Go ahead, go jogging, do aerobics, lift weights. Take care of your health. But if you really want to protect yourself, make sure the company you work for is healthy, too. A bankrupt company could kill your health-care coverage, leaving you vulnerable to costly diseases and unable to pay for medical needs.
Almost five months pregnant and soon to be out of work when the Frederick & Nelson department-store chain in Seattle closes its doors for good, Karin Toycen was shocked to find she soon may be out of health insurance, too.
”I thought I could stay on my plan and pay the premiums myself. But they said they can`t do that because (my pregnancy) is a pre-existing condition,” said Toycen, a deli worker. ”It doesn`t seem fair.”
Toycen contemplates the cost of her baby`s delivery: One hospital quotes figures from $3,500 for a two-day, uncomplicated delivery to more than $6,000 for a Caesarean birth. Intensive care for a newborn there costs about $1,000 a day. Total costs for a complicated birth, such as a premature baby, can rise to $100,000, said one insurance carrier.
Toycen tried what she believes was her last option: getting insurance through a high-risk pool for people who have been turned down by other insurance carriers. But that program told her she would have to be with them for six months before she`d be covered for pregnancy-and even then, only for complications. She`s due in July.
”I`m on a dead-end street,” she said. ”I`ve run out of ideas of what to do. I`m really upset.”
Pregnancy, diabetes, high blood pressure, cancer, ulcers, arthritis. Many workers have at least one pre-existing condition. It`s the one they want health insurance for. And it`s the one that often disqualifies them from getting other health insurance, or is excluded from coverage, if their company goes bankrupt and their group-insurance plan ends.
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There are lots of laws. But there are lots of loopholes, too. And lots of folks fall into them when bankruptcy takes place.
Compared with other benefits, such as pensions, which have legal protections, ”health benefits are an entirely different kettle of fish,”
said one bankruptcy lawyer. ”They are a real mess in a bankruptcy. There`s a good chance that people are going to lose their benefits.”
And these days, bankruptcies occur more often.
While a federal law, called COBRA, gives employees a period of time after they are laid off, or quit, to convert to an individual plan, it doesn`t apply in a bankruptcy.
That`s because COBRA mandates an extension, said John Scanlon, district supervisor for the federal Department of Labor`s Pension and Welfare Benefits Administration. ”If the plan goes to pot in the meantime, there`s no plan there to extend upon,” he said.
Sometimes, specific union contracts offer protections, Scanlon said. He encourages individuals to file their own claims for benefits and wages in bankruptcy court.
But people with health-benefit claims aren`t very high up the pecking order when it comes to parceling out a company`s assets, say bankruptcy lawyers. And allowable claims are very limited, they add.
Even worse, when a big company fails, it may be self-insured. That means even fewer options and legal protections for former employees. A local employment expert estimates half of all large companies self-insure.
”If you`re going to rely on (company-provided self-insurance), you`d better make darn sure you have a real solvent company,” said Chris Meleney, a bankruptcy lawyer. ”(But) these days, nobody knows who`s solvent.”
In addition, some companies in trouble will discontinue health insurance, said Scanlon. ”Currently in law there is nothing that stops that judgment,” he said.
No one knows what will happen for sure at Frederick`s. The retail store, the unions, the company, Citibank and federal Bankruptcy Court are now trying to come to an agreement regarding workers` health benefits.
Joe Peterson, president of Local 1001 of the United Food and Commercial Workers, said he`s concerned because ”we have more long-term employees working at Frederick`s than we do in any other retail operation.”
George Franklin, a 60-year-old shoe salesman at Frederick & Nelson`s suburban Bellevue, Wash., store, doesn`t expect good news about his health insurance. Franklin, who had throat cancer two years ago, speaks with the aid of a voice box held against his larynx.
Robert Nakahara, senior vice president and chief financial officer for Blue Cross, confirmed that group conversion would be possible for Frederick`s employees. Under that program, no screening would be done. There would be a waiting period of 12 months before pre-existing conditions would be covered, although credit would be given for waiting periods that employees satisfied when they first came onto the Frederick`s group plan.
Employees of Frederick`s or other companies going bankrupt also could seek individual coverage, Nakahara said. But they would be screened for pre-existing conditions, and there is a waiting period for coverage.
That doesn`t sound reassuring to Franklin. ”I may have cancer somewhere else, who knows,” he says in the tinny, mechanical tones produced by the voice box.
”For the people who can`t find a job,” said an Insurance Commissioner`s office aide, ”there isn`t really much hope for them except Medicaid.”