COVID–19 and Employee Termination and Benefits Consideration As much of the country is locked-down due to coronavirus 19 (COVID-19), employers have concerns regarding their employee benefit programs. This may stem from a reduction in hours and, unfortunately, from terminating, furloughing, or laying-off employees – at least temporarily. The following are considerations for employers when addressing employees’ benefits during a layoff or other temporary separation from employment. Plan Documents and Termination vs. Furlough vs. Lay-Off Termination, furlough, and lay-off are not defined terms under ERISA or the Affordable Care Act. A furlough is generally considered to be a mandatory leave with limited or no pay, with the expectation that employees return to work once regular business resumes. A termination and a lay-off are more similar, but an employee who is temporarily laid off will likely be asked to return to work. The problem from an employee benefits perspective is that plan documents do not usually differentiate between an employee who is terminated versus one who is laid off versus one who is furloughed. For benefits purposes, eligibility is generally described as an active full-time employee or an employee who works at least a minimum number of hours per week (e.g., 30). If an employee is under protected leave—such as FMLA—benefits continue during leave. This means that any employee who is not meeting the hours requirement or is not actively at work (work from home is considered actively at work) based on being terminated, furloughed, or laid off–even temporarily—will generally have their benefits terminated and receive an offering of COBRA, state continuation, or no offer of continuation depending on the employer’s size and state in which they are located. It is important to review the plan documents from the carrier to determine whether it’s relevant whether leave is paid or unpaid, and to determine how long benefits may continue during a furlough or layoff. It is also important to determine if the carrier will allow coverage to continue as long as premiums continue to be paid, during a public health emergency. For a self-funded/self-insured plan, the employer should look at its own summary plan description, plan document, and the stop-loss policy to determine if there how coverage is affected during a furlough or layoff. A reduction in hours, which includes a temporary lay-off and furlough, is considered a COBRA qualifying event if it results in a loss of coverage. If an employer has fewer than 20 employees, state continuation law (“mini-COBRA”) may apply. The IRS COBRA regulations provide that a reduction in hours for a qualifying employee occurs when there is a decrease in hours an employee is required to work or actually works and is not accompanied by an immediate termination of employment. If a group health plan eligibility depends on number of hours worked in a given period—such as 30 hours per week—and the employee is not working or has not worked those hours, it is considered a reduction in hours. If there is no difference in the plan documents for furloughed, laid-off, or terminated employees and the carrier will not grant a concession, then a reduction in hours or no longer working is a qualifying event and employees should be terminated from the group health plan. We understand this can be hardship and difficult decision to make during a public health emergency. Also keep in mind that loss of coverage opens a HIPAA special enrollment period for an employee to enroll in a spouse’s plan, if one is available. COBRA Offering and Assistance If an employee is eligible for COBRA, an employer must follow COBRA requirements including sending election notices and allowing grace periods. One concern for employers is whether employees will be able to afford COBRA while not working during a public health emergency. An employer does have options in regard to offering COBRA payment assistance to employees. COBRA sets the premium limit at 102% of the cost of coverage; however, an employer is not required to charge the full 102%. An employer can set a COBRA rate to reflect the amount an active employee pays for benefits and the employer can continue to pay their portion. Employers should consider applicable nondiscrimination requirements when deciding whether to change the contribution for all COBRA participants or just those who have a reduction in hours due to a public health emergency. One caveat is, of course, that the payments made by the employee during unpaid leave will be paid post-tax. This may also pose an issue for employees that may not be able to afford their portion of a premium while not receiving a paycheck. As mentioned, an employer may subsidize all or a portion of the COBRA premium while employees are laid off or on furlough. An employer could also set up a repayment plan, where employees repay an employer for a portion of the COBRA premium when they return to work. Employers may wish to have employees agree to repayment terms and a schedule before providing subsidized COBRA. Employers should consult with benefits counsel when drafting a repayment agreement. Applicable Large Employer and Stability Periods Another situation is when an employee is in a stability period as full-time, meaning they should be treated as full- time for purposes of the ACA’s employer shared responsibility