COVID-19 FAQ As They Pertain to Health Insurance

COBRA

During the State of the Emergency, are employees or employers penalized for issuing COBRA notices at a later time if they are unsure of the nature of the layoff (permanent or temporary)?

As it stands today, the current law as written applies. Therefore, COBRA rules apply as they would in any layoff. Should legislation be passed that impacts current law, we will share this news as it occurs.

In the event of a lay-off, how does COBRA/ Continuation apply?

An employee working less than the hours required for eligibility on the group plan must be offered continuation.

It is important to first distinguish whether the group is subject to Federal COBRA, or State continuation rules which differ per state.

The employer may decide to pay for Federal or State continuation. However, they may not discriminate and must pay for all continuees, not just select individuals.
This policy should be added to the SPD and employee handbook.

The employer should clearly advise that an individual who elects COBRA will have to exhaust it before becoming eligible for Individual coverage and will in essence be “stuck” until COBRA runs out or the next Open Enrollment.  That means they also cannot apply for a subsidy until the next Federal Open Enrollment.  An individual obtaining a subsidy will not harm the employer if the individual is not working.

Keep in mind that a small group (1-50 employees) may be subject to Federal FMLA or the Employer Shared Responsibility if they have exactly 50 employees or in NY since small group definition is 1-100 fulltime equivalents.

State leave law plan will also need to be considered.

ERISA: Plan Documents

Are you advising groups to rewrite their plan documents/policies to account for this temporary change to eligibility requirements?

Should legislation pass that impacts eligibility requirements, we will address the need to update documents. Operating under current ERISA rules, any changes to documents currently are communicated through the SMM (Summary of Material Modifications). We would follow the current rule and use the SMM unless new legislation dictates otherwise.

SPENDING ACCOUNTS

We currently offer our employees Dependent Care Accounts. What will happen to dependent care accounts during prolonged periods of leave?

The IRS rules that govern dependent care accounts require an employee’s pre-tax dependent care contribution election to be irrevocable except in the case of a “change event.”
A significant change in childcare costs is a “change event” that would allow an employee to change his or her dependent care contributions mid-year. For example, an employee whose child is now at home because the child’s day care closed has experienced a significant change in costs and could decrease his or her dependent care contributions, or revoke them all together.

Conversely, this change event would also allow an employee to increase his or her dependent care contributions when the day care reopens.

ACA ESR: Variable Employees

If one of our clients (ALE) has variable hour employees, how would the temporary layoff effect their look back period?

Currently, ACA Employer Shared Responsibility law applies to ALE’s. This means that service hours are what is counted during the measurement period to determine future eligibility. If variable employees are not scheduled then there are no hours to count. However, under the Employer Shared Responsibility mandate, there are Break in Service rules:

Breaking Service
The ACA rules offer two methods for an employer to determine if an employee will be considered a continuing employee (for purposes of the ACA employer mandate) following a period of unpaid absence (including a termination). If an employee is treated as continuing, then the employee’s status as full-time or part-time continues when they return.

The two methods are:

• A 13 Week (or Longer) Break in Service. If the employee is rehired after a period of at least 13 consecutive weeks (26 weeks for educational institutions) where s/he did not work or provide an hour of service, the employer can treat the employee as a new employee.
• Rule of Parity. If an employer wants to use a break period shorter than 13 consecutive weeks (26 weeks for educational institutions), it can apply this rule of parity. Under this rule, an employee can be treated as a new employee if the number of weeks during which no services are performed is both (1) at least four weeks long and (2) exceeds the number of weeks of employment immediately preceding the period during which no services are performed. For example, if an employer uses the rule of parity, an employee who works for five weeks and then has no credited hours for six weeks may be treated as a new employee on rehire. This rule of parity really only applies to employees who leave before completing 13 (or 26, for education institutions) weeks of service.

A “Continuing” Employee
If the returning, variable hour employee was full-time before and is a continuing employee, then the employer will avoid an employer mandate penalty if the employee is offered coverage either:
The first day that the employee is credited with an hour of service (basically, when the employee starts work); or

If later, as soon as administratively practicable (often the first of the month following the date of rehire, which is allowed under the rules).
The requirement to offer coverage only applies if the employee had coverage before s/he left. If the employee previously declined coverage for that stability period year, there is no need to offer coverage upon his/her return (although other plan change in status rules may trigger an offer of coverage, even if the employee was gone less than 13 weeks).

Additionally, if the returning employee was part-time when she/he left and is rehired into the same position, then s/he would be treated as part-time when s/he returns.

Finally, the rules do not require the employer to offer retroactive coverage for the period the employee was gone just because the employee is rehired. For the period s/he was not employed, the employee would likely have employer coverage, if at all, only as a result of electing COBRA.

LAYOFF VS. FURLOUGHWhat is the difference?

