my employer might drop our health insurance — what can I do?

by Alison Green on March 26, 2013

A reader writes:

Yesterday, I overheard a conversation between the owner of the company and our accountant where they discussed dropping the company’s health insurance plan. (Note — we were in an open area, they were being loud and speaking openly, and I said hi when I came into the area to alert them that I was there, so I wasn’t snooping!)

Apparently, rates are being increased again, and they are leaning towards just dropping the plan altogether. If past experience with the way the owner handles things like this is indicative of future behavior, it is likely that she’ll tell us just a few days before the change, and offer little or no compensation to make up for it. It’s upsetting on a lot of levels — when we negotiate raises, the owner is always making a big deal about how our health insurance is part of our compensation and how she’s such a generous person to offer it to us, so I am going to feel like this is a pay cut if this happens, and of course, like everyone, I have basic healthcare needs and want to make sure I am protected.

If it does happen, what is the best way to try to negotiate additional money so I can pay for my own insurance? I am searching for another job for other reasons, but as the process may take a while, I am concerned about losing healthcare in the meantime. Another issue is that if she really does not tell us until a few days before, as she has in the past with changes like this, do I have any obligation to warn my coworkers or confront the boss earlier so it’s in the open? I am generally healthy, but I worry about a few coworkers who have some minor health issues that might bankrupt them if they lose insurance coverage, a few who are parents of young kids, one who is a cancer survivor who needs yearly checks, etc. I am sure many of us would appreciate the chance to get one more physical in or one more prescription filled before we lose coverage.

Why not ask directly, since it’s clear that you were right there when they were discussing it?

Yes, it’s not polite to eavesdrop or comment on conversations that you weren’t a part of, but sometimes you can’t help overhearing things, and sometimes those things are alarming enough that it wouldn’t make sense to pretend you didn’t hear. After all, if what you’d overheard was “today is Jane’s last day,” and you were Jane, you’d probably ask about that, right? (Actually, some people wouldn’t even ask about that, but they should.)

Say something like this to her: “When I was in the room with you and Bob yesterday, I couldn’t help overhearing that we might drop our insurance plan altogether. I don’t mean to intrude on a private conversation, but since that would have such a significant impact, I wanted to check with you and see if that’s something you’re considering, especially since it’s the kind of thing that it would help to have as much advance notice of as possible.”

No matter what her answer — whether she says yes or no or that she’s not sure, or whether she doesn’t answer you at all, and even if she bristles at you asking — you should then follow up by, “If things do go in that direction, I’d like to ask that we get as much notice as possible, so that we can use the coverage while we have it.” She may be clueless enough that you actually need to point that out to her.

Depending on how the conversation goes and what kind of rapport you have with her, you can also point out that insurance is a requirement for many people when deciding whether or not to accept a job, that it was part of the benefits package that you signed up for when you were hired, and that eliminating it is likely to cause significant hardship and morale problems for people on staff, as well as make it hard to hire good people in the future. You could also suggest that people might strongly prefer to simply pay an additional portion of the premiums themselves rather than lose the coverage altogether.

And if your company does end up dropping the insurance coverage, you can certainly try to negotiate for additional money so that you can purchase your own, pointing out again that insurance was part of the benefits package that you signed up for when you were hired, and that it factored into your initial salary negotiations. You might not get it, but you can and should make the case for it … and if you don’t get it (or even if you do), then you can decide whether you still want to stay under these new terms.

Given the way the U.S. health insurance system is structured, an employer deciding to drop their coverage is a Big Deal Big Thing to do to employees, particularly when they have employees who took their jobs there with the understanding that insurance was part of the package. I hope you don’t have to deal with it — and if it does happen, I hope your boss hears loud and clear that it’s unacceptable, in the form of people going elsewhere and telling her why.

Read an update to this letter here.

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{ 65 comments }

{ 65 comments… read them below }

  1. Jamie*

    My first instinct is to think they meant considering dropping that particular plan in favor of another. Because otherwise I have a hard time imagining anyone with more than 7 functioning brain cells discussing that where they can be overheard until they had a speech and spin prepared.

    As pointed out – dropping coverage completely is a BIG DEAL and it would be akin to discussing cutting everyone’s salaries by a significant percentage where employees could hear.

