COBRA, Bankruptcies and VEBAs

[Guest 91smithie]

My client is a member of a large controlled group. All of the members of the controlled group have filed for bankruptcy either under Chapter 7 or Chapter 11. Some of the liquidating entities are terminating their health plans (some of which are/were self-insured and some of which were fully insured). We know that under COBRA the employees and former employees covered under these plans are entitled to COBRA benefits under existing health plans within the controlled group. Unfortunately, the insurance company has indicated that they will not cover the employees from the other entities in the insured plan and the banks have indicated that they will not let the remaining companies continue if they offer self-insured plans to cover these individuals. What do we do? Can we establish a VEBA which used employee premiums to purchase the best major medical policy we can to cover what we can? It seems we are between a rock and a hard place.