Self insured employer health plan - bankrupt

[Guest prucker]

Does an employee of a company with a self insured health insurance plan have any protection when they have incurred medical bills thinking that they had coverage and find out two months later the plan and employer are filing bankruptcy? The providers all verified coverage, but were denied payment and now they are billing the employee. The employee had medical premiums deducted from his paycheck. Thanks for any suggestions.

[jeanine]

You have 2 issues here. First, you say the providers verified coverage--they probably verified eligibility for coverage. This is a crucial distinction. In a self-funded plan there is no way to verify with finality whether something will be paid. When the patient goes to the provider they sign a form acknowledging financial responsibility if the insurance doesn't pay. The best thing you can do quickly is to try to negotiate a discount with the provider.

Second is the issue of what happens to the benefits (including the withheld employee contribution). If the employer utilized a trust, the trust will be protected from the creditors, however if the employer underfunded the trust, there is no money to pay claims. You and the other employees can file a motion with the bankruptcy court to gain a more favorable creditor status. What type of creditor status will probably depend on the particular facts. Either way, you face a difficult challenge of receiving all of your contributions. Also, depending on whether it is Chapter 11 or Chapter 7 could have an effect on whether any claims are paid. In 11, the court could authorize the continued payment of claims as part of a reorganization. You might want to consider obtaining legal advice on this.

[GBurns]

Do not forget to get the DOL (PWBA) and the state Dept of Insurance involved immediately.