The world has been hit hard by the loss of life, human suffering, and financial repercussions of the COVID-19 (coronavirus) pandemic. Here in the U.S., federal, state, and local governments have been issuing guidance and directives that affect the general population as well as businesses and employees. At current count more than 100 million Americans are under state or local directives to stay at home or otherwise “shelter in place.” In several states, governors have required or otherwise encouraged “non-essential” businesses to suspend operations and even “essential” businesses are experiencing reductions in working hours, layoffs or furloughs. This situation has directly impacted employees and their families, not only from a pay perspective, but also as to the employee benefits they receive.
We will provide a series of articles to discuss the impact that the coronavirus pandemic and the governmental responses to it have had on employee benefits. This first article addresses key issues involving group health plans that employers offer to their employees.
How Reductions in Hours, Layoffs, and Furloughs Affect Group Health Insurance Coverage
Most employer-sponsored group health plans extend eligibility for coverage to employees who work “full-time,” which is typically defined as at least 30 hours per week, although some employers may define “full-time” more generously in terms of fewer weekly work hours. Regardless of a health plan’s eligibility hours threshold, the default position is that a reduction in weekly hours to below the minimum full-time standard will result in a loss of health plan coverage. However, there are several key exceptions.
Exception – Leave of Absence under FMLA
An employer that is subject to the Family Medical and Leave Act (FMLA) must maintain group health plan coverage for an employee on a qualifying FMLA leave in the same manner as if the employee was an active employee. This means that the employee must be kept on active coverage and at the applicable active employee premium rate for the leave’s duration.
Exception – Applicable Large Employers Under the Affordable Care Act Using Look-Back Measurement Method to Determine Full-time Status
Under the Patient Protection and Affordable Care Act (ACA), employers with 50 or more full-time equivalent employees are required to comply with the ACA’s rules regarding the continued offering of coverage. Employees who were deemed to be eligible for health insurance coverage due to meeting the ACA’s 30 hours per week threshold must remain eligible for coverage during the remainder of the applicable coverage period, even if hours are reduced. This would include a reduction in hours in response to the coronavirus.
This means that an employee who qualified as a full-time employee for 2020 who experiences a reduction in work hours in March and/or April will nevertheless remain a full-time employee for ACA purposes for the remainder of 2020.
For employers who are not applicable large employers under the ACA (i.e., employers with fewer than 50 full-time equivalent employees), these rules will not be applicable. Whether coverage will continue during a business closure for smaller employers will depend on the terms of the employer’s group insurance policy or contract. For example, if the insurance policy provides for coverage during a leave period, the employee will remain eligible during the business closure (up to the maximum period specified in the insurance contract).
Exception – Non-protected Leave Policy
Many large and small employers maintain personnel policies that continue active coverage for a specified period for employees who are on non-protected leaves. Most insurance carriers will agree to this type of active coverage extension provided the extension is six months or less.
An employer could classify a furlough as a leave for these purposes and continue active coverage under the non-protected leave policy. For example, a plan may provide that active coverage will continue until the later of (i) the end of the legally required period for protected leave (if any), or (ii) 6 months following the beginning of the leave. When the leave ends, active coverage will terminate and COBRA continuation coverage will be offered to the employee based on reduction of hours. Before implementing such a policy, an employer should discuss it with its insurer for fully insured plans or its third-party administrator and stop-loss carrier for self-funded plans.
Exception – Effect of Ohio Department of Insurance (Ohio DOI) Guidance to Insurers and Stop-Loss Carriers
The Ohio DOI issued guidance on March 20th that ordered insurers (including stop-loss carriers) doing business in Ohio to permit employers to continue to cover employees even if the employee would otherwise become ineligible due to a reduction in weekly work hours. Also, insurers are required to allow employers to continue to provide coverage regardless of any “actively at work” or similar eligibility requirement. Insurers are also prohibited from increasing premium rates based on a group’s decreased enrollment in a group plan due to the coronavirus.
Group Health Plans and Coverage for Testing or Treatment of Coronavirus
The Families First Coronavirus Response Act requires group health plans to cover coronavirus testing without any cost-sharing. Plans must also cover services incurred during visits to health care providers that result in coronavirus testing to the extent the item or service relates to the testing or evaluation of the patient’s need for a test. However, these testing and services requirements do not apply to group health plans that provide only “excepted” benefits or cover only retirees.
If a group health plan is a high-deductible health plan (HDHP), the lack of a deductible applied to coronavirus testing will be disregarded for determining the status of the plan as a HDHP. The law does not include any requirement with respect to costs for treatment of coronavirus, so treatment costs will still be subject to your plan’s standard deductible and cost-sharing rules.
All employers that sponsor group health plans will need to determine how best to collect premiums from employees during any period of business closure. To the extent the employees continue to be paid during a closure, payroll deductions can continue for employees that have previously elected coverage. However, if the leave is unpaid, then the employer will need to communicate with employees regarding the need to pay the required portion of their premiums. Employers generally have three options: (1) have employees prepay the required premiums; (2) have employees “pay-as-they-go” with respect to the required premiums; or (3) have employees pay the required premiums upon their return to work.
The guidance issued by Ohio DOI on March 20th also included a directive that requires insurers to give employers the option to defer premium payments, interest free, for up to 60 calendar days from each original premium due date.
If you have any questions, please contact Edie Crump (937-449-5530; [email protected]).
Disclaimer: The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail.