Sometimes an employer wants out before the term ends. Read the contract first, then find out why. Settle what's owed in writing, give members clear notice and an option to stay, and update your cash forecast the same week.
Read the contract
Check the notice period, any early termination terms and what happens to members' coverage. If anything is unclear, call your attorney before you reply in writing.
Find out why
Ask directly. Reasons can include cost, low enrollment, a change in ownership or a new benefits broker. Some of these can be solved. A smaller eligible group, a different pricing model or a pause instead of an end may keep the relationship.
Settle what's owed
- Pull the employer's open invoices and any credits due.
- Agree on the last billing date in writing.
- Agree on how any prepaid amount will be handled. Here's how prepaid contracts are recorded.
In a made-up example, an employer paid a year up front, $16,800 for 20 members at $70, and leaves after five months. Five months used is $7,000. If the contract says unused months are refunded, $9,800 goes back. If it says they aren't, the contract and your attorney decide what you keep.
Look after the members
Members didn't choose this. Send them notice of the end date and an easy way to stay as individual members.
Fix your numbers
Take the contract's revenue out of your cash forecast from the end date. If the contract was a large share of revenue, check your break-even. This post covers concentration risk.
What I'd do this week, if it happens
- Read the contract's termination section and call your attorney if unclear.
- Write down the last billing date and any refund owed.
- Send members notice with their options.
- Update your 13-week cash forecast.
Common questions
Do I have to refund prepaid fees?
Follow the contract. If it's silent, talk to your attorney before you agree to anything.
Can I charge an early termination fee?
Only if the contract provides for it. Add terms like this at renewal if you want them.
How many members usually stay as individuals?
It varies by group. Make the offer simple and quick, and track how many convert so you know for next time.
Want to see the effect of losing a contract before it happens?
We reconcile every account every month and send your P&L and Balance Sheet by the 15th, so decisions like this start from real numbers. If that's what you need, apply to work with us.