    This absolutely could be a misunderstanding and was just a causal what if conversation about different plans. I really hope you take Alison’s advice and ask (and update us – because I’m curious.)

    1. mas (The OP)*

      I wish it was a misunderstanding, but it was pretty clear they were talking about dropping altogether. Boss mentioned being able to put herself and her kids on her husband’s plan, and asked the accountant to find out if there were any penalties to dropping everyone. And yes, it was all very awkward to listen to!

      1. clobbered*

        Given what you say I very much doubt that the owner has the sense to do this, but it might be worth suggesting that they talk to an insurance broker. There are ways for employers to reduce their health costs without dropping coverage completely – eg. by transferring the employees on a high deductible plan and then enabling the employees to use pre-tax dollars to fund an HSA (Health Savings Account) to cover the difference.

        Non US readers: Don’t ask. This is why heath coverage through private employers is a bad idea, but you knew than anyway.

        1. Canadian mom*

          To a small extent, in can exist in Canada. Some employers only cover “extended” coverage, while the employee is on the hook for the “basic” coverage. The basic coverage is almost always deducted from the employee’s paycheque, though. Sounds weird, right?

          One reason – some provinces in Canada require monthly payment premiums, and others do not. So some national companies don’t provide “basic” coverage to employees – if they did, then employees in Province A (that charges premiums) could be considered to be getting an enriched-benefit as opposed to employees in Province B (that does not charge premiums). They’d therefore be in the position of having to try to offer an equivalent benefit to people in Province B.

          Overall – basic coverage is, well, basic. No-cost hospital bed (even if it’s a 4-person ward), all medical tests, ambulance transfers to another hospital if necessary. Extended coverage can allow a private or semi-private room (although that doesn’t help if the hospital can’t supply those rooms during the stay) as well as prescription drug coverage (out of hospital, all prescription drugs are covered during the hospital stay).

          I realize that this is very different from the US for the most part – it’s just to show that Canadian employees don’t all have equivalent coverage.

        2. Aimee*

          Even that kind of change should come with quite a bit of advanced notice, especially if it’s a significant change from the current plans. We had maybe 3 weeks notice that my company was changing to this type of plan before open enrollment in December. This was a huge change from the low-copay, no deductible HMO plan I had. I had a baby due mid-January, and found out less than two months before my due date that my out of pocket costs would probably be at least 10 times more under the new plan. Thankfully, all my providers are willing to set up payment plans, so I can make payments as my HSA funds become available, but it was really stressful trying to figure it all out on such short notice.

      2. Cube Ninja*

        Nah, no real penalties. I mean, it’s not like every member of your staff will suddenly go find jobs that do offer health benefits.

        Oh, they will?

        Fish heads for everyone!

      3. twentymilehike*

        Boss mentioned being able to put herself and her kids on her husband’s plan

        OOOH this just chaps my hide!! My company does not offer individual health plans, but all the “higher ups” are able to get coverage through their spouses. My bosses have more or less told us in their own “diplomatic” terms, that they don’t offer medical coverage because they don’t need it. When one of my bosses got divoreced, they started to look into a group plan for the company (for his benefit), but was able to work something else out for himself, so they cut the cord on that. It is really frustrating because those of us who don’t have the option of getting on our spouse’s plans and either go without or buy our own individual plans are paying what sometime seems like an unreasonably percentage of our income for health care.

        I know that it is possible I don’t understand the whole situation, but I really do wish that they would at least listen to us and talk about it instead of making it seem like they just do what they do for their own benefit only.

    2. Anonymous*

      small companies prefer the penalty over paying for insurance. My company chose to pay the penalty cause it was cheaper. We are in massachusetts, so the conversation has always been what is cheaper and still comply with the law. When the penalty is more than health insurance premiums per person, then companies will choose to give insurance, but until then, they wont. When the law in mass took effect, it was $219 per emplyee per year as the penalty of course my boss chose the penalty over a average $500 a month premium per employee.

