Spouses who are covered under a group health plan on the day before a qualifying event have an independent right to elect COBRA.
Six qualifying events apply to spouses: (1) employee’s termination of employment, (2) employee’s reduction of hours, (3) an employer’s bankruptcy, (4) death of the employee, (5) divorce or legal separation, and (6) a covered employee becoming entitled to Medicare.
In most cases, an employer must offer COBRA to a spouse when a qualifying event causes (or will cause) a loss of group health plan coverage. The spouse is given an independent right to elect COBRA, meaning that the spouse can elect coverage even if the employee does not.
Nuance 1: When Employers Stop Offering Spousal Health Coverage
The Affordable Care Act (ACA) does not require that employers offer group health insurance coverage to spouses and dependents. As a cost-saving measure, some employers choose to eliminate spousal health coverage and only offer coverage to employees. So, if an employer chooses to stop offering spousal health coverage, must the employer offer COBRA to spouses who were previously covered?
You may be shaking your head “yes” after reading the previous paragraph. Common sense says that because the plan is still in existence you cannot simply drop the spouses and not offer continuation. However, sometimes in the world of governmental regulation, common sense does not prevail.
Remember that a qualifying event must cause the loss of coverage. The qualifying events that apply to spouses are listed above. The termination or amendment of plan is not a qualifying event under COBRA. Thus, the employer does not have to offer COBRA to the spouses who lose coverage.
Nuance 2: When the Employee is Terminated for Gross Misconduct
If an employee is terminated for gross misconduct, the termination of employment is not a qualifying event. Because no qualifying event has occurred there is no right to COBRA for the employee, spouse and/or any dependents. No one gets a COBRA election.
For once in the compliance world, this seems like a clear rule. Not so fast. The kicker is that COBRA does not define “gross misconduct” and the courts cannot agree on a definition. A good piece of advice is to clearly define “gross misconduct” and communicate this definition with employees before any situations arise.
After consulting with a benefits attorney, if a situation appears to constitute “gross misconduct,” the employer does not need to offer COBRA to a spouse covered under the group health plan.
Nuance 3: When Spousal Coverage is Voluntarily Terminated Before a Divorce
Divorce is rarely a pretty thing. It is possible that an employee may remove a spouse from coverage before a divorce actually occurs. This voluntary termination of coverage is not technically a qualifying event because a divorce has not caused the loss of coverage – the coverage was voluntarily dropped. The IRS recognizes that, in these circumstances, spouses need protection.
The COBRA regulations provide that when spousal coverage is terminated in anticipation of a divorce, the spouse is entitled to COBRA. The tricky part is that COBRA does not begin until the actual divorce occurs – creating a gap in coverage. Thus, the regulations tie the earlier “voluntary” loss of coverage to the eventual divorce but do not start COBRA until the qualifying event (the divorce) happens. Once the employer is notified of the divorce, the employer must offer COBRA to the spouse.
Spousal COBRA Notice Best Practices
In certain circumstances, the Department of Labor requires that employers send a Notice of Unavailability. The notice must be sent under the same deadlines as an election notice. The notice of unavailability is required when the plan administrator receives notice that a qualifying event has occurred and the plan administrator determines that the individual is not entitled to COBRA.
Even when not required, a Notice of Unavailability can prevent confusion and limit disputes. A best practice is to send a Notice of Unavailability to spouses who are determined to be ineligible for COBRA.
Consequences: The Case of the Stale Cake
The potential consequences for failing to offer COBRA are best summed up by the stale cake case. Yes. You read that right. Mayes v. Winco Holdings, Inc., 846 F.3d 1274, 9th Cir (Feb. 3, 2017). In 2011, a nightshift supervisor took a cake from the store’s stales cart and put it in the breakroom to motivate nightshift employees. Even though the supervisor claimed this was a common practice, she was fired for theft. The employer claimed she was fired for gross misconduct and did not offer COBRA.
She sued alleging that she was fired not for stealing a stale cake, but was really the victim of gender discrimination. Her lawsuit included a claim for COBRA coverage. The trial court found for the employer on all counts. She appealed. In February 2017, the appeals court determined that enough evidence of discrimination existed for a trial to proceed. The case was remanded and will proceed to trial.
If the supervisor ultimately wins her case, the employer could be on the hook for retroactive COBRA coverage for the employee and her spouse, outstanding claims of the employee and her spouse and may face a potential penalty of up to $110 per day for failing to offer COBRA.
The moral of this story is to review spousal coverage situations closely. Know when you do not have to offer coverage but make sure to offer coverage when it is required. Also, keep in mind that the COBRA regulations provide the minimum requirements. An employer (following approval by its insurer or stop loss provider) may choose to offer COBRA to the spouse and/or dependents even when the law does not require it.
During open enrollment season for Flexible Spending Arrangements (FSAs), the Internal Revenue Service reminds taxpayers that they may be eligible to use tax-free dollars to pay medical expenses not covered by other health plans through their FSA.
For 2024, there is a $150 increase to the contribution limit for these accounts.
An employee who chooses to participate in an FSA can contribute up to $3,200 through payroll deductions during the 2024 plan year. Amounts contributed are not subject to federal income tax, Social Security tax or Medicare tax.
If the plan allows, the employer may also contribute to an employee’s FSA. If the employee’s spouse has a plan through their employer, the spouse can also contribute up to $3,200 to that plan. In this situation, the couple could jointly contribute up to $6,400 for their household.
For FSAs that permit the carryover of unused amounts, the maximum 2024 carryover amount to 2025 is $640. For unused amounts in 2023, the maximum amount that can be carried over to 2024 is $610.
It’s important for taxpayers to annually review their health care selections during health care open enrollment season and maximize their savings.
Eligible employees of companies that offer a health flexible spending arrangement (FSA) need to act before their medical plan year begins to take advantage of an FSA during 2024. Self-employed individuals are not eligible.
Currently, Medicare beneficiaries who are not officially admitted to a hospital may be classified under “Observation Status,” which is treated as an outpatient procedure for billing purposes. Unfortunately, the common practice of placing a beneficiary on “observation status” can have significant financial consequences for Medicare beneficiaries, since Medicare Part A and its related coverage rules only apply to actual inpatient care admissions. This may lead patients, many who are extremely sick and may need skill nursing care (SNF) to spend many days in the hospital and be charged for services that Medicare would have otherwise paid had they been admitted. Furthermore, hospitals have up to one year to retroactively change admission status to observation, leading unsuspecting beneficiaries with thousands of dollars in bills for SNF care they believed would be covered by Medicare.
Bipartisan legislation is pending in the U.S. House of Representatives that addresses Medicare’s “two midnight” policy. Representatives Joe Courtney (D-CT), Glenn Thompson (R-PA), Suzan DelBene (D-WA), and Ron Estes (R-KS) introduced H.R. 5138 which would allow observation stays to be counted toward the three-day mandatory inpatient stay for Medicare coverage of a skilled nursing facility (SNF).
Please contact your federal legislators and urge them to co-sponsor bipartisan legislation that would address this important issue!
COVID-19 Health Emergency Order Extends No-Cost Coverage of Tests and Vaccines
Employer plans should continue meeting all emergency-order requirements
The Biden administration on Oct. 13 extended the COVID-19 public health emergency for an additional 90 days, keeping emergency measures in place through Jan. 11. The public health emergency was first declared in January 2020 and has been renewed every 90 days since, but some policy analysts thought the administration might allow the emergency declaration to lapse after President Joe Biden said “the pandemic is over” in a September interview with CBS’s “60 Minutes.”
Secretary of Health and Human Services (HHS) Xavier Becerra said he extended the health emergency “after consultation with public health officials as necessary.”
The HHS secretary could terminate the public health emergency earlier than Jan. 11 or extend it again. Before the public health emergency expires, HHS has said it will give at least a 60-day notice.
Employer Coverage Implications
“This public health emergency declaration is important to group health plan sponsors because it determines the period during which group health plans and insurers must pay for COVID-19 tests (including certain over-the-counter tests) and related services without charging cost-sharing,” according to a compliance alert by HR consultancy Segal.
Segal noted that nongrandfathered group health plans and insurers also must cover COVID-19 vaccines without cost-sharing both in and out of network. After the public health emergency expires, nongrandfathered plans may limit COVID-19 vaccine coverage to in-network providers.
The coverage requirements apply to payment through both medical plans and pharmacy benefits.
Self-insured employers should ensure that their health and pharmacy coverage meets all emergency-order requirements by conferring with their plans’ third-party administrators. Fully insured employers should check that their insurance carriers are compliant with all current no-cost-sharing requirements.
Reimbursement Rate for Out-of-Network Providers
As long as the public health emergency is in place, when preventive services such as COVID-19 tests and vaccines are delivered by an out-of-network health care provider, employer plans must reimburse the provider a “reasonable amount,” as determined in comparison to prevailing market rates for such services, Segal advised. Federal agencies have said they will consider the Medicare payment rates to be reasonable.
Costs Shifting to Employers
HHS announced on Aug. 30 that if Congress does not authorize additional funding, then “as early as January 2023, the administration anticipates no longer having federal funds to purchase or distribute vaccines.” As a result, the government will transition vaccine payments to private health plans and insurers, similar to the treatment of seasonal flu or other vaccines, Segal reported.
Similarly, HHS said it expects to transition payment for oral antiviral COVID-19 medications, such as Paxlovid, to plans and insurers in mid-2023.
“Consequently, group health plan sponsors that cover COVID-19 vaccines and medications may see costs increase as the federal government transitions away from paying” these expenses, Segal said.
Additional Requirements
Other health plan requirements, most notably the requirement to extend certain deadlines related to COBRA, special enrollment, and claims and appeals, “are pegged to a different COVID-19 emergency declaration—the national emergency” that was declared in March 2020, Segal explained.
Earlier this year, Biden again extended the COVID-19 national emergency, which was set to expire on March 1, 2022.
Keeping the national emergency in place, the attorneys said, means that the extended deadlines listed below were continued through February 2023 (or, if earlier, 60 days from the end of the national emergency):
FOR PLAN PARTICIPANTS:
COBRA qualifying event and disability extension notices. The 60-day deadline by which qualified beneficiaries must notify the plan of certain qualifying events (e.g., divorce or legal separation, a dependent child ceasing to be a dependent under the terms of the plan) or disability determination.
COBRA election. The extended 60-day deadline to elect COBRA continuation coverage.
COBRA premium payments. The 45-day (for the initial payment) and 30-day (for subsequent payments) deadlines to timely pay COBRA premiums.
HIPAA special enrollment period. The 30-day deadline (in some instances, 60-day) to request enrollment in a group health plan following a special enrollment event (i.e., birth, adoption or placement for adoption of a child, marriage, loss of other health coverage, or eligibility for a state premium assistance subsidy).
Benefit claims and appeals. The deadline under the plan by which participants may file a claim for benefits (under the terms of the plan) and the deadline for appealing an adverse benefit determination.
External review. The four-month period (for the federal external review process; this period could be different for a state external review process) for a claimant to file a request for external review.
Perfecting a request for external review. The four-month period (or 48-hour period following receipt of an incomplete request notification, if later) for a claimant to perfect an incomplete request for external review.
FOR PLAN ADMINISTRATORS:
COBRA election notice. The 14-day deadline (44 days where the employer is the plan administrator) for a plan administrator to provide a COBRA election notice to qualified beneficiaries.
