Employers are facing difficult decisions as COVID-19 impacts business operations. Some employers are considering office closings, workforce reductions, temporary layoffs or furloughs. When furloughing, terminating, laying off or reducing employee hours (even for a limited time) causes a loss of health coverage, employers must remember to properly administer continuation of coverage rights.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows individuals covered under a group health plan to continue that coverage in certain circumstances, at their own cost, when coverage would otherwise cease. Employers are subject to COBRA if they employed 20 or more employees in the prior business year.
A COBRA election is required when there is an event listed in the COBRA statute that causes (or will cause) a loss of plan coverage. Only certain events give rise to a COBRA election, and therefore COBRA does not necessarily have to be offered every time an individual loses health coverage.
The following events require a COBRA election if the event causes a loss of coverage.
- Voluntary or involuntary termination of the covered employee’s employment for reasons other than gross misconduct;
- A reduction in work hours;
- Divorce or legal separation of the covered employee from his or her spouse;
- Death of the covered employee;
- A dependent child ceasing to be a dependent under the terms of the health plan;
- A covered employee becoming entitled to benefits under Medicare;
- An employer’s bankruptcy (for retirees and their families).
An event must result in a loss of coverage to be a COBRA qualifying event.
Employers should review their plan eligibility requirements to determine if a reduction of hours will cause a loss of health coverage (see our Health Care Reform article on ACA requirements, ‘ACA Full-Time Status Even When Work Hours Reduced’). A temporary layoff or furlough might not cause a loss of health coverage. If coverage is maintained on the same conditions as when the individual was an active employee, no COBRA election is required. If coverage is terminated or changed, even if the change is a change in the cost of coverage to the employee, an employer subject to COBRA should give impacted employees and their covered dependents a COBRA election. Employers who are not subject to federal COBRA rules but who are subject to state continuation laws need to consult the state requirements.
Some employers may wish to keep employees on their health plan when the employees' hours are reduced or the employees are told not to come to work. Employers in this situation should check with their insurer and legal counsel before keeping the employees on their plan.
Cobra Control Services (CCS) can assist with providing COBRA notices and managing collection of payments for coverage. CCS can administer employer-subsidized COBRA offerings. For more information about COBRA administration, contact your account manager or solutions@BASusa.com.