Important considerations:

• Group size will determine Federal COBRA rules versus state continuation rules.
• Employees working less than the hours for eligibility in the policy COBRA/continuation applies.
• A person who elects COBRA/Continuation will have to exhaust it before becoming eligible for individual coverage and will not be able to apply for a subsidy. At the next Federal Open Enrollment the individual can purchase an Individual policy. Likewise if they become eligible for a new employer’s group plan, they may enroll once they satisfy the eligibility waiting period.

Layoffs
Layoffs are generally the more straightforward analysis because they can be treated like other employment termination situations. There is a COBRA triggering event for the health benefits (medical, dental, vision, health FSA, etc.) upon termination for those covered under one of the component benefits plans.  Employers can choose but are not required to subsidize COBRA for terminated employees.  Some employers are taking this action when they anticipate or desire to rehire the terminated employees when business returns to normal.  Another consideration for rehired employees is whether they will be required to complete a new waiting period if they are rehired beyond 13 weeks.  Employers could choose to waive the waiting period for rehired employees but will need to amend their plan to do so and will want to get carrier approval for fully-insured plans or stop-loss approval for self-insured plans.

Furlough
Furloughs are more difficult.  Employees placed on furlough may not maintain benefit eligibility depending on how eligibility is addressed in the underlying plan documents.  The two main issues encountered are how to treat employees that remain eligible for coverage due to a stability period and how to treat employees that would lose eligibility under the plan due to the furlough when the employer wants to maintain benefit eligibility.

Employers that utilize a look back measurement period to determine eligibility for segments of its workforce are likely to have employees in a stability period.  Employees in a stability period, by the terms of the plan, remain eligible for coverage as full-time employees even if they are on furlough. Employees in a stability period must be offered affordable coverage to avoid exposure under the Employer Mandate.  Employees are responsible for paying their share of the premiums and can have their coverage terminated for nonpayment of premiums.  An employer can choose but is not required to subsidize a greater portion of the premium for employees in a stability period.

Furloughed employees that aren’t in a stability period, either because the employer does not use the look back measurement method or because the employee is in a classification that is not measured to determine eligibility, will generally lose eligibility under the terms of the plan due to a reduction of hours unless the plan contemplates continued eligibility during a furlough.  The loss of eligibility is acceptable to some employers, in which case the analysis for terminated employees will apply (e.g. offers of COBRA and whether to subsidize COBRA).  However, some employers wish to maintain eligibility for employees on furlough even though they would normally lose eligibility under the terms of the plan.  The employer-plan-sponsor will need to amend the plan to allow for the continued eligibility and will want to get carrier approval for fully-insured plans or stop-loss approval for self-insured plans.

Generally, furloughed employees that aren’t in a stability period will not prompt the same affordability concerns as employees in a stability period because they are not considered full-time employees under the Employer Mandate.  Employers have more flexibility in these situations to decide how much, if any, of the premiums they want to subsidize for these employees.

Premium Payment During Leave:
If eligibility for health care benefits is maintained during a furlough, the employer can collect the employee’s share of premium to maintain the coverage during a paid or unpaid leave of absence.  If the employee fails to pay the required premium, coverage can be terminated for non-payment.

Premiums may be collected (as determined by the employer’s policy) in one of the following manners:

• Catch up (the employer’s current practice).  Some employers choose to keep employees on leave enrolled in their benefits until they return to active work, and then recoup those payments at the time the employees return to work.  If there is a fairly large premium payment due at the time the employees return to work following the leave, it may be necessary for the employer to take deductions over several payroll periods.  In some cases, state wage and hour laws will limit the amount that can be deducted from pay (thus the cap may be necessary).  The plan sponsor should check with their legal advisor (labor and employment attorney).  The main problem with the catch-up option identified by employers is that if the employee never returns to work, then it may be difficult or impossible for the employer to recover the employee’s share of premiums paid by the employer during the leave.
• Pre-pay (if the leave is scheduled in advance), and the employee remains eligible for benefits during the leave, the employer may collect the employee’s share of premium for the rest of the plan year from the employee’s pre-tax earnings before the start of the leave.  However, if the leave is anticipated to span more than one plan year, then the employer cannot collect the premiums for the latter part of the leave since this would violate the cafeteria plan regulations prohibiting deferred compensation.
• Pay-as-you-go.  During the leave, the employer may require the employee to pay the employee’s portion of the premiums to maintain coverage.  Such payments would generally be on an after-tax basis, by remitting payment to the employer, and the employer could require payment no more frequently than regular deduction frequencies for employees during periods of active work.  Most employers collect premiums from employees on leave of absence on a monthly basis.

HIPAA

Does the broker have a legal responsibility to alert the employer that an employee is in contact with an individual who has symptoms of COVID-19?

The broker’s obligation, as a HIPAA business associate, to the covered entity (the plan) would prohibit the broker from sharing this information with the employer.

