- Find out what triggers a COBRA event for employees and which events do not require COBRA coverage.
- Learn more about the time frames involved with electing coverage.
- Learn more about the wait-and-see approach to electing coverage.
In response to the novel coronavirus (COVID-19) outbreak, many employers have closed all or parts of their operations. They have also placed all or some employees on temporary unpaid leave in the form of mandatory furloughs. If your company has done so, or is considering it, you may wonder whether you have to offer continuing health care coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly referred to as “COBRA.” Fortunately, Fiducial has answers!
COBRA election required
The short answer is yes. Assuming your plan is subject to COBRA, covered employees with a reduction of hours and loss of coverage because of a furlough are generally entitled to this election. Their covered spouses and dependent children meet this requirement as well. Your organization should give them timely election notices and follow standard COBRA procedures.
A reduction of hours for a covered employee is a COBRA triggering event that commonly occurs when an employee:
- Goes from full-time to part-time,
- Experiences a temporary lay off,
- Takes a leave of absence, or
- Has hours reduced because of a strike or lockout.
If eligibility for the plan depends on the number of hours worked, and the employee fails to work the required hours, then the employee has experienced a reduction of hours for COBRA purposes. Keep in mind that, if the reduction in hours doesn’t cause a loss of health coverage under your plan’s rules, no COBRA obligation arises. For instance, an employee on COVID-19-related paid sick or family leave who hasn’t experienced a loss of coverage wouldn’t trigger a COBRA election.
Wait-and-see approach to electing COBRA coverage
As a practical matter, given the time frames involved with offering COBRA — including at least 60 days in which to elect coverage and 45 days in which to make the first premium payment — qualified beneficiaries can adopt a wait-and-see approach. Using this approach, they can elect coverage only if they need medical care before the election is due. For example, if the employer furloughs employees for only 30 days, those workers may choose to wait and see whether they have any medical expenses during the one-month furlough period. Then they can decide whether to elect COBRA.
COBRA coverage has long been an important stopgap measure. It helps ensure employees have health care coverage when their hours are reduced or eliminated. The COVID-19 crisis has made it even more critical. Do you need assistance in monitoring your obligations and managing the financial risks of offering health care benefits? Call Fiducial at 1-866-FIDUCIAL or make an appointment at one of our office locations. Ready to book an appointment now? Click here. Know someone who might need our services? We love referrals!
For more small business COVID-19 resources, visit Fiducial’s Coronavirus Update Center to find information on SBA loans, tax updates, the Paycheck Protection Program, paid sick and family leave, and more.