By Randall Cook and Christine Moehl, Employee Benefits & Executive Compensation Attorneys
During this public health crisis, employers are having to make hard decisions including employee lay-offs, terminations, and furloughs. Employers often ask how this affects the employer-provided health and welfare benefits for their employees. Here are some considerations for employers with regard to those benefits:
Health Insurance and Employee Reduction in Hours
The general rule is that when an employee no longer meets the hour requirement for eligibility for an employer-sponsored health insurance plan (e.g., 30 hours per week), their employer-provided health insurance benefits must be terminated. This can happen if their hours are reduced, or if they are terminated, furloughed, or laid off. When employees lose their health insurance coverage, they must then receive an offer of COBRA or state continuation coverage, depending on the size of the employer. There are three exceptions to this general rule, as follows:
- The employee is under protected leave, such as FMLA. In this case, health insurance coverage will be extended for the duration of the protected leave.
- The health insurance carrier waives the hour requirement for coverage. This is becoming more and more common as the pandemic has resulted in many employers reducing hours or temporarily closing their doors. Employers should check with their health insurance carrier to determine if they will consider waiving the hour requirement.
- The health plan document distinguishes between employees who are terminated and those who are furloughed or laid-off. Some plan documents provide that furloughed and laid-off employees may continue to receive coverage, while those who are terminated may not. All employers should examine their plan documents to see if this distinction is made and, if it is, carefully categorize their employees accordingly.
Premium Payment Assistance
If an employee loses health insurance coverage and is eligible for COBRA or state continuation coverage, an employer must follow specific requirements including sending election notices and allowing grace periods. One concern for employers is whether employees will be able to afford COBRA premiums while not working. During this time, employers may continue to cover some or all of the premium costs for employees, as long as they operate on a nondiscriminatory basis. Employers can also set up repayment plans with employees that provide that the employee will repay some or all of their COBRA premiums when they return to work. Benefits counsel should be consulted to help write a repayment agreement and employers should ensure that employees understand what it entails.
Non-COBRA Eligible Benefits
For benefits that are not COBRA eligible, such as disability and life insurance, an employer should discuss continuation options with its carrier. A carrier may allow the temporary continuation of coverage for employees who are furloughed, laid-off, terminated, or not meeting minimum hour requirements for eligibility if the premiums continue to be paid either by the employer or the employee.
Benefits for Closed Businesses
Unfortunately, some employers have had to permanently close their doors due to the pandemic. When this happens, group health and welfare benefits generally end and there are no COBRA or state continuation rights. There may be options for employees to convert certain policies into individual policies, and carriers should be contacted to help make this determination. Cessation of a business is also a qualifying event to enroll for individual coverage under the Affordable Care Act or for other employer-sponsored coverage (such as an employee’s spouse’s group coverage).
Next Steps for Employers
It is important to be in close communication with your carriers and brokers during this time to ensure that you are giving accurate information to your employees about their health and welfare benefits. In addition, the Employee Benefits group at Saalfeld Griggs is available to answer your questions.
Randall Cook and Christine Moehl are attorneys in the Employee Benefits & Executive Compensation practice groups. Christine is also a member of the Non-Profit and Agri-Business industry teams. The information in this article is not intended to provide legal advice. For professional consultation, please contact Randy at firstname.lastname@example.org or Christine at email@example.com. 503.399.1070. © 2020 Saalfeld Griggs PC