On March 17, 2020, the Department of Health and Human Service Secretary Alex Azar issued a limited waiver of certain HIPAA sanctions to improve data sharing and patient care during the pandemic.

https://www.hhs.gov/sites/default/files/hipaa-and-covid-19-limited-hipaa-waiver-bulletin-508.pdf

Under the waiver, hospitals will not be penalized for failing to comply with HIPAA requirements found in 45 CFR:

• to obtain a patient’s agreement to speak with family members or friends involved in the patient’s care
• the requirement to honor a request to opt out of the facility directory
• the requirement to distribute a notice of privacy practices
• the patient’s right to request privacy restrictions
• the patient’s right to request confidential communications

The employee may also decide to notify the employer – but the broker should not be making this report.

HIPAA is clear that disclosing this PHI to the employer would be a breach of the privacy rule.

HHS also released guidance reminding covered entities and business associates that they cannot disclose this information, including as it related to coronavirus or potential coronavirus infection.

PREMIUM PAYMENTS

If employees are left on the plan for a period of time even though they are not actively at work, how are premium payments be collected?

Premium Payment During Leave:
If eligibility for health care benefits is maintained during a furlough, the employer can collect the employee’s share of premium to maintain the coverage during a paid or unpaid leave of absence.  If the employee fails to pay the required premium, coverage can be terminated for non-payment.

Premiums may be collected (as determined by the employer’s policy) in one of the following manners:

• Catch up. Some employers choose to keep employees on leave enrolled in their benefits until they return to active work, and then recoup those payments at the time the employees return to work.  If there is a fairly large premium payment due at the time the employees return to work following the leave, it may be necessary for the employer to take deductions over several payroll periods.  In some cases, state wage and hour laws will limit the amount that can be deducted from pay (thus the cap may be necessary).  The plan sponsor should check with their legal advisor (labor and employment attorney).  The main problem with the catch-up option identified by employers is that if the employee never returns to work, then it may be difficult or impossible for the employer to recover the employee’s share of premiums paid by the employer during the leave.
• Pre-pay (if the leave is scheduled in advance), and the employee remains eligible for benefits during the leave, the employer may collect the employee’s share of premium for the rest of the plan year from the employee’s pre-tax earnings before the start of the leave.  However, if the leave is anticipated to span more than one plan year, then the employer cannot collect the premiums for the latter part of the leave since this would violate the cafeteria plan regulations prohibiting deferred compensation.
• Pay-as-you-go. During the leave, the employer may require the employee to pay the employee’s portion of the premiums to maintain coverage.  Such payments would generally be on an after-tax basis, by remitting payment to the employer, and the employer could require payment no more frequently than regular deduction frequencies for employees during periods of active work.  Most employers collect premiums from employees on leave of absence on a monthly basis.

FAMILIES FIRST CORONAVIRUS RESPONSE ACT

I heard that the new Act includes tax credits. For what size employers does this apply and what is the credit?
First, most importantly, be sure to familiarize yourself with the requirements under the Families First Coronavirus Response Act provisions. You can do so by referring to the chart we have made available in the COVID-19 Resources section of our website. Affected employers are employers with 1–499 employees.

Specifically addressing the tax credit, The U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor (Labor) announced in a News Release on March 20^th, that small and midsize employers can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees.

Eligible employers will be able to claim these credits based on qualifying leave they provide between the effective date, April 2nd and December 31, 2020. Equivalent credits are available to self-employed individuals based on similar circumstances.

The chart goes into detail about the credit for Paid Sick leave. Note: Eligible Employers receive 100% reimbursement for paid leave pursuant to the Act.

Health insurance costs are also included in the credit.

Employers face no payroll tax liability. And Self-employed individuals receive an equivalent credit.

The next logical question is how quickly will the employer be reimbursed?

If there are not sufficient payroll taxes to cover the cost of qualified sick and childcare leave paid, the IRS Notice released on 3/20 addresses Prompt Payment for the Cost of Providing Leave.

When employers pay their employees, they are required to withhold from their employees’ paychecks federal income taxes and the employees’ share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns on Form 941 with the IRS.

Under guidance that will be released later this week, eligible employers who pay qualifying sick or childcare leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and childcare leave that they paid, rather than deposit them with the IRS.

If there are not sufficient payroll taxes to cover the cost of qualified sick and childcare leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure are expected to be announced this week.

CARRIER RULES

Are carriers allowing furloughed or temporarily laid off employees to remain on the plan?
Carriers are beginning to implement exceptions to allow furloughed employees to remain active on the group health plan. Employees who are not working the required number of hours to satisfy eligibly requirements under the plan and who are not on protected leave, lose eligibility to remain on the plan.

MISCELLANEOUS STATE TESTING SITES
Is there Information on COVID-19 state testing sites?
This is definitely fluid information as testing sites appear to be popping up daily. Most important is to follow the recommendations of the CDC which is to consult with a medical professional. State Department of Health websites have information regarding testing instructions.