This blog post can also be found on our “Coronavirus: Your Business and People Risks” resource center.
1. Does the CARES Act impact employee benefit plans?
Yes. The CARES Act impacts employer-sponsored group health plans in the following ways:
- Free coverage to individuals for COVID-19 preventive services and vaccines (when available)
- Ok for HDHPs to provide first-dollar coverage (i.e., no or low-cost coverage before meeting the HDHP’s annual deductible) for any and all telehealth visits
- Temporarily in effect for the duration of the crisis (but will expire by December 31, 2021 unless new guidance is issued)
- FSA/HRA/HSA (effective January 1, 2020):
- Permanent revocation of the prescription requirement to receive OTC reimbursements
- Includes menstrual care products as qualified medical expenses
2. Are we required to cover coronavirus (COVID-19) testing at no cost to the employee?
Yes. Under the Families First Coronavirus Response Act (FFCRA), all plans regardless of size or method of funding must provide COVID-19 testing free of charge (i.e., without any cost-sharing) to plan participants.
Note that unlike the portion of the FFCRA that applies only to employers with less than 500 employees, this portion of the FFCRA does not have an exception for employer size and applies to all health plans of any size.
3. Is the health plan required to offer coverage for testing and treatment?
Yes. This benefit in now included under essential health benefits (EHBs), therefore all plans must cover both COVID-19 testing and treatment in order to be an ACA-compliant plan. Furthermore, testing must be provided without any cost-sharing to the individual.
4. Can we provide free or low cost COVID-19 care/treatment if an employee hasn’t satisfied the HDHP deductible without disqualifying the HDHP/HSA?
Yes. Under IRS Notice 2020-15, a plan may provide free or reduced copayments for COVID-19 treatment without interfering with HSA eligibility even if a plan participant has not met their deductible. This includes telehealth visits if the visit is specifically related to COVID-19.
UPDATE from the CARES Act: Free or reduced copayments for ALL telehealth visits (not just COVID-19 specific visits) will not interfere with HSA eligibility. This should apply to mental health telehealth sessions as well.
5. Will the short-term disability (STD) plan cover non-illness self-quarantine work absences as a result of COVID-19?
Unlikely. Self-isolation with the ability to perform work would not be a payable claim under an STD policy. Individuals can get disability payments if they are unable to perform the major duties of their job as a result of the COVID-19 illness/injury beyond the STD plan’s elimination period.
6. Are there other programs that will provide payments to cover absences (including quarantines and self-isolation) as a result of COVID-19?
Yes, there may be other programs, including federal, state, and local programs.
For federal programs: Individuals may be able to receive up to 80 hours of emergency sick paid leave (and/or 12 weeks of FMLA leave) under the FFCRA. Read this legislative alert for more about these types of paid leaves under FFCRA.
For state programs: Some states (such as CA) may provide unemployment benefits (self-isolation for fear of exposure or to care for a child during a school closure) or disability benefits (quarantine under a doctor’s order). In some cases, the states have waived the normal elimination period before payments begin. Click here to review CA, CO, MA, OR and WA’s rules, or check your state’s employment website.
For local programs: Some cities have announced their own local assistance programs. For example, San Francisco will provide paid sick leave (up to 40 hours) for 1 of 5 reasons (e.g., self-isolation to prevent spread, staying home to care for a child during school closures, etc.). San Francisco will pay $15.59/hour, up to $623/employee and the employer will pay the difference between the City’s rate and the employee’s regular hourly wage. Click here for more information from the City’s website. Please check your local city or county’s webpage for similar programs.
7. Can we ask employees to alert us if they think they’ve been exposed to COVID-19 without violating HIPAA?
It depends. The HIPAA Privacy Rule (about protected health information) will apply only if the health information (e.g., COVID-19 diagnosis) comes out of the employer’s health plan.
Even if HIPAA may not apply, employers should treat all information with confidentiality and pay attention to state privacy laws which may be more stringent.
8: Can I change my dependent care FSA (DCAP) because of COVID-19 shutdowns?
Yes. Employees can enroll in, increase, or decrease DCAP elections as a result of COVID-19 related work from home policies or school/daycare shutdowns.
For now, the same permissibility does not apply for health FSAs, even if planned medical procedures have been delayed as a result of the COVID-19 pandemic. We will update these FAQs if/when the IRS provides additional guidance on this issue.
9. We need to temporarily furlough some or all of our employees. Can we keep them on the group health plan?
It depends. For the purposes of determining employee benefits, a furlough is a temporary (non-medical) leave of absence or a reduction of hours down to zero, but the employment relationship between the employer and employee is still maintained. If the ERISA plan document allows employees to take an approved (non-medical) leave of absence and still be covered for a certain time period (e.g., 12 weeks), then the furloughed employee can remain on the plan as an active member.
If this is a desirable feature, employers can amend their ERISA plan document to add this provision on a prospective basis. Employers should also notify the insurance carrier to ensure that both parties are on the same page. If this is not a desirable feature at this time, furloughed employees may either elect COBRA continuation coverage or ACA marketplace coverage.
