We will be making updates to this post on an ongoing basis as new information becomes available. Please check back often. Last updated: May 30, 2020.
The state of our nation – and the entire globe – has been turned upside down in light of the novel coronavirus COVID-19 pandemic. Many businesses are being forced to close their doors, or limit the services they provide and the ways they can offer them, for several weeks – or longer. These orders have come abruptly to most businesses, and many are struggling to find ways to cope.
Employees are worried about their paychecks, how they’ll pay their bills, what they’ll do about childcare and schooling their children. Employers are worried about the viability of their businesses and their ability (or inability) to pay staff, rent, and other bills. Many employers are looking at their group health insurance contracts wondering what their options are – if any.
We have compiled a list of frequently asked questions from employers about their health benefit plans in the case of the COVID-19 pandemic. Note that new laws are being written and applied by government. More information, regulations, and laws will certainly be released in the coming days and weeks as the country continues to grapple with the effects of the pandemic.
Before you jump in, be aware that what is in place right now may not be in place tomorrow; the information presented is subject to change. Lawmakers are creating laws quickly – and the Department of Insurance, Department of Managed Healthcare, and carriers are all trying to understand and respond to these new rules and regulations. Also know it is imperative for employers to treat similar employees the same, under all circumstances. Situational accommodations should be given to all, rather than just one or a few, if they are granted by the employer or carrier. Also, these FAQs are for fully insured group insurance. Self-insured coverage is similar, but has some differences that can slightly change some of these answers.
Lastly, for full compliance with the law, employers should seek legal counsel. These FAQs are based on thorough conscientious research, but the responses can change – or apply in different ways, for different employers. The information in this reference is not intended to be specific legal, medical, financial, tax or other advice. Every attempt has been made to ensure the accuracy of this information, according to general information currently available to the public regarding the COVID-19 pandemic.
What happens if I’m unable to pay my premium?
If an employer is unable to pay the premiums as agreed in the contract with the carrier (the employer application), the health insurance carrier is generally in legal compliance to terminate the policy. However, with the tremendous and sudden hardship across the country, carriers will likely create leniency policies for the many employers unable to pay premiums. Employers should not assume carriers will accept late payments or create these policies until officially announced by the carrier.
The California Insurance Commissioner, Ricardo Lara, issued a notice requesting that all insurance companies provide their policyholders with at least a 60-day grace period to pay insurance premiums due to the COVID-19 outbreak. Unlike Lara’s request made by the CA Department of Insurance, the California Department of Managed Healthcare (DMHC) has not yet commented. California carriers have not released their responses to Lara’s notice yet, but will do so in the coming days. Nevada’s Insurance Commissioner has not made a similar order, but may soon follow California’s lead. Stay tuned to the W&B Newsroom for state and carrier responses to the COVID-19 pandemic.
When an employer’s policy is terminated completely, there will be no COBRA continuation-of-coverage options for employees or current COBRA participants. An employer must have an active policy in order for COBRA participants to continue on that policy upon the experience of a loss of coverage. This means, all employees and current COBRA-participants will lose coverage entirely – including those in medical treatment, and for those seeking services related to COVID-19. These instances are all in compliance with COBRA law.
My employees have had their hours significantly cut or are not working at all and are unable to pay their share of employee contributions. What should I do?
The employer should consider trying – if it can – to come up with creative ways to fund advances on employee premiums, to prevent the employer from not being able to pay its full premium. The employer may attempt to recover employees’ shares of premiums upon their return to work. As stated above, a carrier may contractually terminate a policy if the employer does not pay the full premium. It is important for the employer to do its best diligence to pay its full premium to prevent concerns of contract termination. Carriers will likely soon provide further guidance on this issue.
Also, the employer may send a bill/invoice to the employees, asking for payment of premiums – which, in most circumstances, should be paid with employees’ post-tax dollars.
The employer would be wise to consider creating a policy for collecting/receiving payment of employee premiums in the future, should something similar happen again. Some employer policies request advance payment of employee contributions beforehand (if possible) – or withhold automatic deductions of employees’ retroactive monthly premiums when they return to work.
Note: the new Families First Coronavirus Relief Act (FFCRA), which goes in effect April 1, 2020 and is not retroactive, creates new protections for employees on leave due to COVID-19 quarantine/treatment and related school/childcare closures. Such leaves generally protect an employee’s job and his or her health coverage. See the final FAQ item for further information.
My employees are not working right now; my business is barred from operating due to the coronavirus outbreak. Are employees eligible to continue benefits?
Firstly, the employer should consult its ERISA plan documents for guidance on this situation. ERISA requires all group health plans to create legal plan documents, which outline the terms and benefits of their health plans. One of the required terms is on employee eligibility – including when employees’ hours drop to zero. It is imperative for the employer to administer its plan in accordance with the eligibility rules it created and detailed in its ERISA plan documents.