provision (ESRP) and continue to be offered health coverage even if they are not working full-time. Under the “look-back” measurement method, an employee that worked full-time hours during the measurement period generally must be treated as full-time for their entire stability period unless they are terminated. An employer may design its plan to terminate coverage (and offer COBRA) to employees who are in a stability period but have experienced a recent reduction in hours. If an employer chooses to terminate health benefits for an employee in a stability period (but the employee is still employed), the employer may be exposed to the “affordability” penalty if an employee receives a premium tax credit for Marketplace coverage (as COBRA coverage is unlikely to be “affordable” in these situations). One way to help with potential exposure is to subsidize COBRA, to make sure that the offering still meets affordability under the ACA. Return to Work and Reinstatement of Benefits For group health plans, the ACA requires that benefits be reinstated, if the employee was enrolled prior to leave, and the unpaid leave did not extend for more than 13 consecutive weeks (26 for educational institutions). If an employee was not enrolled in benefits at the time they left (i.e., because they previously waived an offer of coverage), they are not required under the ACA to be reinstated on benefits. If an employee was in a waiting period, then their time on the waiting period is usually added to whatever remains upon their return. For example, assume an employer’s waiting period is first of the month following 60 days. An employee is temporarily laid off on day 31, due to COVID-19. Upon return to work, 30 days are credited towards the waiting period and the employee should be able to enroll the first of the month following 30 days (because he served 30 days previously). The facts and circumstances, along with terms of the plan should be reviewed to confirm how waiting periods and reinstatement works in specific situations. If leave extends for a longer duration, the waiting period may reset. Non-COBRA Eligible Benefits For benefits that are not COBRA eligible, such as disability and life insurance, an employer should discuss options with its carrier and broker. A carrier may allow temporary continuation of coverage for employees that are furloughed, laid-off, terminated, or not meeting hour requirements for eligibility if the premiums continue to be paid. Public Health Emergency as Qualifying Event to Enroll Carriers should be contacted to determine if they will allow the public health emergency to be considered a qualifying event to allow employees to enroll on a plan. Some carriers are allowing this. New state regulations and emergency declarations should also be reviewed, to determine if fully insured plans are required to allow enrollment or if the Marketplace Exchange is allowing a special enrollment onto an individual plan during this time. If an employer has a self-funded plan, it should review its own plan documents if it is considering amending to allow a special enrollment to occur during public health emergencies. The employer should ensure their stop-loss carrier agrees, and they should also consider any potential section 125 issues (employee contributions may need to be after-tax for the remainder of the plan year, if mid-year enrollment is not pursuant to a change in status event). Note that section 125 permits employees to make a new election to participate upon a return from unpaid leave that lasts more than 30 days. Employees Paying Premiums If an employer has terminated, furloughed, or laid-off employees but has allowed them to continue benefits, the employer needs to determine if and how they want employees on unpaid leave to pay for their premium contribution. An employer can require a weekly or monthly check to be sent in for any benefit offering—including medical, dental, vision, disability, life, etc., as long as coverage continues. It also includes voluntary products that an employee wants to continue. Pay-as-you-go should be offered as an option to employees, although an employer could also set-up a repayment plan with employees where the employer subsidizes the entire premium and the employee repays a portion on return to work. Counsel should be consulted to help write a repayment agreement and employers should ensure that employees understand what it entails. Closed Business- What Now? Some employers are having to close down their entire businesses and no longer operate at all. When a business closes, benefits also end. This is for businesses that are completely closed—not just temporarily. Without any active employees, the insurance carriers may not be willing to maintain coverage. There may be options for employees to convert certain policies into an individual policy, and carriers should be contacted to help make this determination. If conversion is possible, this should be communicated to former employees, so they are aware of their choice. If COBRA and state continuation does not have to be offered because the group health plan has ceased altogether, an unavailability of COBRA notice should be provided. For those who are experiencing this, a business closing its doors and employees—as well as owners—no longer working (and losing coverage) is a qualifying event to enroll for individual coverage or other