Your employer laid you off and terminated insurance can they do that?

It depends on why you are terminated and the size of the employer.

If it is for gross negligence they can.

If it is just a normal involuntary termination (and the group has at least 20 employees), such as cutbacks or being laid off then they have to offer you Cobra. Cobra allows you to continue on your current health plan for a period of 18 months with you paying up to 102% of the premium. Under ARRA the government will pay 65% for up to 9 months for all employees involuntarily terminated until 12/31/09.

This is the federal law, States have there own laws which often differ and are more strict than the federal law so you will need to check your states health department website for more info on Cobra.