American Rescue Plan Act Employment-related Provisions
President Joe Biden signed the American Rescue Plan Act of 2021 (ARPA) into law on March 11, 2021. The law generally provides financial relief for individuals, state and local governments, schools, businesses and for other purposes.
In addition, the law contains the following measures of special interest to employers and their employees:
A subsidy for COBRA premiums, funded through employer tax credits
Extension of employer tax credits for FFCRA employee leave voluntarily provided through Sept. 30, 2021
Expansion of employee earnings eligible for the FFCRA tax credit
Inclusion of testing and immunization as reasons for FFCRA leave
Extension of $300 increase in weekly unemployment benefits
Extension of weekly unemployment benefits for workers who otherwise wouldn’t qualify for these benefits
Expansion of subsidy for ACA premiums
Increase in DCAP contribution limits
Extension and expansion of the employee retention tax credit
Employers should review the ARPA’s provisions to identify any requirements and opportunities that apply to them. Employers should also watch for official guidance on the implementation of the law.
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NEW YORK ALMOST READY TO ADOPT HEALTH & ESSENTIAL RIGHTS ACT (HERO)
NY State is near ready to adopt enforceable legislation protecting employees under the HERO Act. This is in addition to the March 12th law allowing up to a maximum of 4 hours of PAID time off for COVID19 vaccinations/iinjections (8 hours for 2 vaccines) for employees only. This time off is not intended for family member vaccinations.
As an employer:
– you may require proof
– you cannot require employees provide advanced noticeSome States and Cities have their own act regarding vaccinations. In Philadelphia, all employers with 50+ employees must allow for vaccinations and recovery.
If enacted, the HERO Act would require the New York Department of Labor (“NYDOL”) to issue enforceable minimum workplace health and safety standards, and would also impose significant new health and safety obligations on employers in the state. Because Governor Cuomo is expected to sign the bill into law, New York employers should be aware of the HERO Act’s implications and take necessary steps to prepare for compliance.
In additiona, California is considering allowing employees to cover dependent adults on employer sponsored plan coverage. Dependent Adults must be living in the US and considered dependent under IRS rules. Stay tuned to see if this has any movement forward.
The Current State of Consumer Driven Health Plans
Health care consumerism has always been about empowering individuals to select more cost-effective, appropriate care. This thesis is the backbone of consumer driven health plans (CDHPs), which aim to make employees active participants in their health care.
A CDHP is simply the combination of a high deductible health plan (HDHP) and a health care account. Since HDHPs have low premiums but high deductibles (i.e., employees must cover a significant portion of incurred health costs), health care accounts are often used to offset these expenses.
CDHPs can be an excellent way for employers to control health care spending, too. In fact, CDHPs are often more effective than traditional health plans at reducing total medical costs. For example, short-term cost savings increased by 20% for employers during their first year of switching to a CDHP, according to a Cigna report. That’s because CDHPs share much of their costs with employees, rather than relying primarily on the employer. Even employers that contribute to employee health accounts can choose how much to do so, providing even more spending control.
Beyond monetary advantages, CDHPs also help improve employee satisfaction with their health coverage. Reach out today to learn more about how CDHPs can benefit your organization.
Washington, D.C. – Matt Eyles, president and CEO of America’s Health Insurance Plans (AHIP), issued this statement following President Biden’s Executive Order designed to ensure that more Americans can obtain coverage as the nation continues to work to overcome the COVID-19 crisis:
Every American deserves access to affordable, comprehensive health coverage and high-quality care. We applaud President Biden for his swift actions to create more pathways for Americans to obtain coverage that is so essential to their health, well-being and peace of mind.
We applaud the call for a targeted special enrollment period that is accompanied by robust consumer outreach and education, which will provide an additional opportunity for hardworking Americans to obtain comprehensive coverage for themselves and their families. We also support the elimination of barriers for low-income adults to obtain Medicaid coverage, which is particularly essential in the midst of a pandemic.
