It’s not over ’til it’s over! Conversion options for terminating employees

The termination of an employee’s group benefits coverage is not necessarily the last step in the employer/employee insurance relationship. There is one additional, often overlooked step–conversion options! Most group benefits plans/insurers offer a time-limited opportunity for members losing their group insurance coverage to convert some of their coverage to individual insurance products evidence-free.

The primary benefit of pursuing a conversion option at termination from a group benefits plan is that it allows the terminating member to continue some degree of insurance without having to satisfy medical evidence of insurability (proof of good health).

Although a person can pursue individual insurance options at any point in their life, in order to obtain it outside of a conversion option, they will likely have to submit medical proof of good health in order to obtain coverage. Insurers can then either opt to deny coverage or rate a person poorly (e.g., charge higher premium rates) based on the results of the medical information provided. The advantage of pursuing a conversion option is that there is no medical proof of good health required.

Although conversion options come in many shapes and sizes, there are some commonalities:
•    Most Life Insurance and Accidental Death and Dismemberment (AD&D) Insurance conversion options require that application be made within 31 days of termination of coverage under a group insurance plan.

•    Most Health Insurance conversion options require that application be made within 60 days of termination of coverage under a group insurance plan. Further, many insurers offer Health Insurance conversion products that are available to a member coming off any group insurance plan (e.g., one of their own, or even from another insurer).

•    Insurer booklets and policies generally include details on the available conversion options for Life Insurance and AD&D Insurance, if applicable, but rarely for individual Health Insurance. Regardless, employees often don’t take the time to read their booklet cover to cover and may not be aware that such options exist.

Every insurer approaches conversion slightly differently. Some automatically send out notifications outlining available conversion options when a member terminates or is approaching the terminating age, while most leave it to the plan member or plan administrator to research and make contact.

Although pursuing conversion to individual insurance products is the employee’s responsibility, it is good practice to inform terminating employees of the conversion options available under their own group insurance plan, and/or remind them to research available market options due to the time-sensitivity of conversion options. This practice ensures that employees don’t miss out on an opportunity to continue insurance coverage they may not otherwise be able to obtain. It also leaves you (the employer) with the peace of mind that you haven’t simply ended the employer/employee insurance relationship, but that you’ve thoroughly informed the terminating member of their options. 

For more information on the conversion options available to your employees and how to proceed for your specific group benefits plan, please contact your Benefits Consultant.