Though these plan documents are required for employers of all sizes under federal law, many employers do not have them. In this case, the employer may check its plan’s Evidence of Coverage (EOC) document, which is a legal document created by the carrier (health plan) detailing all plan benefits. The EOC is usually a major component of an employer’s ERISA plan documents. It may have language on employee eligibility. Many EOCs dictate a certain amount of time a person can remain on the policy when he or she is not actively working.
If it is determined that an employee is no longer eligible for the health plan, and then that employee experiences a loss of coverage Qualifying Event, COBRA must be offered. This Qualifying Event will also create a Special Enrollment Period (SEP) on the state exchange and, in most circumstances, a SEP to join a spouse’s or parent’s plan, as applicable.
It is highly encouraged for the employer to create plan documents if it does not have them, per ERISA law. Also, the employer should ensure it is following the procedures dictated in its plan documents.
Not having plan documents, or not following the rules and regulations dictated in those documents, can result in hefty non-compliance penalties and/or civil lawsuits.
Note: the new Families First Coronavirus Relief Act (FFCRA), which goes in effect April 1, 2020 and is not retroactive, creates new protections for employees on leave due to COVID-19 quarantine/treatment and related school/childcare closures. Such leaves generally protect an employee’s job and his or her health coverage. See the final FAQ item for further information.
May I increase or decrease my employer contribution (now, outside renewal) in response to these economic challenges?
In most instances, yes. But, the employer should consult its ERISA plan document to ensure doing so is compliant with the plan. The employer should also consider seeking legal counsel to ensure full compliance with the law according to its specific circumstances. A change in employer contribution may create a mini-Open Enrollment for employees, where they’d then be able to change plans or enroll in coverage on the individual state exchange. However, it is important to check with the health carrier for guidance on this issue before enacting such changes. Also, ACA affordability is still a requirement of all Applicable Large Employers (ALEs) subject to the ACA’s employer mandate, which should be considered.
Under standard circumstances and per current federal law, a change in employer contribution requires an advanced ACA 60-Day Notice of Material Modification. This document must be distributed by the plan administrator (the employer) to employees at least 60 days before implementing a plan change outside renewal, and it must describe the changes being made to the plan – including contribution changes.
Furthermore, since contribution changes impact ERISA plan documents, an ERISA Summary of Material Modification (SMM) must also be distributed to employees within 210 days after the conclusion of the plan year in which the change was made. An SMM amends the original plan document with new language, detailing changes such as this.
Given current circumstances, we may hear further guidance from lawmakers and/or carriers on this matter in the near future.
My employees’ incomes are being drastically cut. Are my employees able to change plans to a more-affordable, less-rich plan? Alternatively, can they move to a more costly, richer plan? Can they change Flexible Spending Account (FSA) elections?
When employees pay their premium shares on a pre-tax basis via a Premium Only Plan (POP) – including FSA elections – those elections are usually irrevocable. However, when one experiences “significant cost changes in coverage” or “significant curtailment of coverage,” elections can be revoked or changed per IRS rules.
When employees pay premiums on a post-tax basis, the IRS does not require premium elections to be irrevocable. They may be changed without reason throughout the plan year, per IRS rules.
However, health insurance carriers may have additional internal policies that could limit an employee’s ability to change coverage outside of open enrollment – even when otherwise allowed by the IRS. The employer should check with its carrier and/or seek legal counsel for guidance. As with all other items, the employer should consult its ERISA plan documents for guidance here as well.
Can my carrier reduce or enhance the benefits in my plan? Does my plan include COVID-19 testing and treatment?
In almost all circumstances, carriers cannot reduce plan benefits midyear. They can, however improve them.
Some carriers are now considering COVID-19 treatment to be an “Essential Health Benefit” (EHB) of their plans, and are adding extra language to their plans to ensure coverage for COVID-19 testing and treatment. The Centers for Medicare and Medicaid Services (CMS) issued an FAQ on COVID-19, which states that COVID-19 testing and treatment must be covered as an EHB of most plans. However, cost-sharing and plan benefits vary, and are specific to each separate plan.
The CMS FAQ states that medically necessary isolation or quarantine, required by a physician during hospital treatment, is generally considered an EHB and must be included in plans. However, quarantine outside a medical facility without oversight of a doctor is not medical treatment and therefore not an EHB.
Most fully insured health plans in California and Nevada consider COVID-19 testing to be a preventive benefit, with no cost sharing to policyholders. Any treatment needed as a result of such testing, however, will likely be run through the policyholder’s plan as normal, with standard cost-sharing.
What do I need to know about the new Families First Coronavirus Response Act (FFCRA), signed into law by the President on 3/18/2020?