Note that if employees are on standby (or on-call) mode, it might be possible to assign them hours of service for the sole purposes of ACA benefit eligibility. Employees who are locked in for benefits during their stability should continue to be eligible for coverage regardless of hours worked.
If none of the above apply, then employers may opt to help pay for the employee’s COBRA continuation coverage.
10. We need to layoff some/all of our employees. Can we keep them on the group health plan?
For the purposes of determining employee benefits, a layoff is a complete severance/termination of the employment relationship. The termination might be temporary, but it is still a complete termination. If the employment relationship is terminated, the former employees should only stay on the employer’s group health plan by electing COBRA continuation coverage. Individuals may obtain coverage in the Marketplace as an alternative.
Some insurance carriers are permitting employees with temporary layoffs to stay on active coverage (i.e., treating the layoff as a furlough), but we recommend that employers treat layoffs as complete terminations of employment and offer COBRA continuation coverage.
11. Can we help pay for an employee’s COBRA continuation coverage?
Yes, but an employer’s direct payments of COBRA premiums might adversely impact an employee’s ability to obtain subsidized coverage in the ACA Marketplace. Employees who lose active coverage as a result of a furlough or layoff will trigger COBRA rights and a special enrollment period in the ACA Marketplace. For a short window of time (~60 days), employees will have the option to either (1) elect COBRA continuation coverage, or (2) obtain coverage (possibly subsidized coverage) in the ACA Marketplace. If, for example, an employer offers to pay for COBRA premiums for 3-6 months, and the employees elect to take COBRA coverage for as long as the employer pays for it, the enrollment window for the Marketplace will have closed by the time the employer stops paying for COBRA coverage.
12. Can an employee drop coverage if their hours were reduced from 30 to 20 hours per week?
It depends. They can if the reduction of hours results in a loss of eligibility under the terms of the health plan. For example, if the minimum threshold to qualify for plan eligibility is 30 hours/week, then the employee must be dropped from the plan and offered COBRA continuation coverage.
They also can if the employee’s reduction of hours is still above the hours of service requirement to be eligible to participate in the plan, but the plan adopted an amendment pursuant to IRS Notice 2014-55 which allows individuals to drop the plan mid-year in order to obtain Marketplace coverage instead.
They cannot drop coverage, however, if the employee’s reduction of hours is still above the hours of service requirement to be eligible to participate in the plan and no plan amendment was adopted pursuant to IRS Notice 2014-55.
If this is a desirable feature, employers can amend their ERISA plan document to add this provision on a prospective basis.
13. Can employees drop coverage if their share of premiums is no longer affordable to them as a result of a reduction of work hours?
No. Unfortunately, the reduced hours/pay would probably not count as a significant cost increase under Section 125 of the Internal Revenue Code (if the cost of the coverage itself has not increased).
Employers may consider amending their ERISA plan document to add this provision from IRS Notice 2014-55 (mentioned above) on a prospective basis. This would allow employees to drop coverage mid-year regardless of the cost of the employer coverage. However, employees should be aware that some states require their residents to maintain qualifying health coverage or pay a state tax penalty.
14. Can employees change enrollment elections if we increase or decrease the employer’s premium payment?
Yes. A significant change to the amount an employer pays towards coverage is a permitted election change event under Section 125 of the Internal Revenue Code.
If there is an increase in how much an employer pays for premiums, all eligible employees should be provided a 30-day window to elect the impacted coverage (including those who previously waived coverage). Currently enrolled employees may also switch to a richer plan option if the cost of that plan option is significantly reduced as a result of the employer’s increasing payment.
If there is a decrease in how much an employer pays for premiums, all currently enrolled employees should be provided a 30-day window to elect to drop coverage or switch to a less expensive plan option if available.
15. Some insurance carriers have announced that they will permit individuals to enroll midyear. Can employers allow employees to enroll in the plan midyear without a qualifying event?
No. ERISA requires that employers administer the plan in accordance with the ERISA plan document. Furthermore, the Internal Revenue Code does not permit a midyear enrollment change unless there is a qualifying event, such as a gain/loss of eligibility because of an employment change or significant cost increase or gain/loss of a dependent, etc.
If employers want to permit midyear enrollments without a qualifying event, they will need to at least (1) prospectively amend the ERISA plan document and SPD, and (2) deduct the newly enrolled employee’s share of the premium payments on a post-tax basis. Employers should also provide as much advance notice to eligible employees as possible.
16. Do I need to pay attention to the “actively at work” provision under the disability and life insurance policies?
Yes. The DOL removed the “actively at work” provision for medical plans, but this provision is still quite relevant for disability and life insurance plans. Carefully review this provision in those policies to understand how they could affect your employees who are on a temporary furlough or leave of absence. This is an issue that employers will want to be on the same page with the carriers, so call your broker service team for assistance in navigating this topic.