  2. Marie*

    State law in some states, like Massachusetts who implemented health care reform, requires employers of a certain size face tax penalties if they do not provide health insurance to their employees in the same category, like all full-time. Try calling your state’s department or division of insurance or your state’s attorney generals office to see if your state has any consumer protections. Further, some states have laws that require insurance companies to notify subscribes within a certain time period that the employer stopped contributing premiums, that the coverage will end or has ended, and may give you the option to continue coverage. Also, you should not be eligible for COBRA if your insurance is terminated because if the employer’s health plan ends, there is no employer sponsored insurance plan to continue COBRA coverage with.

    In the end, however, employers are not obligated to provide insurance benefits to employees until state law mandates otherwise.

    1. Jamie*

      True that they aren’t obligated to offer it, but if they have in the past and discontinue they will see a stampede of employees looking elsewhere. I know a lot of people for whom coverage is right up there with salary as the reasons they work.

      If they do that they need to be prepared for huge turnover in a short time.

    2. VictoriaHR*

      I believe that, according to Obamacare, if an employer has more than 50 employees, they are required to either offer health insurance (even if it’s majorly expensive) or participate in the voucher program that’s set to begin next year.

      1. Ann O'Nemity*

        Wasn’t the free choice voucher piece of the legislation repealed in the 2011 appropriations bill? From my understanding, employers that do not offer affordable insurance will have to pay a penalty (tax).

        1. RG*

          Employer will pay a penalty for either not offering coverage to eligible employees, or if they do offer coverage, they’ll have to pay a penalty for anyone that goes to the exchange to get coverage and gets a federal subsidy to do so (usually because the coverage offered was unaffordable as defined by statute).

          Citizens will be able to go the exchange to get coverage if their employer doesn’t offer coverage, or if they don’t like their employer’s coverage. Citizens only get the benefit of a federal subsidy if they fall within certain (generous) household income guidelines.

          1. class factotum*

            The penalty is still cheaper than providing employer-paid insurance, which makes one question what the strategy is here.

            The ACA provision applies to companies that employ at least 50 full-time-equivalent people. A company of that size not providing health insurance would pay a $2,000 per-head penalty, excluding the first 30 full-timers.
            http://journaltimes.com/news/local/the-insurance-penalty-employers-weigh-obamacare-fine-instead-of-coverage/article_1da89b94-7e3e-11e2-9e6a-0019bb2963f4.html

        2. RB*

          Unfortunately, I bet these conversations are happening all over the US. The Affordable Health Care Act is anything but affordable. We had a meeting with our broker this week. We are an over 50 non-profit and our funding is getting reduced. As we look at the insurance, the fines and how we can still keep our doors open this has become incredibly painful.

          We are expecting a 38% increase in premiums. When we calculate it out, if we drop the insurance and pay the fine we save close to 350K. As much as we do not want to stop providing this benefit, our next option may end up with us laying off several employees.

          It is a terrible situation to be in and you can bet I’m losing sleep over it.

          1. Bee*

            Except that in my (admittedly shaky) understanding, the penalties will be skyrocketing in the next few years, so even though it may be cheaper now to drop insurance, in a few years it may be far more expensive NOT to have it.

            We are also an over-50 non-profit dealing with this, and yeah, it hurts a lot. I’m trying to see it as growing pains and am hopeful that we (as a company and as a nation) will figure it out in a way that doesn’t bankrupt half the country.

      2. Lisa*

        Its 11 employees in mass before the penalty kicks in, and the penalty was a pittance. See Anon’s comment above

    3. mas (The OP)*

      Yep, we are a small (less than 25) company so we/I get none of those protections or incentives. I didn’t realize that about COBRA, which sucks even worse, because I was thinking if she cut us off before I could scrambled to get some alternate insurance, I could just stay on COBRA for a month as an emergency backup plan. Thanks for alerting me to that.

      1. just another hiring manager...*

        In my experience, COBRA is often insanely expensive compared to what you were paying while working for a company. At my last job, I was only paying $75/month (thanks large university!), but to keep the same level of benefits through COBRA would have been almost $1000/month. Paying for an individual insurance plan (albeit, with half the coverage I had grown accustomed to) ended up being only $115/month…

        1. Rana*

          On the other hand, COBRA will often include coverage of things you can’t get as an individual – infertility treatments, for example, or maternity coverage, as noted below.

