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What to do if Your Health Coverage can no Longer Pay Benefits

March 2015

The Department of Labor’s Employee Benefits Security Administration (EBSA), administers the Employee Retirement Income Security Act of 1974 (ERISA), which governs group health plans.

This fact sheet provides basic information about your potential options if your health coverage can no longer pay benefits. For example, there are health coverage providers known as multiple employer welfare arrangements (MEWAs), which provide health and other benefits to employees of two or more unrelated employers. Although some MEWAs provide valuable coverage, other MEWAs cannot pay claims because of insolvency or fraud, causing the MEWA to file for bankruptcy or to go out of business. If this happens to you, here are some options to consider for obtaining alternative health coverage. These options implicate the health coverage portability provisions of the Health Insurance Portability and Accountability Act (HIPAA) and the health insurance marketplace provisions of the Patient Protection and Affordable Care Act (ACA).(1)

Know Your Health Coverage Options

HIPAA Special Enrollment in another Group Health Plan. If other employment-based, group coverage is available to you (such as coverage through a spouse’s employer-provided plan), consider special enrollment in that plan.

Special enrollment provides you and your family members an opportunity to enroll in a group health plan for which you are otherwise eligible, regardless of enrollment periods, after you experience a loss of other health coverage (or you experience certain life changes, such as marriage, birth of a child, adoption, or placement for adoption). However, to qualify, you must request enrollment within 30 days of losing eligibility for other coverage (or within 30 days of the life change). After you request special enrollment due to loss of eligibility for other coverage or due to marriage, your coverage will begin on the first day of the next month. With special enrollment as a result of birth, adoption, or placement for adoption, coverage is retroactive to the date of the event.

Individual Health Coverage through the Health Insurance Marketplace. Another option to consider is individual coverage purchased through the Health Insurance Marketplace (Marketplace). The Marketplace offers “one-stop shopping” to find and compare private health insurance and certain other options. In the Marketplace, you choose between different categories and types of plans and you can see what your premium, deductibles, and out-of-pocket costs will be before you make a decision to enroll. You also may be eligible for a tax credit that will lower your monthly premiums and cost-sharing reductions that will lower your out-of-pocket costs.

Losing your job-based health coverage may qualify you for a special enrollment period, which allows you to enroll in a Marketplace plan outside of the annual open enrollment period. You may come to the Marketplace up to 60 days before losing your job-based coverage or within 60 days after losing your job-based coverage. Once you qualify for a special enrollment period, you then have 60 days to complete the full enrollment process, including plan selection.  The date your coverage will start depends on when you select a plan.  For more information, visit Healthcare.gov.

You can apply for Marketplace coverage online or get more information at HealthCare.gov or by calling 1-800-318-2596 (TTY users call 1-855-889-4325).

Health Coverage through a Government Program. When you fill out a Marketplace application, you also can find out if you and your family qualify for free or low-cost coverage through a government program, such as Medicaid or the Children’s Health Insurance Program (CHIP). Medicaid is a state-administered health coverage program for low-income families and children, pregnant women, the elderly, people with disabilities, and in some states, other adults. CHIP is a Federal/state partnership that helps provide children – including those in families who do not have health coverage due to a temporary reduction in income – with health coverage. In some states, CHIP also covers parents and pregnant women. You can apply for and enroll in Medicaid or CHIP at any time during the year.

Visit HealthCare.gov or call 1-800-318-2596 (TTY users call 1-855-889-4325) for more information or to apply for these programs. You can also apply for Medicaid by contacting your state Medicaid office.  To learn more about the CHIP program in your state, call 1-877-KIDS-NOW (543-7669) or visit insurekidsnow.gov on the Web.

Research Your Coverage Options and Act Quickly

Get information about all of your options and review it. When considering your health coverage options, you should examine the scope of the coverage. Do the plans offered cover the benefits that are important to you? Are there deductibles? What are the out-of-pocket expenses you may face? Do they include in their networks the providers you may want to see, and cover the prescription drugs you may need?  Determine your needs and priorities. For information on the coverage through a particular group health plan, ask for copies of two key documents – the Summary Plan Description (SPD) and the Summary of Benefits and Coverage (SBC) – to get details about covered benefits and costs. Compare all of your options before you decide which coverage to elect.

Act Quickly. Be aware of the deadlines for deciding on coverage. If you’re considering special enrollment, you have 30 days after the loss of coverage to request special enrollment in other employer coverage and 60 days before or after loss of coverage to select a plan in the Marketplace. Regardless of what option you choose, you may be asked for evidence of prior health coverage under the MEWA. If the MEWA has gone out of business, a letter or other evidence from the MEWA may be difficult to obtain. However, you can demonstrate your prior coverage by following these three steps:

  • Provide the new plan or insurer a written statement signed by you describing your prior coverage and its dates;
  • Include some corroborating evidence, such as a pay stub that reflects a deduction for health insurance, a prescription drug card, or an Explanation of Benefits (EOB) statement; and
  • Cooperate with the prospective health plan in any reasonable way to verify your prior coverage.

For More Information

Visit the Employee Benefits Security Administration’s Website at dol.gov/ebsa to view the following publications. To order copies or to request assistance from a benefits advisor, contact EBSA electronically at askebsa.dol.gov or call toll free 1-866-444-3272.

You also may visit the U.S. Department of Health and Human Services Website at HealthCare.gov or call 1-800-318-2596. This is where you can find out more about Marketplace plans, what they cover, and how to apply. You can also get information by contacting your state insurance commissioner’s office.

This fact sheet has been developed by the U.S. Department of Labor, Employee Benefits Security Administration. It will be made available in alternate format to persons with disabilities upon request: Voice phone: (202) 693-8664; TTY: (202) 501-3911. In addition, the information in this fact sheet constitutes a small entity compliance guide for purposes of the Small Business Regulatory Enforcement Fairness Act of 1996.


Footnotes

  1. This fact sheet does not discuss continuation coverage offered under the Consolidated Omnibus Budget Reconciliation Act, or COBRA. Purchasing COBRA may be an additional coverage option in instances where the employer health plan continues to be in effect for active employees. For more information on COBRA coverage, see the Department of Labor publication An Employee’s Guide to Health Benefits Under COBRA.