Dot-com workers losing insurance when firms close

Along with their stock options and steady paychecks, victims of
the recent dot-com die-off are losing something else: their health coverage.


Most employees who leave a job can extend their health coverage through a
federal program called COBRA, the Consolidated Omnibus Budget Reconciliation
Act. But COBRA does not cover employees when a company has gone out of
business--an increasingly common fate for dot-coms struggling through a
market downturn.

"When a company goes bankrupt themselves, that's an instance when COBRA
isn't offered," said Tim Morris, benefits specialist for outsourced human
resources provider ProBusiness.
"If they're out of business, they offer no (health) plan."

That has got Karl Idsvoog worried about his two children.

"If I tell Adam to get off his Rollerblades, that's when he would tip over
on his bike," said Idsvoog, a former managing producer for APBnews.com. The
online crime news service recently announced that it had
run out of money
and is currently looking for investors while operating on a limited
basis. "I hope nothing happens, but that's basically life in America."

Idsvoog said he has until the end of the month before health insurance
covering him, his wife and their two children runs out.

More than a dozen companies have recently announced they are going out of
business, including Toysmart, Digital Entertainment Network, Red Rocket and Foofoo.com.

Not all employees at defunct dot-coms lose their benefits, however. If a
company that went out of business had outsourced their benefits and payroll
services, then employees could use COBRA through the outsourced company.
That was the case with Toysmart, which laid off 110 employees when it shut
down.

Industry analysts say there will be increasing consolidation, layoffs and
outright failures this year.

"Venture capital is drying up for the business-to-consumer companies, and now
that they're in the third and fourth rounds of funding they may be left out
on an increasingly shaky limb," said Bill Battino, global leader of
e-business strategy at PricewaterhouseCoopers.

While many will find new employment, those who are not able to will face
paying for expensive independent health insurance. HMO coverage for a family
of four through Blue Cross of California, for example, costs more than
$5,000 a year.

"One of the things employees don't appreciate is what health benefits are
worth," Idsvoog said.

COBRA protects people who leave a job or who lose coverage because of
reduced work hours, allowing them to maintain group rates for a limited
period of time. Companies with 20 employees or more are required to offer
the program.

And while many think of dot-com employees as being young and healthy, many
are starting families or are engaged in rigorous outdoor sports such as
mountain biking and snowboarding.

A broken leg can cost $950 in hospital bills without insurance, compared
with $100 with a PPO plan through Blue Cross, a Blue Cross representative
said. Or for childbirth, doctor bills can run around $3,000 to $4,000,
and the delivery itself can run $5,000 to $7,000 without insurance.

"When you take a job with a start-up, you know there's a certain amount of
risk," Idsvoog said. "(Going out of business) goes with the territory, but
it's never fun."