employer sponsored coverage (such as if an employee’s spouse has employer coverage). If the business reopens, it can start a new group health plan as well as other benefits. What Employers Should Do If an employer has questions, they should ask their broker and carrier to see what options are available to continue to maintain employees’ or former employees’ benefits, as well as if they want to terminate coverage. During a public health crisis, there are options to help elevate concerns with benefit offerings. There may also be tax credit and financial assistance available for some employers at the state level, as well as potentially the federal level. About the Authors. This whitepaper was prepared by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act. Contact Peter Marathas or Stacy Barrow at firstname.lastname@example.org or email@example.com. Offering Telehealth to Employees Not Eligible for Group Health Plans Many employers that sponsor group health plans have portions of their employee population that are not eligible for the group health plan, typically because they are part-time employees. Employers sometimes wish to give these part-time employees something to assist them with their health care needs or expenditures, and it can be tempting to offer that population telemedicine benefits instead of the group health plan. There are significant compliance concerns with this design however, as a telemedicine program can be robust enough to qualify as a group health plan subject to ERISA, COBRA, HIPAA, and other regulations. When telemedicine is coupled with a major medical program, this only raises minor concerns or compliance needs. When offered as a stand-alone service however, this raises more serious issues. This is because on its own, a telemedicine program cannot meet the ACA’s market reforms, such as offering preventive care like immunizations; or certain health screenings. A group health plan that fails to meet market reforms can be subject to penalties of up to $100 a day per employee. Offering these employees telemedicine in the short term during the COVID-19 pandemic is likely less risky than a blanket offer of telemedicine coverage for an entire calendar or plan year, but it is currently unclear how regulators will respond to this approach. If an employer wishes to offer telemedicine to employees who are not eligible for the group health plan, they should consult with counsel to ensure they understand the potential risks. Alternatively, employers in this situation could offer part-time employees Individual Coverage HRAs (ICHRAs) to offset the cost of coverage the employee purchases individually. Alera Group will continue to monitor for any signals from Washington DC that telemedicine may be used in unique ways during the COVID-19 pandemic. About the Author. Danielle Capilla is the Director of Compliance for Alera’s Employee Benefits division. She previously served as the Senior Vice President of Compliance and Operations and Chief Compliance Officer at United Benefit Advisors (UBA). Additionally, she served as an Adjunct Professor at DePaul University. She worked as a Senior Writer Analyst at Wolters Kluwer and as a Law Clerk at Clifford Law Offices. Danielle graduated with a B.A. in Sociology, History, and Business at Tulane University. She earned her JD in Health Law from DePaul University College of Law. Information for Employers and Group Health Plan Sponsors on COVID-19 States and the federal government have issued (or re-issued) guidance for employers in response to the recent novel coronavirus disease 2019 (COVID-19) pandemic. As of March 14, 2020, the Centers for Disease Control and Prevention (CDC) has reported more than 2,000 cases from 49 states and Washington, DC. Agency guidance includes the following: Internal Revenue Service (IRS): High Deductible Health Plans and Expenses Related to COVID-19 Centers for Medicare and Medicaid Services (CMS): FAQs on Essential Health Benefit Coverage and the Coronavirus Equal Employment Opportunity Commission (EEOC): Pandemic Preparedness in the Workplace and the Americans With Disabilities Act (ADA) U.S. Department of Labor (DOL): COVID-19 or Other Public Health Emergencies and the Family and Medical Leave Act Questions and Answers We expect additional guidance in the coming weeks. There will likely be COVID-19 related legislation as well. On March 14, the House of Representatives passed the Families First Coronavirus Response Act (with adjustments on March 16) which includes emergency paid sick leave and job-protected paid family and medical leave. The Act will head to the Senate the week of March 16, where it’s expected to pass. The Act applies to employers with less than 500 employees, primarily because there are tax credits to assist employers in paying employees. In the meantime, below are highlights of state action and other guidance for employers related to COVID-19. State Mandates and Related Guidance Some states have begun directing insurance companies to eliminate cost-sharing for COVID-19 testing. These insurance mandates apply directly to fully insured group health plans; self-insured ERISA plans would not be subject to any state insurance mandates, although third party administrators may be making certain changes automatically unless the employer opts-out. Likewise, some health insurance carriers in non-mandated states have indicated