[co-authors: Lisa Shallue, Emily Zimmer]*
It is hard to find a sector of the American workforce that has not been affected by the COVID-19 emergency. Employees are being asked to work from home if they are able, businesses are being forced to close, and employers are left wondering what obligations they have to their employees under employer-sponsored benefit plans and programs. For example, what are our continued compliance obligations under the ACA if employees are not actively at work, or is employer action required to cover the waiver of co-insurance and deductibles relating to COVID-19 testing, telemedicine, and treatment?
We have joined forces to put together this FAQ to address those questions most commonly asked by employers. Employer action items are noted in bold. If you have any questions, require plan amendments or assistance with employee communications, please contact any member of the Pepper Hamilton or Troutman Sanders Employee Benefits and Executive Compensation Practice Groups or the COVID-19 Response Team. We are here to help you in any way that we can.
This FAQ is current as of March 19, 2020. We will make every effort to update it as pertinent information becomes available.
How does the Families First Coronavirus Response Act (the “Act”), signed into law by President Trump on March 18, impact our group health plan?
The Act mandates that all employer sponsored health plans provide COVID-19 testing coverage (including associated visits to a health care provider, urgent care center or emergency room) without any cost sharing, prior authorization or other medical management requirements. As a result, health plans that don’t currently provide for such coverage will need to be amended to include it (which might take the form of issuing a summary of material modifications to update the plan’s summary plan description). This change should also be communicated to employees as soon as possible.
The impact of the Act will differ, depending upon whether an employer sponsors a fully insured or self-insured plan, as follows:
The Act is unlikely to impact fully insured plans – as many insurance carriers previously announced that any otherwise applicable cost-sharing with respect to COVID-19 diagnostic tests would be waived and several states have been encouraging or requiring their insurers to cover a variety of COVID-19 related services, including testing and treatment without cost-sharing.
Self-insured health plans, on the other hand, are not subject to state insurance mandates, which means the state cost-sharing directives for COVID-19 will not apply – so that employers with self-insured health plans had the discretion, prior to the Act, to choose whether to apply cost-sharing (including deductibles, copayments and coinsurance) to COVID-19 testing. However, the Act eliminates this discretion – so that employers who had opted to apply cost-sharing to COVID-19 testing will now need to check with their third-party administrators to determine what action, if any, is needed to eliminate the application of any such costs related to COVID-19 testing.
How long do we have to implement the COVID-19 testing coverage mandated by the Act?
Although the Act is generally effective April 2 (15 days after the date of enactment), it explicitly provides that employer sponsored group health plans must cover, and shall not apply any cost sharing to, COVID-19 testing services that are furnished “on or after the date of enactment of this Act.” Employers will therefore need to take swift action to ensure that any necessary adjustments to COVID-19 testing coverage are applied effective as of March 18th. Although third-party administrators may take some time to implement these adjustments, they should be able to apply them retroactively to March 18th.
Does the COVID-19 testing coverage mandated by the Act require us to offer telemedicine?
The answer to this question is unclear. As indicated above, the Act requires employer sponsored health plans to provide coverage, without any cost-sharing, for health care provider office visits that result in COVID-19 testing. The Act explicitly states that a “health care provider office visit” includes both in-person and telehealth visits. Accordingly, it would appear from the face of the Act that employer sponsored health plans may be required to provide telemedicine services. However, the Act allows regulatory agencies to implement the COVID-19 testing coverage mandate through sub-regulatory guidance and we are hopeful that such guidance may be issued to clarify that only employers that have opted to offer telemedicine services must extend the mandated COVID-19 testing coverage to such services (so that no cost could be charged to a participant for a telemedicine consult that resulted in an order for a COVID-19 test)– rather than requiring employers that do not currently offer telemedicine to implement this feature. Unless and until such guidance is issued, employers that do not currently offer telemedicine will need to assess whether to adopt this feature in response to the Act, keeping in mind that such services must be designed to comply with the Affordable Care Act and not to interfere with high deductible health plan requirements, if applicable.
Does the COVID-19 testing coverage mandated by the Act apply to both in- and out-of-network services?
Although cost-sharing limitations under the Affordable Care Act are limited to in-network services, this Act does not distinguish between COVID-19 testing services provided in-network versus out-of-network. Therefore, in the absence of guidance to the contrary, it would appear to apply to both. Employers should consult with their third-party administrators for implementation specifics in this regard.
What if our group health plan does not comply with the COVID-19 testing coverage mandated by the Act?
A failure to comply with the COVID-19 testing coverage mandates is subject to a self-reporting excise tax in the amount of $100 per day per affected participant as well as participant challenges under ERISA.
We are not able to have all of our employees work remotely. If we have to temporarily close our office or facility, some of our employees may be considered inactive; are they still entitled to group health plan coverage?
It depends. The terms of the group health plan document (or certificate of coverage, if the plan is fully insured) will determine how long employees who are not actively working may remain covered by the employer’s group health plan. Active employee coverage must be terminated when this period expires and a COBRA notice must be sent. Employers may request that the insurance carrier temporarily waive applicable eligibility provisions. Likewise, employers that sponsor self-insured plans should confirm that any stop-loss coverage insurance carriers agree to cover claims relating to participants who would otherwise be ineligible for coverage prior to waiving any applicable plan eligibility provisions. To the extent an active employment eligibility requirement is waived, employers will need to remember to amend their plan documents and/or issue summaries of material modifications accordingly.
