COBRA Continuation

tom · May 2001

If an employee is on COBRA with a company who subsequently sells the assets of that company to another company, what options are available to that employee upon the sale and elimination of insurance by their former company. Is the new company obligated to place that employee on their COBRA plan or is that person lose out completely on insurance continuation?
This is a situation in Massachusetts.
Thank you.

smarti · May 2001

If there was a "no loss no gain" clause, the new company is responsible from my understanding. You might check that with your attorneys

Margaret Morford · May 2001

If the purchasing company assumed all the liabilities of the purhased company, the new company must enroll the COBRA individuals on their COBRA program for the remainder of each one's COBRA period. The new company may not have the same insurance, but must offer them what they do have. If you have further questions, feel free to call me at 615-371-8200.

Margaret Morford

Scott Ruth · May 2001

Unless the seller specifically agreed otherwise in the sale documents, the buyer
has the obligation to pick up the COBRA beneficiaries from the seller -- if the
seller ceased all coverage for its employees in connection with the sale and the
buyer continues the seller's business without interruption or substantial
change. This will include both persons on COBRA before the sale and employees
whose employment terminates as a result of the sale (and their beneficiaries).

Scott Ruth
Miller & Martin LLP

tom · May 2001

Scott/
Does it matter that the seller has other health and dental plans for other companies of theirs in other states?
Even with the existence of these other plans, is the obligation to continue COBRA rest with the buyer?

tom · May 2001

Scott/ Margaret/ Smarti
Thanks for your responses.
Does the existence of other medical and dental plans at other companies owned by the seller have any bearing on your responses? If I understand your responses correctly, it appears that the COBRA obligation rests with the new company( buyer) unless specified otherwise in the sale agreement.
Thanks again

Scott Ruth · May 2001

Could be a different result. Did the other companies with other group plans
fall within the same controlled group with the company whose assets were sold?
If yes, then it is the seller's obligation to provide COBRA. What state they
are in doesn't seem to matter.

The rule for the asset sale I described previously applies when the seller
ceases to maintain any group health coverage for any employee in connection with
the sale.

COBRA Continuation

Comments