that they will voluntarily waive charges for COVID-19 testing for participants in fully insured group health plans or individual market plans. IRS / HSA-Qualified HDHPs The IRS has provided that, until further guidance is issued, a high deductible health plan (HDHP) will not fail to be HSA-qualified merely because the health plan provides health benefits associated with testing for and treatment of COVID-19 without regard to whether the minimum deductible has been satisfied. This extends to all medical care services received and items purchased associated with testing for and treatment of COVID-19 that are provided by a health plan. Part of the government’s response to COVID-19 is removing barriers to testing for and treatment of COVID-19. Therefore, the IRS has extended this relief due to the nature of this public health emergency, and to avoid delays or financial disincentives that might otherwise impede testing for and treatment of COVID-19 for participants in HDHPs. All other HSA eligibility requirements are maintained at this time. Employers sponsoring HDHPs or other health plans should consult with their broker to determine how their insurance carrier or third party administrator will handle benefits for testing and treatment of COVID-19, including the potential application of any deductible or cost sharing. Note that the IRS did not go so far as to change HDHP rules to except telehealth generally for non-COVID-19 related illnesses. In other words, employers who waive all telehealth copays may during the pandemic may jeopardize HSA eligibility. That said, we have seen some insurance carriers and telehealth vendors willing to waive copays for all telehealth visits for a limited duration (e.g., 2-3 months). Those employers with HSA-qualified plans who wish to broaden their telehealth program to include all visits should consider doing so only for a limited duration and understand that the IRS does not seem to be fully on board with that approach yet. In addition, an employer extending no-cost telehealth for all visits should consider whether to extend the same treatment for virtual behavioral health visits. Note that many physicians, providers, and health care systems are extending (or have already extended) telehealth visits to their patients. These are coded the same or similar as an office visit and require copay or deductible amounts to be met. A virtual visit with a member’s own primary care physician may not have the same HDHP restrictions as a telehealth visit with an external vendor. CMS / Essential Health Benefits (EHBs) The EHB package required to be offered as part of all non-grandfathered plans for sale in the individual or small group market includes coverage for the diagnosis and treatment of COVID-19 Exact coverage details and cost-sharing amounts for individual services may vary by plan, and some plans may require prior authorization Many health plans have publicly announced that COVID-19 diagnostic tests are covered benefits and will be waiving any cost-sharing that would otherwise apply to the test Many states are encouraging carriers to cover a variety of COVID-19 related services, including testing and treatment, without cost-sharing Some states are requiring health plans to cover the diagnostic testing of COVID-19 without cost-sharing and waive any prior authorization requirements for such testing Quarantine outside of a hospital setting, such as a home, is not a medical benefit, nor is it required as EHB; however, other medical benefits that occur in the home that are required by and under the supervision of a medical provider, such as home health care or telemedicine, may be covered (pursuant to prior authorization and/or cost-sharing or other limitations) While a COVID-19 vaccine does not currently exist, current law and regulations require specific vaccines to be covered as EHB without cost-sharing, when recommended by the federal government Plans are not required to cover a recommended vaccine until the beginning of the plan year that is 12 months after the recommendation is issued; however, plans may voluntarily choose to cover a vaccine for COVID-19, with or without cost-sharing, prior to that date EEOC / ADA Now that COVID-19 is a pandemic as reported by the World Health Organization and the CDC, employers may take certain actions without violating the ADA, which applies to employers with 15 or more employees. Employers may send employees home if they display flu-like symptoms (e.g., fever, cough, shortness of breath) during a pandemic Employers may ask employees who report feeling ill at work or who call in sick if they are experiencing flu-like symptoms Employers must maintain all information about employee illness as a confidential medical record in compliance with the ADA When the CDC recommend that people who visit specified locations remain at home for several days until it is clear they do not have symptoms, an employer may ask whether employees are returning from these locations, even if the travel was personal Making disability-related inquiries or requiring medical examinations of employees without symptoms is prohibited by the ADA; however, when a pandemic becomes more severe or serious according to the assessment of local, state or federal public health officials, ADA-covered employers may have sufficient objective information from public health advisories to