One of the most complex assignments for an entrepreneur is providing healthcare to their employees. Most small to mid-sized business owners do not have a legal background, and the laws in healthcare and labor are continually changing and getting more complicated.
Add a bankruptcy to this mix and the task of providing healthcare can seem insurmountable. But maintaining the health of employees and employer could be possible with the right advice.
The first step would be knowing the two types of bankruptcy available to businesses and how they affect any healthcare decisions:
- Chapter 11
One of many benefits of Chapter 11 bankruptcy is that the business’ finances are reorganized. Cost-cutting measures can be taken, such as layoffs or salary reductions. But business operations continue as debts are renegotiated.
Chapter 11 gives your employees the chance to keep existing health insurance benefits. If the business employs at least 20 staff, those that are laid off will still be able to keep their policy due to COBRA (Consolidated Omnibus Budget Reconciliation Act). Employees pay more during this period under COBRA as they would pay both their usual portion of the premium and the employer’s portion.
Alternatively, a business could decide to take Chapter 11 but drop all employee’s health insurance benefits. No staff could continue coverage through COBRA because the group plan would not exist. Employees in this case would likely turn to professional advice on transferring from the group policy to an individual policy, or their spouse’s policy.
- Chapter 7
Chapter 7 bankruptcy is a complete shutdown of business operations and liquidating assets to satisfy creditors’ claims. There are some advantages for those that choose this path.
Employees’ first thought might be they are owed money either from the business or the insurer. If these sums are not paid out before the company shuts down, it may lead to the employee lodging claims in the bankruptcy court.
Consult and communicate
It would be helpful to consult experts in health insurance and the law who are strategically focused on covering this area.
Talking it out with employees can help. This can have a large impact on whether top performing staff will stay on, or leave the company on good terms.
More than 50 percent of the USA’s small business owners are over 50 years old, and older Americans are more likely to have pre-existing conditions. Remember, life goes on after bankruptcy and so taking care of your own health is paramount. Part of this will be attaining finding financial and legal security.
Healthcare is not often on the list of major concerns in bankruptcy, but it is something that can affect your company and your own ongoing reputation.