Health Benefits During a Pandemic: Key Questions and Answers
Since the novel coronavirus (COVID-19) crisis exploded, employers of all sizes have been grappling with the challenge of whether and how to remain operational while taking care of their people. In short, health care benefits are more important than ever. The pandemic’s impact, however, has created a variety of compliance issues. Here are some key questions and answers.
How’s coverage affected for furloughed employees?
Many employers have turned to furloughs to ease payroll costs during the severe economic downturn triggered by necessary social distancing measures. Whether maintaining health care coverage for furloughed employees makes sense depends on several factors, including the fine print of your plan document and contracts with insurers and stop-loss carriers.
Except in cases involving employees on unpaid leave through the Family and Medical Leave Act, health insurers typically don’t consider employees on unpaid leave as eligible for “active” employee status. However, exceptions sometimes exist for a relatively brief lapse in active status, such as a furlough. Review your insurance documents carefully.
If your plan is self-insured, you have more discretion regarding maintaining coverage for furloughed employees. But if that involves a formal change in policy, you’ll need to update your plan language accordingly and check on implications for your stop-loss coverage.
You also must be careful about the language you use in expanding coverage eligibility so that you don’t inadvertently promise coverage under scenarios that aren’t as disruptive as the current pandemic. Cost considerations and your anticipated post-pandemic labor needs should play a vital role in your deliberations as well.
What about the ACA?
How you handle furloughs could have implications for Affordable Care Act (ACA) compliance, assuming you’re covered by that law’s employer mandate. Consider the situation if an “employment relationship” is assumed to still exist while employees are furloughed. Further suppose that, instead of keeping furloughed employees on your health care plan, you cut them off and their only option to maintain coverage is via COBRA.
The cost to furloughed employees of maintaining COBRA coverage, assuming you don’t subsidize their premiums, would typically cause your plan to fail the ACA’s affordability test because, by definition, furloughed employees aren’t being paid. (In theory, the earnings of other family members who are still working could make their COBRA benefits “affordable,” but this is improbable for all furloughed employees.)
You could try to avoid the affordability issue by subsidizing furloughed employees’ COBRA coverage for a fixed period. But if that period extends beyond the point at which you’re willing or able to provide a subsidy, you’d need to coordinate the end of subsidies with furloughed employees’ eligibility to obtain coverage via a Health Insurance Marketplace (commonly known as an “Exchange”). Bad timing could cause a furloughed employee to miss the enrollment window and lose coverage altogether.
Other potential ACA compliance issues can crop up, too, including when furloughed employees can rejoin your plan after they’re returned to active employee status. Consult an employment attorney with ACA expertise before tinkering with your health benefit maintenance policy for furloughed employees.
Should we provide first-dollar coverage for treatment?
The Coronavirus Aid, Relief, and Economic Security (CARES) Act and the earlier Families First Coronavirus Response Act (FFCRA) require most health care plans to cover COVID-19 testing on a first-dollar basis during the federally declared emergency period. The laws don’t, however, mandate first-dollar treatment of COVID-19 — though major health plans (including Aetna and Anthem) have seized the initiative to do so, at least until June.
Their rationale includes practical considerations: If covered plan members postpone seeking COVID-19 treatment because of financial concerns, and their conditions deteriorate, the cost of treating them will be far greater — and their prognoses worse — than if they sought treatment immediately.
While some self-insured employers have opted to provide first-dollar coverage for COVID-19 treatment, others are still mulling their options as of this writing. A March 2020 poll of self-insured employers by a major consulting firm found mixed expectations among those that remain undecided, and that nearly half hadn’t yet considered the question.
If your organization remains on the fence about whether to offer first-dollar coverage for COVID-19 treatment, cost is certainly one factor to consider — but it’s not the only one. You might decide to offer the coverage purely out of concern for your employees’ well-being.
Either way, you’ll need to establish some ground rules. These include how long to maintain the policy, and whether you’ll drop copays, deductibles and cost-sharing for COVID-19 treatment only if it’s delivered within your provider network. You’ll also need to weigh in on whether to protect employees from balance billing (often referred to as “surprise billing”) by out-of-network specialty providers whose services are rendered in conjunction with those of in-network providers.
How can we forecast our 2020 costs?
However you modify your health care plan during the pandemic, if you do at all, you’ll want to forecast how much more you’ll need to spend on benefits this year for business-planning purposes. (If you’re fully insured, you’re simply left wondering how much your premiums might go up in 2021.)
Given the rapid pace of COVID-19 developments, you’ll need to revise estimates regularly. Sunit Patel, top health benefits actuary at consultancy Mercer, suggests the following forecasting method. Start with your original 2020 cost projection, then adjust it for three variables related to COVID-19:
- Testing costs. Include in your estimate both the cost of the tests themselves and the number you expect to be performed. Consider ease of testing — the easier it is, the more tests that will likely be taken — and any changes in recommended testing criteria.
- Treatment costs. Hospitalization obviously costs more than outpatient treatment. The World Health Organization estimates that only 20% of people who contract COVID-19 require hospitalization. Infection rates vary by geography, of course.
- Unrelated noncritical medical services. When health care providers are booked up treating serious conditions such as COVID-19, other medical issues take a back seat. Some elective services may be unavailable because of the need to limit infection risk by keeping people away from facilities where patients are being treated or tested. Some noncritical services might be pushed into next year; others, such as those for conditions that resolve naturally, might be dropped altogether.
Turn to your advisors
The implications of the COVID-19 pandemic touch every facet of being an employer, including health care benefits. If you’re having a tough time with the learning curve, you’re not alone. Your professional advisors can help you understand the legal changes and cost impact of this crisis.