        2. Natalie*

          The one time I have been offered COBRA it was just bonkers how expensive it was. I even had an expensive prescription at the time and it still made more sense to just pay out of pocket.

        3. PJ*

          COBRA costs are so high because you are picking up the total cost of the premium — what your part was, PLUS what the company was kicking in on your behalf. While I think it’s crappy for an employer to drop their coverage for employees, it is a ridiculously high cost of doing business if you’re picking up most or all of the premiums.

          1. RG*

            Right – the total cost to the company of the premium (not just the employee’s share) plus an administrative fee.

      2. Joe*

        If you’re a small company, then the over-50-employees provisions of the ACA won’t apply to your company, but there are also subsidies for small businesses that want to purchase health care insurance for their employees through the exchanges, starting Jan 1, 2014. I don’t know details of this, but it might be worth having them look into, and seeing if that would help them come up with better numbers.

  3. Anonysaurus Rex*

    Insurance is such a sticky point. My company is tiny (fewer than 10 employees) and we just got an email that the upcoming increase in insurance is being passed on to us. For myself, that’s actually tantamount to a noticeable cut in pay. I actually wish my boss would elect to drop insurance altogether; besides me, there are only two other people who use it (including him). For myself and at least one of the other two employees, our spouses’ employers offer better insurance but we’d be penalized if we opt for their coverage if our employer offers insurance. Since we’re so small, there’s only one plan offered, so there’s also no possibility of moving to a less expensive plan.

    So, OP–I feel for you! My own boss also likes having a lot of open-door, loud conversations (about salary, about how bad our financials are, about which positions he can or cannot justify next year….) Awkward….

  4. mas (The OP)*

    Thanks for answering my question Alison. I definitely am afraid of her bristling or being offended if I ask about it, but I think you are right that I have to get up my nerve and just ask about it directly, because this is a big deal. I will definitely update you when I do this!

      1. JohnQPublic*

        It definitely simplifies the “why are you seeking other employment” question- no tap dancing required!

  6. Rana*

    That scenario? Horrifies me. Here’s just one reason why: assume that one of the employees, or their spouse, is pregnant. If you take their insurance away, they cannot get independent maternity coverage until after a full year of premium payments have been made, meaning that they are facing the full cost of prenatal care, labor, and delivery without any insurance assistance.

    Other people, who might be undergoing cancer treatments, require regular medications, and so on, are less in this boat now that preexisting conditions are no longer a barrier for coverage, but they could still end up paying through the nose for new coverage and/or their treatments.

    What a terrifying idea.

    1. Stephanie*

      As someone who is going on maternity leave next week and whose mom just found out she has an tennis ball-sized mass in her abdomen and seeing an oncologist tomorrow, I was thinking the same thing. :(

      There is so much to worry about in situations like this that going bankrupt because an employer decides to drop coverage without any prior warning? Ugh.

    2. KD*

      You are correct, except that the preexisting condition barrier is still in effect for individual policies. It was in Obamacare, but does not take effect until 2014 I believe. So someone with a pre-existing condition would still be very much out of luck in this situation. Terrible that your company is doing this! Just another reason we need healthcare reform in this country.

    3. Judy*

      Doesn’t even have to be dropping health insurance to be that bad (or at least seem that bad when you’re 7 months pregnant). I was due in early January, and during our November sign up time for insurance, we were told our network was switching. So everyone had to get new doctors. They told me I had to get a new doctor, and go to a different hospital after January 1, when I was due January 10. (This was in 2006, so way before Obamacare.) And I couldn’t switch doctors and hospitals before January 1. There was even talk if I were in labor on December 31, they would have to transfer me at midnight. But finally, someone had some sense…

      Luckily there was a provision in the contracts with the old network, that I could stay in network with the old network for 3 months for any preexisting items, if I got preapproval. I was able to get preapproval, and it only took 6 months afterwards for the insurance payment to come through.

  7. Canuck*

    Argh! I know it doesn’t need to be said, but I truly do feel for all of you south of the border. Access to healthcare should not be something you need to consider when taking a job! :(

    1. girlreading*

      Yeah but you start talking about government paid health insurance and people start freaking out about evil socialism taking over America. Trust me, I live in in TX-anything remotely liberal goes down and I hear about it all day (not easy being liberal in a conservative state).

