When someone leaves, the last paycheck usually gets handled carefully and the benefits get handled late. That is backwards. The benefits side has deadlines attached to it, and the person who just left is the one who feels the mistake.
The steps
- Terminate the employee in the enrollment system, with the correct last day of coverage.
- Terminate health benefits with the carrier.
- Terminate life and AD&D, and disability, if the employee had them.
- File the carrier confirmations with the employee record.
- Send the continuation coverage notice that applies.
Step one sets the date everything else keys off. Get it wrong and you will either pay a premium for someone who is gone or leave someone uncovered who thought they had a plan through the end of the month. Both are fixable, and both are much easier to fix in the first week than in the second month.
Which continuation rule applies
There are two families of rules, and which one you are under depends on the size of the group and the state.
Federal COBRA applies to larger employers and gives a qualified person the right to keep the group coverage for a period, at their own cost, if they elect it in time.
Smaller groups are often outside COBRA and fall under a state continuation rule instead. Those rules vary by state, and we work in six of them. The election windows, the length of coverage, and who has to send the notice are not the same everywhere.
The practical point for an employer is this: you do not get to pick which rule you like. It follows your group. If you are not certain which one applies to you, that is a question to ask before someone leaves, not after.
Why timing matters
Continuation notices have deadlines. A late notice does not just annoy the former employee, it can extend their election window and leave you carrying an open question about coverage you thought was closed. Carrier terminations have timing too. Terminate late and you may be billed for a month you did not intend to buy. Terminate early and a claim from the employee's last covered week can be denied.
The fix is boring and it works: run the five steps in order, on the day you know the last day, and file the paper.
If a departure is unusual
Reductions in hours, leaves that turn into separations, and terminations for cause all have their own wrinkles, and some of them change whether continuation coverage is offered at all.
If you are not sure which rule applies to your group or how to treat a particular departure, call the office before you send the notice. It is a short conversation and it saves a long one.