reasonably conclude that employees will face a direct threat if they contract the virus In these circumstances, employers may make disability-related inquiries or require medical examinations of asymptomatic employees to identify those at higher risk of complications Employers may require employees to adopt infection-control practices, such as regular hand washing, coughing and sneezing etiquette, and proper tissue usage and disposal at the workplace Employers may require employees to wear personal protective equipment (e.g., face masks, gloves, or gowns) designed to reduce the transmission of infection. If an employee with a disability needs a reasonable accommodation under the ADA (e.g., non-latex gloves, or gowns designed for individuals who use wheelchairs), the employer should provide these, absent undue hardship When employees return after a pandemic, employers may require a doctor’s note certifying fitness to return to work; however, as a practical matter, health care professionals may be too busy during and immediately after a pandemic outbreak to provide fitness-for-duty documentation Department of Labor / FMLA The DOL released an FAQ to assist employers who are subject to the Family and Medical Leave Act (generally, an employer with at least 50 employees within 75 miles). Employees are eligible to take FMLA leave if they have worked for their employer for at least 12 months and have at least 1,250 hours of service over the previous 12 months (and work at an FMLA-covered location). As a reminder, under the FMLA, covered employers must provide employees job-protected, unpaid leave for specified family and medical reasons. Employees on FMLA leave are entitled to the continuation of group health insurance coverage under the same terms as existed before they took FMLA leave. Employees are entitled to leave to care for themselves or a sick family member; however, leave taken by an employee for the purpose of avoiding exposure to COVID-19 would not be protected under the FMLA (under current law) Employers may require employees to use paid sick and paid vacation/personal leave during periods of unpaid FMLA Federal law generally does not require employers to provide paid leave to employees who are absent from work due to COVID-19 State or local laws should be considered as well Some federal contractors may be required to provide paid leave Employers may change their paid sick leave policy (in accordance with state law) if employees are out and they cannot afford to pay them all, as long as it is done in a manner that does not discriminate between employees because of race, sex, age (40 and over), color, religion, national origin, disability, or veteran status What Employers Should Expect Next In addition to the federal guidance noted above, employers who are reducing hours or laying off employees should review the terms of their plans to determine how benefits are affected. Group health plan coverage may terminate due to the reduction in hours; if so, COBRA must be offered. Employers may generally subsidize COBRA premiums, and employees may wish to avail themselves of premium tax credits, should they opt for Marketplace coverage. Subsidizing COBRA coverage has the added benefit of ensuring that employees who are in a stability period as full-time continue to be offered “affordable” coverage for purposes of the ACA’s employer shared responsibility provision. Ancillary plans (e.g., life insurance, long-term disability) may terminate once employees are no longer actively at work, or the policy may contain an extension of coverage for a certain period of time (typically one or two months). Employers who would like to extend coverage to laid-off employees should consult with their broker or consultant and ensure the carrier agrees with their approach. We expect additional guidance at the state and federal levels that may impact employee benefit plans as well as employee leave requirements. It is also important for employers to stay up to date on their state notices, as some are providing for required paid leave, as well as other insurance requirements. In addition, employers need to be cognizant of local and state emergency regulations that may affect how employers in certain industries, such as food services, operate during a public health emergency. For more information on COVID-19, see: https://www.cdc.gov/coronavirus/2019-ncov/index.html https://www.who.int/emergencies/diseases/novel-coronavirus-2019 About the Authors. This alert was prepared by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act. Contact Stacy Barrow or Alyssa Oligmueller at firstname.lastname@example.org or email@example.com Congress Passes Families First Coronavirus Response Act On March 18, Congress passed, and President Trump signed into law, the Families First Coronavirus Response Act (FFCRA). The FFCRA is a bipartisan effort to help employers and individuals alike in managing pay, benefits, and business considerations during the COVID-19 pandemic. The focus of this alert is the impact of FFCRA on employer-sponsored benefits and paid leave. The paid leave provisions of the Act apply to employers with less than 500 employees. They are effective within 15 days from date of enactment and expire at the end of 2020, unless extended. Mandated Free Testing FFCRA mandates free COVID-19 testing from all group health plans, including fully insured