  8. Elle*

    Is there some reason that you can’t start looking for another job? I know the economy is not great right now but I would be out of there if I could. Or at least start looking.

    1. AB*

      Yes — I’d start looking right away. And for everybody reading, not just the OP: I think people put too much emphasis on “the economy is bad”, giving up on a job search without reason. I’ve started a new job last November, and since then, had to hire 4 people already (and this is a small company).

      It’s always harder for someone who has been out of work for a while (the bias against the unemployed is unfortunately a factor), but for anyone who currently holds a job, unless you live in such a small town that there aren’t many other employers to consider, it’s not as difficult as it might seem to find a new position. Especially if you have friends in other companies who could help connect you with current openings in their companies or with partners, clients providers.

      1. Jen in RO*

        The OP has said she’s already looking for a job for reasons unrelated to the insurance thing.

  9. Erica B*

    does your state offer any plan through them if they drop the insurance? to Piggy back on the Massachusetts thing, there are some caveats to the program. Thankfully our state offers insurance if your company doesn’t offer it and you need it (otherwise you get fined on your taxes) unfortunately it’s REALLY expensive. Also if you work at a company that offers insurance, and you can’t afford it, you are not eligible to get care through the state if your employer pays atleast 50% of the premium. i.e. My mother has a crappy hourly job that pays something like $10/hr. She is unmarried and lives by herself in an old apartment that no normal person would want to lve, because it’s the only thing she can afford. The company offers insurance, but pays only 50%, the remaining 50% cost that my mom would have to pay would be about 75% of her paycheck if not more. It’s cheaper for her to not have insurance, and get fined on her taxes all the while not going to the doctor and being chronicly sick.

    With that said I am thankful that I work at a state university and can choose from many different plans for my family, and the costs are fairly reasonable.

    I am sorry your company is doing this to you OP!!

  10. girlreading*

    This stuff irks me. Employers consider the healthcare part of your compensation when offering you the job, but when they want to take it away, don’t think they should have to compensate you to make up for that. It’s ridiculous. You still need the insurance, so you are in fact taking a pay cut.

    1. Jane Doe*

      I think that’s the problem – lots of employers see health insurance as a “perk” akin to free snacks in the break room and discount gym memberships, not a necessity that people will jump ship over.

      1. twentymilehike*

        lots of employers see health insurance as a “perk”

        This is so true. Until you need ongoing medical care. Then you keep a crappy low-paying job because the benefits are a necessity and you can’t afford an individual plan because of your ongoing medical condition. It’s a sad state of affairs we are in.

    1. Parfait*

      …but then you risk having a pre-existing condition when you have to shop for your own insurance. You can’t win.

      1. Natalie*

        Not necessarily. Under HIPAA, if the OP has had 18 months of continuous insurance coverage, they can enroll in individual health insurance without having pre-existing conditions excluded. They would also be allowed to enroll in a spouse’s/domestic partner’s group policy outside of the open enrollment period.

  12. Bryce*

    Some employers I know of have handled this issue by moving from a defined-benefit (employer picks up the tab for all or part of the premium) to a defined-contribution (employer gives everyone a set amount for health coverage and people shop for plans on an “exchange” that offers different plans at different premiums) approach. This approach has allowed them to keep their coverage while better managing costs…anyone else out there have a similar arrangement?

  13. Rachel B*

    How terrible! The company I work for (Under 20 employees) offers expensive health insurance, but no dental or vision coverage. Even with a young, largely healthy staff, not offering this coverage has hurt us. An employee missed 2 weeks of worth due to emergency dental surgery (He had been saving up for surgery but his wisdom tooth operated under it’s own schedule). Two women left for more comprehensive coverage for maternity expenses elsewhere. I appreciate the sticker shock of rising insurance premiums, but I think any savings would be short-lived, when you factor in sick days and staff turn-over.

  14. Wilton Businessman*

    Yay for Obamacare!