NOTE: In determining whether to temporarily waive any applicable active employment eligibility requirement, employers should keep in mind that without the waiver, employees who may be considered “full time” for purposes of the Affordable Care Act could lose health coverage and thus potentially trigger excise tax penalties.
If we continue group health plan coverage for inactive employees, what happens to their coverage if they are unable to pay their share of premiums?
Typically, group health plan coverage will end when an employee does not timely pay his or her premiums. Individual circumstances will vary, but an employer could potentially take temporary measures to pay 100 percent of health insurance premiums until the employer is able to reopen and resume operations.
We sponsor a high-deductible health plan with a health savings account. Can we waive coinsurance and copayments?
Yes. On March 11, the IRS issued Notice 2020-15, clarifying that, until further notice, health benefits, medical services and items purchased in association with testing for or treatment of COVID-19 may be provided by a health plan without a deductible, or at reduced or no cost to participants, without disqualifying the high-deductible health plan (HDHP) or covered individual from making contributions to a health savings account (HSA). Employers sponsoring an HDHP with HSA should review their plans and work with their insurance carriers and third-party administrators to coordinate appropriate action items and communications relevant to any changes made in connection with COVID-19 testing and treatment coverage. As indicated above, all employer sponsored group health plans, including HDHPs, are required to cover COVID-19 testing without a deductible (or any other cost sharing) as of March 18 – so HDHPs that do not currently provide such coverage will need to be updated accordingly. Treatment costs, on the other hand, may be subject to cost sharing – unless otherwise required by state law for fully insured plans. So, employers will need to determine whether to reduce or eliminate HDHP cost sharing with respect to the treatment of COVID-19. Self-insured health plans, on the other hand, are not subject to state insurance mandates, which means the state cost-sharing directives for COVID-19 will not apply – so that employers with self-insured health plans had the discretion, prior to the Act, to choose whether to apply cost-sharing (including deductibles, copayments and coinsurance) to COVID-19 testing. However, the Act eliminates this discretion – so that employers who had opted to apply cost-sharing to COVID-19 testing will now need to check with their third-party administrators to determine what action, if any, is needed to eliminate the application of any such costs related to COVID-19 testing.
Are there other benefit offerings that may help our employees during the COVID-19 emergency?
Yes, many employers offer health care services that are often underutilized by employees, such as telemedicine, employee assistance programs, and wellness program services. Telemedicine may be particularly helpful in this circumstance – because it allows patients to avoid doctors’ offices where they could be exposed to COVID-19 or other illnesses. This, in turn, increases the capacity of health care providers and facilities who would otherwise be seeing these patients. Employers should encourage employees to take advantage of these programs, as they provide a comprehensive approach to addressing the medical, physical and emotional impact of the COVID-19 emergency. Note that the IRS guidance described in the previous FAQ does not extend to non-COVID-19 related telemedicine services. Some insurers and TPAs have indicated that they will waive all participant cost sharing for any telemedicine services to encourage use of those services as a means of social distancing, but doing so under an HDHP without specific IRS approval could disqualify the HDHP and jeopardize participants’ eligibility to contribute to an HSA.
If we hire temporary employees to supplement our workforce during the COVID-19 emergency, do we have to offer them benefits?
It depends upon the eligibility terms of the applicable plan. However, in order to avoid penalties under the Affordable Care Act, an applicable large employer’s group health plan would have to cover temporary employees hired to supplement the employer’s workforce if they were expected to work at least 30 hours per week or 130+ hours per month when hired and they were still employed after the maximum permissible waiting period (generally three months). As always, employers should make certain that temporary employees are properly classified and that their hours are measured in compliance with the employer’s Affordable Care Act measurement periods for full-time employees. Employers should also review the eligibility provisions of other employer-sponsored benefits, such as qualified retirement plans, to determine whether benefits must be offered to their temporary employees.
Can we permit employees to make changes to their Section 125 cafeteria plan elections in light of a change in circumstance due to COVID-19?
Under a Section 125 cafeteria plan, an employee is permitted to revoke elections made before the beginning of the plan year only under special circumstances, which include a change in the employment status of the employee (or the employee’s spouse or dependents) or the offering of a special election period under the plan. The change in the election must also be consistent with the change in status. For example, when an employee’s eligibility for or cost of coverage under the group health plan changes because the employee experiences a reduction in hours as a consequence of COVID-19, the employer must allow the employee to make a change in his or her Section 125 cafeteria plan elections. In addition, if an employee is on an FMLA leave of absence due to COVID-19, whether because of their own illness or to care for a family member, the employer must allow the employee to revoke their coverage under the employer’s group health plans, if desired. Lastly, employees may experience a change in the cost of dependent care – either a decrease in cost due to the closing of day care facilities or an increase in cost due to the need to arrange alternative child care following a school closing. Such change in dependent care cost is a valid midyear election change event that would require employers to allow an employee to make a corresponding change to their dependent care flexible spending account election – to either stop/decrease or start/increase contributions to the employer’s dependent care flexible spending account, as applicable.
* Troutman Sanders