and self-funded plans, as well as grandfathered plans. All group health plans must waive cost-sharing, prior authorization requirements, and other medical management as it relates to COVID-19 testing. This includes provider office visits, urgent care, emergency room, and other healthcare visits that are for the purpose of evaluating or administering testing. Emergency FMLA The FFCRA provides for up to 12 weeks of job-protected leave under the Family and Medical Leave Act (“FMLA”) for a “qualifying need related to a public health emergency.” These provisions generally apply to private-sector employers with under 500 employees and all government employers. (There are exceptions for employers with less than 50 employees if the required leave would jeopardize the viability of their business.) This new law expands the leave for employees who have been employed at least 30 days, overriding, for these purposes, FMLA’s general requirement that employees must be employed for at least 12 months to be covered. For these purposes, a “qualifying need” exists if an employee is unable to work or telework because he/she/they need to care for a child who is under 18 years if their school or place of care has been closed, or the child care provider is unavailable, due to a public health emergency, such as COVID-19. This Emergency FMLA rule also requires employers to pay employees after 10 days. Employees on leave are to be paid at two-thirds of their regular rate of pay, based on normally scheduled hours, up to $200 per day and to a maximum of $10,000. Emergency Paid Sick Leave FFCRA requires employers with less than 500 employees to provide paid sick leave to any employee who is unable to work or telework because the employee: Is subject to a federal, state, or local quarantine or isolation order related to COVID-19; Has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; Has COVID-19 symptoms and is seeking medical diagnosis; Is caring for an individual who is subject to a quarantine or isolation order; Is caring for a child if the school or day care center has been closed, or the child care provider is unavailable, due to COVID-19 precautions; or Is experiencing any other substantially similar condition specified by the regulatory agencies. Overall, employees are entitled to at least 80 hours of paid sick leave (prorated for part-time employees). An employee is immediately eligible on date of hire. An employer cannot require an employee who is eligible for paid sick leave to find a replacement or be involved in finding a replacement for their scheduled work shift. Paid leave is limited to $511 per day ($5,110 total) for an employee’s own illness or quarantine (paid at the employee’s regular rate), and $200 per day ($2,000 total) for leave to care for others (paid at two-thirds of the employee’s regular rate). Failure to pay the required sick leave is treated as a failure to pay minimum wages in violation of the Fair Labor Standards Act. Tax Credits FFCRA offers some relief to employers who are now required to provide paid leave. The credit is available for up to $200 per day for Emergency FMLA and up to $511 per day for Emergency Paid Sick Leave payments. The credit is calculated on an individual employee basis for a total of 10 days paid leave. Employers should maintain records on employees who qualify for leave, which includes the reason for the leave, and the days taken in order to substantiate qualifications for the credit. There is also another tax credit for employers who continue to provide health coverage to employees who take Emergency FMLA or Emergency Paid Sick Leave. Employers may receive a credit for the amount paid toward maintaining the health plan, for the amounts excluded from an employee’s gross income as it related to federal income tax. This is in addition to wages paid for qualifying leave, but it cannot exceed the credit available for Emergency FMLA and Emergency Paid Sick Leave. This credit is to be requested on quarterly tax returns. It will be included in an employer’s gross income. What Employers Should Expect Next We expect additional guidance at the state and federal levels that may impact employee benefit plans, and potentially more state leave requirements. It is also important for employers to stay up-to-date on their state and municipal notices, as some are providing for insurance requirements. In addition, employers need to be cognizant of local and state emergency regulations that may affect how employers in certain industries, such as food services, operate during a public health emergency. For more information on COVID-19, see: https://www.cdc.gov/coronavirus/2019-ncov/index.html https://www.who.int/emergencies/diseases/novel-coronavirus-2019 About the Authors. This alert was prepared by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act. Contact Stacy Barrow or Alyssa Oligmueller at firstname.lastname@example.org or email@example.com This is designed only to give general information on the developments actually covered. It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Benefit Advisors Network and its members are not attorneys and are not responsible for any legal advice. To fully understand how this or any legal or compliance information affects your unique situation, you should check with a qualified attorney. © Copyright 2020 Benefit Advisors Network. All rights reserved.