    “If you like your health care plan, you can keep your health care plan.”
    –Barack Obama on Tuesday, August 11th, 2009 in a town hall meeting

    1. twentymilehike*

      If you like your health care plan, you can keep your health care plan

      There are people who like their health care plan?! :)

      1. QualityControlFreak*

        Yes, there are. Awesome health care benefits are a major reason I hope to stay with my current employer until I retire! Even though I am always looking at “what’s out there” – and occasionally apply to jobs that would be a good fit and an increase in salary, I haven’t yet seen anything where the increase in pay would actually offset the increase in health care costs for my family. It is absolutely a factor in retention.

      2. Wilton Businessman*

        I love my plan. Yes, it is a PITA sometimes, but when I needed it, the plan came through big time.

        1. twentymilehike*

          but when I needed it, the plan came through big time.

          I think in general the group plans tend to be significatly better than individual ones. I’m on my own plan and it is mostly a giant PITA, but my hubby, is on a group plan that is really great as far as copays, but iffy with their doctors. They DID however, really work with us well after he was in a major accident! We tried to add me to his plan, but it would have reduced his montly salary by 25%. Absurd.

      3. Heather*

        Yeah, mine’s not bad (hoping I did not just jinx myself). But that’s because I work for a big company. When I worked for a tiny company, the copays for my chronic conditions were killing me. I will never understand how in a country that talks such a big game about entrepreneurship and following our dreams, we make it so difficult for entrepreneurs and small businesses to attract the best employees.

        OK, that’s not quite true. I understand how it happens (freaking lobbyists!) but I don’t understand why people cling so tightly to such a broken system. I would love to be able to work for a smaller company without having my insurance costs go through the roof!

      4. JuliB*

        I for one like my health care plan. We have 4 or 5 to choose from and the prices are all over the board. Being single, I pick one of the higher priced ones.

        My company offers us two underlying comp plans: 1. More 401k money from company, and a small health ins company payment, or 2. Less money for 401K and more money towards their insurance payment.

        I pick option 2 and they pay more of the health insurance premium. This way, I get that benefit immediately and not 25 years from now.

  15. KarenT*

    This is an aside, but if your employer is going to drop your healthcare plan you will likely recieve little notice (maybe 30 days). There may be laws preventing this in some areas (I have no idea) but in most places your insurance company will pressure your employer not to give notice to avoid the spike in claims (people knowing they are going to lose their insurance will of course start making appointments, refilling prescripstions, etc. at high rate.)

  16. Jackie*

    My mom told me to always have “mad money” aka an emergency fund. I think this is so important with today’s job market. I just had to carry a “bridge” health insurance plan and if I hadn’t put money away I would have been out of luck. To get the best price on health insurance you have to already be insured. Just like to get hired, you have a better chance of getting that job when you have a job.

  17. From the owner's perspective*

    One thing I see on this thread is that no one is even thinking like a business owner, especially a small-business owner. Offering any type of subsidized healthcare for employees is outrageously expensive, and often taken for granted by employees. I think we should be expecting more companies to get out of this because, for many, the health law changes can make it significantly less expensive to pay the penalty than continue the required level of coverage defined as Essential Benefits. Most plans, up until HMOs became popular, required employees to pay 20% of most treatment, making them much better consumers of health care than we are today (where we complain about our $15 co-pay for an expensive, optional procedure). Skin in the game is important if we want to continue to have employer-supported health insurance.
    Many folks forget why the US has employer-sponsored benefits (that are not considered income)… it dates back to post-War wage freezes and this was the best thing employers could offer at the time – quite an evolution to today’s plans!

    1. squirrel*

      High costs don’t excuse the owner from not warning the employees! And that’s what Alison asked for.

  18. Guera*

    Insurance companies require 30 day notice before cancelling group coverage….but it’s almost never enforced.
    As a broker who has managed hundreds of accounts during my career I can tell you that many employers considered dropping health insurance as an option but I can count on two fingers those that actually did it. Usually it’s just an emotional reaction to the high cost. And health insurance is a HUGE expense to small business….but so is payroll. (albeit without the high annual increases).
    If your company does not already work with a broker they need to ASAP. A broker will show them options and plan a strategy for getting costs down before taking that final, drastic step.
    And the day that our neighbors up north stop coming down here for critical health care services that they need they can criticize our imperfect system.

  19. lucitania1979*

    So how does one ask to be compensated for the raise the employer gave themselves by cutting your salary=benefits?

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