Continuation of Cover (COC): An Essential Employee Benefit or a Hidden Financial Risk?
When employees leave a company, they often face a critical question: What happens to my health insurance? In response, many employers — especially employers of expats like international schools and multinational companies — offer a Continuation of Cover (or COC) option, allowing departing employees to stay on the company’s health insurance plan for a limited time.
This benefit can be essential for employees transitioning between jobs, but if not carefully managed, it can lead to significant financial risks for the employer. In this article, we explore the advantages and pitfalls of COC, why companies need to carefully structure their offerings, and how to balance support for employees with long-term cost control.
What Is Continuation of Cover (COC)?
COC allows departing employees to remain on their company’s group health insurance plan for a defined period, typically 1 to 6 months. The employee pays for this coverage, often through a deduction from their final paycheck.
COC is also sometimes known as:
- Bridge of Cover – as it “bridges” the gap between jobs.
- COBRA (in the USA) – a federal program allowing employees to continue employer-sponsored health insurance for up to 18 months (at their own cost).
For many employees, COC is far more affordable than buying an individual insurance policy, as it typically offers comprehensive coverage without new underwriting or exclusions.
When is COC Essential?
In some cases, COC is not just a benefit, but a necessity.
For example, most international schools typically renew their group insurance plans on August 1. There are a few international schools however with a July 1 renewal date. A teacher leaving a school with a July 1 renewal cycle will lose coverage on June 30, potentially leaving them uninsured for a full month before their new job starts. Offering 1 month of COC in this case makes complete sense.
Another situation where COC might be considered essential is for employees relocating to countries with mandatory waiting periods for local insurance – they may also need temporary coverage to avoid a gap in protection.
The Hidden Risks of Offering COC
While COC sounds like a win-win, it can quickly become a financial liability for the employer if not carefully structured.
1) Adverse Selection: Who Really Benefits?
COC is most attractive to employees who expect high medical expenses. Why?
- The cost of COC is significantly lower than an individual insurance plan.
- Pre-existing conditions are covered (which most individual plans exclude).
- Departing employees have no long-term stake in keeping claims low.
If a disproportionate number of high-claim individuals opt into COC, the company’s loss ratio will rise, leading to higher renewal premiums for the remaining staff.
2) Short-Term Coverage, Full-Year Costs
Even though COC members only stay on the plan for a few months, they get access to a full year’s worth of benefits.
For example, a departing employee on 3 months of COC can still undergo an expensive surgery or cancer treatment — the cost of which will affect the company’s entire plan renewal.
3) Premiums Tied to the Group, Not the Individual
Unlike an individual policy (where each person’s health impacts only their own premium), group plans spread risk across all employees. High-cost COC claims increase the loss ratio, meaning higher premiums for active employees next year.
How Employers Can Control COC Risks
To offer COC responsibly while protecting the plan’s long-term viability, companies should consider these best practices:
1) Limit COC to 1 Month (Recommended Best Practice)
COC should be a short-term solution for transitioning employees, not a way to extend benefits long-term.
💡Best practice: Offer only 1 month of COC. If extending to 2+ months, consider premium loadings (see below).
2) Adjust Premiums to Discourage Uptake and/or Misuse
Historically, COC pricing was simple: 1 month of coverage = 1/12 of the annual premium. However, this creates a huge incentive for high-cost individuals to maximize their benefits before leaving the plan.
💡New approach: Some employers (on One World Cover’s recommendation) are now introducing premium loadings to offset risk:
- 1-month COC: Standard pricing (1/12 of annual premium).
- 3-month COC: 10-25% premium loading.
- 3-month COC: 25-50% premium loading.
- 6-month COC: 50-100% premium loading (though we do NOT recommend offering this).
3) Keep Longer COC Options in the Contract, But Don’t Promote Them
Some companies remove longer COC options entirely, but a better strategy is to keep the option in the contract, for flexibility. Only offer it in special cases (for example, a departing employee is relocating to a country with no immediate health insurance options).
4) Require Prepayment of COC Premiums
To avoid non-payment issues, companies should:
- Deduct COC premiums from the final paycheck.
- Do not allow month-to-month payments, as this increases risk of non-payment.
5) Educate Employees on Their Alternatives
Many employees assume COC is their only option—but that’s often not the case. Employers can help provide guidance on individual international health insurance plans by introducing the employee to the individual private medical insurance team at their broker. Note: this is something One World Cover can help with.
Bottom Line: COC Should Be a Safety Net, Not a Financial Drain
COC is an important tool that can help employees transition smoothly — but it must be carefully managed to avoid major financial consequences for the company. Key takeaways:
✔ Limit COC to 1 month (best practice).
✔ Apply premium loadings to discourage misuse.
✔ Keep extended COC options in the contract for flexibility, but don’t openly promote them.
✔ Deduct COC premiums upfront to prevent non-payment issues.
✔ Educate employees on alternative options to prevent over-reliance on COC.
By balancing employee needs with responsible risk management, companies can ensure that COC remains a valuable benefit—not a liability.
Thinking about offering Continuation of Cover options for your employees? Contact us for guidance on structuring your group health insurance policy to protect your plan and your employees.
Michael Pennington, Customer Experience Director, One World Cover – [email protected]