From the start of the COVID-19 crisis, health insurance providers have taken decisive action. Working together with federal, state, and local leaders and our private-sector partners, we are committed to strengthening coverage and ensuring that costs are not a barrier to care for the virus. Health insurance providers stand ready to implement the guidance that will follow this executive order.
As the national economy reopens, an unprecedented number of workers will be required to wear faces masks in the workplace for the first time.
To help employers provide a safer work environment, the Occupational Safety and Health Administration (OSHA) has published a series of answers to frequently asked questions (FAQs) regarding the use of masks in the workplace. The new guidance outlines the differences between cloth face coverings, surgical masks and respirators.
Among other things, the FAQs explain that:
Cloth face coverings are not considered personal protective equipment and employers are not required to provide them;
OSHA generally recommends that employers encourage workers to wear face coverings at work;
Cloth face coverings are not a substitute for social distancing measures;
OSHA suggests following CDC recommendations, and always washing or discarding cloth face coverings that are visibly soiled; and
Employers must not use surgical masks or cloth face coverings when respirators are needed.
When: On June 5, 2020, President Trump signed the Paycheck Protection Program Flexibility Act (PPPFA) into law. These amendments are effective as if included in the CARES Act.
What: The PPPFA modifies provisions related to the forgiveness of loans made to small businesses under the Paycheck Protection Program (PPP) implemented in response to COVID-19. The following summarizes how the PPPFA changes the PPP.
The PPPFA reduces the amount of loan needed for payroll from 75% to 60%.
The PPPFA requires only 60% of forgivable expenses be used towards payroll costs, as opposed to 75%. Meaning, the percentage of loan proceeds that must be spent on payroll costs is now reduced allowing borrowers to spend more on overhead and fixed costs such as rent and utilities.
This does not technically change the requirement under the Small Business Administration’s (SBA) First Interim Final Rule that at least 75% of the loan be used for payroll costs, but it seems likely the SBA will issue new guidance to conform its guidelines to this legislation.
The PPPFA extends time period to use loan proceeds from eight weeks to 24 weeks.
Borrowers can now decide whether to retain its current eight weeks covered period or switch to a 24-week covered period. The flexibility to spend the PPP funds over the course of the remainder of the year increases the likelihood of satisfying the criteria for loan forgiveness.
Extending the time period to use loan proceeds does not permit the SBA to continue accepting applications; the PPP application deadline remains June 30, 2020.
The PPPFA prolongs the rehire date deadline from June 30 to December 31, 2020.
Borrowers must restore FTEs and certain salaries to February 15 levels on or before December 31, 2020, extended from June 30th.
The PPPFA eases rehire requirements based on employee availability and social distancing/safety requirements.
In order to avoid a reduction in forgiveness, borrowers that could prove an attempt to rehire an employee who reject the offer will be disregarded.
PPPFA adds additional exceptions for a reduced head count should the borrower be able to document the inability to find qualified employees for unfilled positions on or before December 31, 2020, and when the borrower cannot restore business operations to February 15 levels because it is unable to comply with federal requirements or guidance related to COVID-19 (e.g., social distancing, sanitation requirements or customer safety needs).
The PPPFA extends the repayment period from two years to five years.
PPPFA eases repayment terms in the event loans or portions of them are not forgiven. Borrowers now will have a minimum of five years instead of two years. The interest rate remains one percent. Also, the first payment will be deferred for six months after the SBA makes a determination on forgiveness.
The PPPFA repealed the provision of the CARES Act that barred PPP forgiveness recipients from deferring employer payroll taxes.
The PPPFA allows borrowers to take advantage of the CARES Act provision allowing deferment of the employer’s payroll taxes. Previously, PPP did not permit deferment of these taxes on the forgivable portion of the loan. Specifically, PPPFA allows borrowers to defer 50% of the employer’s share of payroll taxes until 2021 and the remaining 50% until 2022.
Borrowers should look for additional guidance and rules from the U.S. Treasury Department and the U.S. Small Business Administration.