Currently, we are awaiting guidance – which will come to us in the next week or so – from the U.S. Department of Labor (DOL) and U.S. Department of Health & Human Services (HHS) on how to execute this new law.
For certain circumstances related to COVID-19, the law provides up to two weeks of sick leave (full pay for self – up to $511 day, and 2/3 pay for family care – up to $200/day) for illness, quarantine, or school closures. And, up to 12 weeks of Family and Medical Leave Act (FMLA) leave for school closures (10 days unpaid, then up to 10 weeks at 2/3 pay, capped at $200/day).
The Paid Sick Leave and FMLA sections go in effect 4/1/2020 and expire on 12/31/2020. There is no retroactive application of the law.
FFCRA does not preempt existing state and local paid sick leave requirements, and employers cannot require employees to use other leave first. Sick leave provided under the act does not carry over from year to year, and requirements expire December 31, 2020.
FMLA expansion
This applies to employers with less than 500 employees. Employees are eligible if they have been employed for at least 30 calendar days, though employers may be able to exclude employees who are health care providers or emergency responders. The leave is covered under the new FMLA expansion if it is to care for the employee’s child(ren) (under 18) because the child’s school has been closed, or the child’s childcare provider is unavailable, due to public health emergency – such as COVID-19. The leave provides up to 12 weeks of job-protected leave.
Under the leave, the employee is not required to be compensated for the first 10 days of leave (other paid time off and emergency sick leave under FFCRA may be applied, however). After 10 days, employers must pay two-thirds of the employee’s regular rate of pay for the number of hours they would normally be scheduled to work, capped at $200/day and $10,000 total.
Emergency Paid Sick Leave
This applies to employers with less than 500 employees. All employees are eligible regardless of length of employment. Like the FMLA expansion, employers may be able to exclude employees who are health care providers or emergency responders. The leave is covered due to any of these circumstances:
- When quarantined/isolated, subject to federal, state, or local order
- When advised by a health care provider to self-quarantine (due to COVID-19 concerns)
- When experiencing symptoms of COVID-19 and seeking a medical diagnosis
- When caring for an individual doing #1 or #2 (2/3 of pay, as detailed by the FMLA expansion)
- When caring for a child whose school or place of care is closed due to COVID-19 (2/3 of pay, as detailed by the FMLA expansion)
- When the employee is experiencing any other substantially similar condition (2/3 of pay)
Full-time employees are entitled to 80 hours of paid sick leave. Part-time employees are entitled sick leave equal to the number of hours worked on average over a typical two-week period. Sick leave must be paid at the employee’s regular rate of pay for leave used for the employee’s own illness, quarantine, or care. It must be paid at two-thirds of the employee’s regular rate if taken to care for a family member or child whose school has closed, or if the employee’s childcare provider is unavailable due to COVID-19. Pay is capped at $511/day and $5,110 total for reasons 1-3 described above. Pay is capped at $200/day and $2,000 total for reasons 4, 5 and 6 above.
My High Deductible Health Plan (HDHP) covers COVID-19 testing and treatment before the plan deducible is met. Does that impact HSA eligibility, and my ability to contribute tax-advantaged dollars to it?
No, it does not. The IRS released Notice 2020-15 on March 15, 2020, which clarifies that an HDHP can cover the costs of COVID-19 testing and treatment before a patient meets his or her plan deducible, without losing the plan’s status as an HDHP.
Generally speaking, an HSA holder can only make contributions to an HSA when actively enrolled in a HDHP that provides no disqualifying, pre-deducible coverage. In light of the recent COVID-19 pandemic, the IRS explicitly states HDHPs are permitted to provide pre-deducible coverage for such testing and treatment, without losing tax-advantage status for HSA contributions. Note, however, that the IRS cannot mandate a plan to cover certain benefits – including COVID-19 treatment. The federal agency can simply clarify tax status, as it does in Notice 2020-15.
More about the author:
Paul Roberts is the Director of Education and Market Development at the Word & Brown General Agency, responsible for leading Word & Brown’s educational initiatives and providing oversight of the WBCompliance team in California and Nevada. Paul is a tenured veteran in the health insurance industry, carrying a long history of health insurance experience and an education in business management. He has performed nearly every operational role at Word & Brown General Agency in his fourteen-year tenure, and was a leader in the creation and development of Word & Brown’s legendary in-house Compliance team. Paul is passionate about education and keeping health insurance brokers and employers in-line with compliance. Paul can be found at many industry events across the nation delivering CE, HRCI and SHRM courses, educating himself, advocating for the role of the agent, and working directly with brokers and employers. This gives Paul the best ability to innovate and improve Compliance and educational resources to support the businesses and abilities of brokers. Paul is passionate about education, diversity and helping others. He is grateful for his opportunity to support both brokers and employers and is committed to your success.