What Happens When an Employee Is Terminated?

Employee turnover is a normal part of running a business — people move, retire, change jobs, or start new adventures. But when someone leaves your company, one of the most common questions we get is: “What happens to their benefits?”

In most cases, coverage ends on the last day of the month in which the employee worked, though it can vary based on the employer contract with the insurance carrier.

For example:

• If an employee’s last day is October 10, their coverage will most commonly end at 11:59 pm on October 31.

• Some plans end coverage immediately on the employee’s last day of work.
  
  

Your specific plan documents (your agreement with the insurance carrier as the employer/business owner) will outline the exact policy; your broker should be able to help you confirm what your plan documents say.

When an employee leaves employment for any reason it is important to reach out to your broker as soon as possible. Your broker may also ask for a brief explanation of why the employee left as this can sometimes affect what notices need to be sent to the employee. If you are subject to COBRA, be sure to also notify your TPA (Third Party Administrator) of the termination or send out the required documentation. For additional information on COBRA, click here.

During this time, it is also important to me mindful of your invoice. Invoices are often generated prior to the month in which coverage is being billed (we call this advanced billing). Reach out to your broker if you have questions about your invoice or if you think an employee may be listed on your invoice in error. It is much easier to fix any issues immediately rather than waiting another month to see if it resolves.