When an industry gets hammered the effects are magnified by the fact that they are concentrated in particular areas and communities. There was a lot of talk about this re: the defense build-down, but in the event the problems do not seem to have been enormous. Some people ended up in lower-paying jobs, but that has been happening more generally.
The Gov would need more employees to administer a public system, so some of the insurance people could go there. The present employment situation is unusual, but insofar as it obtained in your scenario, the displaced workers would be easily absorbed elsewhere.
mbs