We have had a number of questions from clients about their ability to maintain group medical and other employer-provided benefits for employees affected by temporary layoffs and working hours reductions related to COVID-19. Absent changes in applicable law or an agreement by insurance carriers to temporarily amend policies, employers unwilling or unable to subsidize COBRA premiums may have little alternatives for assisting employees with the loss of health coverage. However, the fact that laid off employees will have little ability to afford COBRA premiums (or perhaps even regular employee co-pays even if they remain active on the group plan) may prompt government and the insurance industry to provide relief.
Absent that relief, here’s how it works: When employees are terminated, have their working hours reduced, are placed on leave of absence, or are temporarily laid off, they may cease to be considered “active employees” as defined under a company’s group health plan. In this event, employees are typically offered COBRA continuation coverage (or similar coverage under state law for very small employers), and they may remain on the health plan only if the employees pay the usually expensive COBRA premiums. For fully insured plans, the insurance carrier may refuse to pay medical expenses submitted by a worker who is not permitted to remain on the plan outside of COBRA.
While self-insured plans may have some flexibility to continue coverage in these circumstances, their stop-loss carriers may impose the same conditions, and employers should obtain written consent from their stop-loss carriers if they want to extend coverage outside of the normal plan provisions. Employers should check their insurance policies to determine whether and for how long employees who have reduced hours or are not actively working can remain covered under the health plan.
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