Over the past several weeks, human resources and employee benefits professionals (and their attorneys) have been scrambling to assemble staffing plans, telework arrangements and strategies for complying with the paid leave provisions in the Families First Coronavirus Response Act (“Response Act”). However, amidst the flurry of new laws, guidance and blog articles landing in your in-box, it’s important to keep in mind how longstanding compliance requirements apply to the current situation. This article briefly addresses some of the fundamental benefits questions that employers are asking as they navigate these challenging times.
Must we continue health coverage for employees who have been subject to a temporary layoff or a reduction in hours? Apart from COBRA and Pennsylvania’s “Mini-COBRA” law, no federal or Pennsylvania law requires employers to continue group health coverage during a period of layoff or reduced hours that would otherwise render the employee ineligible for coverage under the plan. However, employers that use the “look back measurement period” approach for determining full-time status of employees under the Affordable Care Act (ACA), could be subject to a penalty if they terminate coverage for existing full-time employees (including those laid off or subject to a reduction of hours) while those employees are in a “stability period”. On the other hand, employers that wish to continue coverage for employees during a period of layoff or reduced work hours may run into trouble with their insurer (or reinsurer) if their plan does not allow for continuing coverage in these circumstances. These are complex issues that are beyond the scope of a brief article. However, there are ways to manage these competing compliance concerns. Employers considering a layoff or a broad reduction in hours should sort through these issues before proceeding.
Must we continue health coverage for employees who take a leave of absence during the pandemic? It depends. If the absence is covered by the FMLA (including the new paid leave available under the Response Act), then coverage must be continued unless the employee elects not to do so. Likewise, some states (not PA) have passed laws requiring continued coverage in other circumstances. Employees who take other types of leave that are not protected by law may or may not be entitled to continue coverage depending on their employer’s leave policy and terms of their health plan.
May an employer help an employee pay for COBRA continuation coverage? It’s not uncommon for employers to assist employees with the cost of COBRA during periods of layoff. However, if the employer offers a self-insured health plan, COBRA subsidies should not be offered in a manner that discriminates in favor of highly compensated individuals either in terms of the subsidy amount or duration. Offering subsidies on a discriminatory basis could jeopardize the favorable tax treatment afforded to plan benefits.
What options are available for laid off or terminated employees who can’t afford COBRA? Individuals in this circumstance should investigate their eligibility for a tax credit to purchase coverage on the ACA Exchange. In addition, eligible individuals should explore coverage options under a spouse’s or parent’s plan as well as CHIP, Medicare or TRICARE (for veterans). It would also be advisable to consult with an insurance broker to see if there are other low cost coverage options available.
May employees change benefit elections under a cafeteria plan due to recent events? If a cafeteria plan allows for mid-year election changes due to qualifying changes in status, the COVID-19 pandemic may trigger a number of permitted changes. Employees may be permitted to add dependents to their health coverage who have lost other coverage due to layoff. Employees may be permitted to drop their coverage due to a reduction of hours. Similarly, elections for dependent care costs may be altered due to a change in the employee’s daycare cost (i.e. parent is now at home and caring for child). Plans that don’t allow for mid-year changes may need to be amended if an employer wishes to allow for certain adjustments. However, if a carrier allows for employees to enroll mid-year (due to a spouse losing coverage) any employee contributions for such coverage would need to be on a post-tax basis through the end of the plan year.
Must our health plan cover the cost of COVID-19 testing? Yes, the Response Act requires all employer-sponsored plans (including high deductible health plans) to cover diagnostic in-vitro testing for COVID-19 and related service costs at no expense to the participant. This may require a plan amendment and issuance of a summary of material modifications (“SMM”) to participants.
This is not the first pandemic to hit the US. However, never before have businesses had to balance so many regulatory requirements while navigating the other challenges that a pandemic poses. We hope this brief overview of some of the health coverage issues to consider is helpful in this regard. If you need further information regarding this article or any aspect of pandemic preparedness, please contact any member of our Labor and Employment Practice Group.