Can an Employer Legally Cancel Health and Dental Benefits for a Terminated Employee?

Once you are no longer employed by a company, your entitlement to company-paid insurance such as health and dental benefits typically ceases. Upon termination, the day you end employment marks the end of your coverage, unless you choose certain options to continue your health benefits under COBRA or state continuation laws.

Termination and Employee Benefits

Terminated employees are no longer employees and, as such, do not retain their benefits. It's important to understand and negotiate for these benefits to continue before the termination date. However, expecting to retain these benefits following misconduct is highly inappropriate and may be seen as a breach of professional decorum.

Standard Practices and Legal Considerations

Employers typically terminate health and dental benefits upon termination, regardless of the reason for the termination, whether due to misconduct or not. The official date of the end of benefits is often the last day of employment, though some employers may extend benefits for a specified period, such as up to the end of that month.

COBRA and State Continuation Laws

Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), employers with 20 or more employees must offer terminated employees and their dependents the opportunity to continue health coverage at their own expense. The employee is responsible for the full premium plus a 2% administrative fee.

COBRA typically allows for continued coverage for up to 18 months, although this can extend in specific circumstances. Key eligibility conditions include termination not being due to gross misconduct. Most states also have similar continuation laws, which are often outlined as "mini-COBRA" statutes.

Employer Policies

Employers may have specific policies regarding when coverage ends for terminated employees. These policies must comply with applicable laws and can sometimes offer additional benefits beyond what is legally required. Employers are required to notify employees of their right to continue benefits under COBRA or state continuation laws, usually within the period of 14 to 44 days after termination.

Exceptions and Special Cases

Collective Bargaining Agreements: If the employee's benefits are governed by a union or collective bargaining agreement, the agreement may stipulate that the employer must maintain benefits for a certain period after termination.

Severance Packages: Some employers may offer extended health and dental benefits as part of a severance agreement, although this is typically negotiated and not a legal obligation.

Voluntary Termination or Retirement: Similar rules apply to employees who resign or retire; benefits generally end upon separation, unless COBRA or state continuation coverage is elected.

Misconduct and Benefits

In instances of gross misconduct, employers may deny COBRA continuation rights; however, if there is no gross misconduct, the employee retains the right to elect COBRA continuation coverage.

Alternatives for Health and Dental Coverage

Terminated employees have several options to maintain their health and dental coverage:

COBRA/State Continuation: The employee can elect to continue existing coverage by paying the full premiums. Spousal or Family Coverage: Join a spouse's or family member's health plan if available. Marketplace Plans: Termination qualifies as a qualifying life event, allowing employees to enroll in Affordable Care Act (ACA) marketplace health plans. Subsidies may be available based on income. Medicaid: For those who qualify, Medicaid provides a low-cost or free coverage option.

Conclusion

Employers are legally allowed to cancel health and dental benefits for terminated employees unless the employee opts to continue coverage under COBRA or a state continuation plan. Employees should explore alternatives like COBRA, marketplace plans, or spousal coverage to maintain their health and dental benefits.