, 2017 6:59 pm
Exactly... as I stated, losing coverage (your fault or now) is a qualifying event.
Not entirely true - if you lose coverage during the plan year (say for lack of payment) it would not be a qualifying event.

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celia
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by celia » Sun Oct 15, 2017 10:57 pm

avalpert wrote:
Sat Oct 14, 2017 6:49 pm
celia wrote:
Sat Oct 14, 2017 5:32 pm
runner3081 wrote:
Sat Oct 14, 2017 2:05 pm
niceguy7376 wrote:
Sat Oct 14, 2017 1:56 pm
To me, the main concern is that old employer insurance ends in August month while new enrollment at companies are on calendar month of jan to dec.
Would this be considered an event that you can enroll at new employer next august (2018) or 2019 august?
Yes, former HR manager here. Losing other coverage is a qualifying event.
But the OP is NOT losing coverage in Aug 2018, so he may not be able to get on the new insurance at that time. If he doesn't want to continue paying the premiums, that is his choice, not something out of his control.
Choosing not to renew your employer-based plan during their annual enrollment period is a qualifying event.
I disagree. I suggest the OP (or anyone else who wants to) call a Medigap plan, give the exact circumstances as an "example" to them, and I think they will expect to do underwriting for him. This is what happened to us, since we were in similar circumstances and assumed we could pick up a Medigap plan when we stopped paying the premiums on my employer medical coverage, in the middle of the year. I then found out I was wrong.

(Edit since Medicare is not relevant here.)
Last edited by celia on Mon Oct 16, 2017 12:34 am, edited 1 time in total.

avalpert
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by avalpert » Sun Oct 15, 2017 11:44 pm

celia wrote:
Sun Oct 15, 2017 10:57 pm
avalpert wrote:
Sat Oct 14, 2017 6:49 pm
celia wrote:
Sat Oct 14, 2017 5:32 pm
runner3081 wrote:
Sat Oct 14, 2017 2:05 pm
niceguy7376 wrote:
Sat Oct 14, 2017 1:56 pm
To me, the main concern is that old employer insurance ends in August month while new enrollment at companies are on calendar month of jan to dec.
Would this be considered an event that you can enroll at new employer next august (2018) or 2019 august?
Yes, former HR manager here. Losing other coverage is a qualifying event.
But the OP is NOT losing coverage in Aug 2018, so he may not be able to get on the new insurance at that time. If he doesn't want to continue paying the premiums, that is his choice, not something out of his control.
Choosing not to renew your employer-based plan during their annual enrollment period is a qualifying event.
I disagree. I suggest the OP (or anyone else who wants to) call a Medigap plan, give the exact circumstances as an "example" to them, and I think they will expect to do underwriting for him. This is what happened to us, since we were in similar circumstances and assumed we could pick up a Medigap plan when we stopped paying the premiums on my employer medical coverage, in the middle of the year. I then found out I was wrong.
I don't know your exact circumstances - as I said, not renewing during the annual enrollment period is most certainly a qualifying event (see for example the 5th bullet under 'Losing job-based coverage' here).

On the other hand, as I said in the subsequent post, losing coverage during the plan year is not qualifying.

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celia
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Re: Severance includes 2 yrs healthcare. Should I use that instead of new company?

Post by celia » Mon Oct 16, 2017 12:32 am

I withdraw my last comment as I assumed (today) that this was a Medicare-related topic. (I am participating in some of those threads at the moment and got this confused with the others.)

But while re-reading the original post, the old employer's open enrollment period is in November, not August.

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