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The COVID-19 Crisis: Questions and answers for employee welfare benefit plans

Trish Winchell Lori Jones March 26, 2020

What are group health plans required to cover with respect to COVID-19?

The Families First Coronavirus Response Act (the “ Act”) signed into law March 18 generally requires group health plans to cover COVID-19 testing and screening without imposing deductibles, co-pays, co-insurance or other cost sharing. Plans also cannot apply “prior authorization or other medical management requirements.” For example, a plan cannot require that a participant first have a test for the flu which is negative as a condition to covering the COVID-19 testing. The plan must also cover the costs of a provider visit (office visit, telehealth visit, or urgent care or emergency room visit) related to the testing without cost sharing. The Act does not impose any requirements with respect to coverage of treatment of COVID-19; a plan’s regular coverage terms and cost-sharing provisions will apply.

Currently, it is not clear whether a plan satisfies the requirement of the Act if it limits the coverage without cost-sharing to services and products provided by in-network providers, (assuming an in-network provider is available). Such a limitation would be consistent with the requirements applicable under the Affordable Care Act to covering preventive services with no cost sharing, but we await further guidance on whether the same approach would be acceptable with respect to COVID-19 testing under the Act.

The Act’s requirements for coverage of COVID-19 testing and screening apply to insured and self-insured group health plans, including grandfathered plans, but they do not apply to retiree-only plans or excepted benefit plans like EAPs. The requirements became effective March 18, 2020 and will continue to be effective until the Secretary of HHS declares the public health emergency has ended.

Employers should make the necessary changes to plan documents to reflect the coverage of COVID-19 testing. Employers of plans subject to ERISA should notify participants of the change by providing them with a Summary of Material Modification (SMM).

What happens to employees’ health coverage if they are furloughed, laid off or put on leave? Can an employer continue coverage if it chooses to do so?

The terms of the health plan, the insurance policy and potentially the contract with a third-party administrator will determine whether active coverage continues during a period in which an employee is not actively at work or is working reduced hours. Employees on a FMLA leave of absence must be allowed either to drop medical coverage or to continue it during the leave. Some plans and policies have explicit provisions about continuation of coverage during other types of leaves. Other plans and policies may simply provide that active full-time employees who work or are regularly scheduled to work a certain number of hours a week (e.g. at least 30) are eligible. In that case, if an employee’s hours are reduced or the employee stops working altogether even temporarily, coverage may terminate. Employers should carefully review their plan documents and, particularly in the case of any ambiguity, confirm with insurers or stop loss carriers their interpretation of whether or not coverage continues during any furlough, lay off or leave.

If a plan would not otherwise provide for continued coverage, generally an employer could amend the plan to provide coverage, provided the amendment does not discriminate in favor of highly compensated employees or against employees based on health status. It is critical, however, that an employer who wants to expand coverage coordinate with the plan’s insurer, third party administrator and stop loss carrier as applicable. If the employer does not, an insurer or stop loss carrier could refuse to cover the claims of the ineligible employees, potentially leaving the employer liable.

If coverage continues during leave, the employer should consider how employees will pay any contributions or premiums. Again, the terms of the health plan will govern, but these terms could be amended by the employer. FMLA regulations set forth the acceptable methods of payment for individuals on FMLA leave. If an employee is required to pay premiums or contributions on leave and fails to do so, coverage will typically terminate. The employee would not be eligible for COBRA coverage if this occurs.

When is an employer required to make COBRA continuation coverage available to an employee who is furloughed, laid off or put on a leave of absence?

COBRA continuation coverage generally must be offered if an employee loses group health plan coverage due to a termination of employment or a reduction in hours. If the employee is required to pay an increased contribution or share of premium as a result of an unpaid leave or reduced hours, the employer must also offer COBRA coverage. An employee may be charged up to 102% of the cost of coverage. An employer may subsidize the cost of coverage if it wishes to do so, provided it does so on a non-discriminatory basis. Employers should be aware, however, that if the former employee wishes to drop the coverage when the subsidy ends, the employee will not be eligible to enroll in coverage on the exchange as a result of the end of the COBRA coverage; the employee will have to wait for the regular annual enrollment period or another enrollment opportunity.

Does an employer who fails to continue coverage for an employee on leave risk penalties under the Affordable Care Act (“ACA”)?

Potentially, yes. An employer who fails to offer affordable, minimum value coverage to a full-time employee during any month may be subject to penalties under the ACA if that employee obtains coverage from an exchange and receives a premium subsidy. In addition, an employer who fails to offer coverage to at least 95% of its full-time employees during any month will be subject to a penalty if any employee obtains coverage from an exchange and receives a premium subsidy. Many employers determine whether or not an employee is full-time by counting hours during a “look-back” measurement period and then deeming a person full-time for a subsequent stability period. If an employee’s hours are reduced or the person is placed on leave during a stability period, that employee continues to be full-time for ACA purposes. If coverage is not offered to such an employee, there is a risk of an ACA penalty.

Also, if the coverage is no longer “affordable” as defined by the ACA as a result of an extended unpaid leave, there may be a risk of penalty which an employer could consider addressing through an increased subsidy.

What happens to other benefits during an unpaid leave, lay off or furlough?

Again, employers should review their plan documents and insurance policies to determine if benefits such as life insurance, AD&D and disability continue during any time when an employee will not be actively working or will be working reduced hours. Employers should be sure to coordinate with their insurers and administrators.

If an employee’s need for child care changes as a result of a change in employment status or day care arrangements, can the employee change an election to contribute to a dependent care account?

Generally yes, as long as the plan permits it. While midyear election changes are generally prohibited, some changes to a participant’s child care needs can trigger an option for a midyear election, enabling participants to adjust contributions in a manner consistent with that change. This includes a change in employment status, including a termination of employment, a leave of absence, or a change in worksite (such as working from home). It also includes certain changes to dependent care arrangements. The election change must be consistent with the change in status.

For example, if an employee’s schedule changes, and the employee’s need for child care increases from 3 days a week to 5 days a week, that employee is permitted to make a midyear election to increase contributions to his or her dependent care account. Similarly, if a day care center closes permanently or temporarily, an employee is permitted to make a corresponding midyear election to decrease his or her dependent care account contributions. Importantly, although many plans allow all election changes that are permissible under the Internal Revenue Code, plans are not required to permit these midyear election changes. Check your plan document or summary plan description for details.

Has the IRS granted an extension of time for the filing of the ACA reporting forms?

No. Although extensions have been granted for other IRS filing deadlines as a result of the public health crisis, the deadline for filing the 2019 Forms 1094-B, 1095-B, 1094-C and 1095-C  has not been extended. They are due March 31, 2020. Employers who need more time to complete these filings should be aware that they can obtain an automatic 30-day extension by filing Form 8809 with the IRS prior to the March 31 deadline.

Are employers required to provide paid leave to employees absent from work because they are affected by COVID-19?

In some circumstances yes. Legislation passed by Congress in response to the COVID-19 pandemic requires some employers to provide paid leave to certain employees affected by COVID-19. Thompson Coburn’s Labor and Employment Practice group has prepared an alert on the legislation, which can be found here.

The attorneys in Thompson Coburn’s Employee Benefits Practice Group are available to answer your specific questions about the benefits issues you are facing as you respond to the current public health crisis. Please contact one of the attorneys listed below or your regular contact at Thompson Coburn.

Trish Winchell and Lori Jones are partners in Thompson Coburn’s Employee Benefits practice.

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