Plan sponsors considering reduced hours or layoffs should follow these steps when determining whether benefits should continue.
- Contact your BSG|HJI Account Manager or check the plan documents for a layoff/leave provision. This may be different from any FMLA provision you may find. For insured plans, also check the group application, since certificates often lack this detail. Check all lines of coverage. If your group has a wrap document, it may also have a lay-off/leave provision. If the plan covers collectively-bargained employees, check the collective bargaining agreement as to continuation of coverage provisions following a layoff.
- Some plans state that coverage will remain in force until the end of the third month following the date of lay-off/leave. If so, this may be your first strategy, i.e., follow the terms of the plan. This will get you through that length of time.
- Absent a provision, or if the extension of leave is very short, for example, benefits continue to the end of the month following the date of leave, consider proceeding as follows.
People who are moved from full-time to part-time typically automatically lose their benefits, but – if this has not FORMALLY occurred, the employer can choose to keep benefits in force. Example: all or some employees will have hours reduced from 30 to 25. The goal is to bring them back to full time when business picks up. Reducing someone’s hours temporarily without necessarily designating the person as part-time or ending benefits is something the employer could choose to do. You can use the term furlough. Keep the carriers, including the stop-loss carrier, informed. Be sure to state the furlough is occurring due to the National Health Emergency.
As time passes, such an arrangement may not be practical. The employer perhaps is financially strapped and has to formally layoff some employees and end coverage. COBRA must be offered if both of these happen:
(1) health coverage arrangements change to become more onerous and expensive from the employee’s perspective and
(2) such change is due to a FORMAL reduction in hours or temporary or permanent loss of coverage.
Example: the reduced hours go on for weeks and months. The employer has to cut the workforce, so FORMALLY advises some employees that they are terminated or FORMALLY switched to part-time. Put this in writing. With this FORMAL change in status, then each affected employee is offered COBRA.
For your non-COBRA plans, make sure to offer any conversion or portability option.
What if the plan sponsor wants to offer COBRA and help pay the premiums? Be very cautious. If a person takes subsidized COBRA, they are stuck until COBRA is exhausted, regardless of whether the subsidy continues or ends, until at least January 1 when coverage on the individual market would be available.
- The Marketplace won’t allow mid-year enrollment unless there is a qualifying event. Dropping COBRA is not a qualifying event. COBRA must be exhausted before a mid-year enrollment is allowed.
- Group health plans won’t allow mid-year enrollment unless there is a qualifying event. Dropping COBRA is not a qualifying event. As above, COBRA must be exhausted before a mid-year enrollment is allowed. Be aware the mid-year event of ‘Significant Change in Cost’ option will not work here, since the regulations do not consider who was paying the COBRA premiums.