Extension of Benefits on Cancelled Group Plan
Q: I own a small business with three employees and I am closer the doors in June so I can retire. I will try to sell the business assets, but probably not sell the actual business. One of my employees just found out she was pregnant. Will she be able to still get medical treatment for the pregnancy even after the group plan ends? I had a friend once that worked for a company that went out of business and she lost her health insurance and was being treated for cancer and the insurance company continued to pay for her treatment. Is this the case with all health insurance plans and types of treatments?
A:This should be addressed in the Evidence of Coverage booklet that was provided to you and your employees at the time you enrolled in the group health plan. There should be a section in this policy entitled “Extension of Benefits.” Under this section, there will be detailed conditions on who may qualify for the extension of benefits under your group health plan. If your group health insurance contract ends due to the business closing its doors, only members that are totally disabled or in the hospital on the date that coverage ends may be eligible for an extension of coverage. Pregnancy does not usually fall into either of these categories, unless this employee just happens to be in the hospital delivering the newborn on the date that coverage ends. This would be an unlikely coincidence, so she should not count on this happening and would be best served by preparing for other options to guarantee that there will be no lapse in coverage between the date that coverage ends and the start date of her replacement health insurance.
Even if there is an extension of benefits granted to this employee at the termination of coverage, that extension will not cover any treatment for the newborn child, so she definitely wants to secure other health insurance to guarantee that the newborn child will also be insured. Since the group health plan is ending, their will be no COBRA option, but your insurance company may have conversion options available, or you can look into the guaranteed issue options in your state under federal HIPAA regulations.
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