COVID-19 and Employee Benefits

By Jason W. Douthit - Bullard Law

March 17, 2020

COVID-19 was not even a term until a few months ago.  Now it is impacting every facet of our lives.  Bullard Law is receiving myriad questions related to COVID-19 and every aspect of the employer/employee relationship including employee benefits.  Employers and employees should be particularly aware of the following employee benefits issues as the coronavirus pandemic unfolds.

Health Plan Coverage and Coronavirus Testing.  A number of states, including Oregon and Washington, are requiring insured health plans to cover the costs of coronavirus testing.  Oregon and Washington require health plans to fully cover the cost of testing so insured’s are not subject to deductibles, co-payments or co-insurance costs.  Note that self-insured health plans (i.e., employer sponsored health plans where the plan’s benefits are paid from the employer’s general assets instead of an insurance company) are not subject to such state requirements because these plans are governed exclusively by Federal law.  There is currently no requirement under Federal law for self-insured plans to cover costs related to coronavirus testing, but that is likely to change as the House recently passed the Families First Coronavirus Response Act (H.R. 6201) which requires no-cost testing coverage.  Since the bill in its current form also mandates paid sick time and amends the federal Family and Medical Leave Act to cover certain employees impacted by COVID-19 for employers with fewer than 500 employees, it is anticipated that the bill will be modified before passage. We will continue to keep you informed.

Using a Health Savings Account to Pay for Coronavirus Testing or Treatment.  Employers and employees may make tax free contributions to a health savings account to help offset the costs associated with qualified high deductible health plans (HDHP).  A qualified HDHP must require the deductible to be met before any costs are covered, except for preventative care.  This has raised questions about whether testing or treatment costs related to coronavirus would be deemed preventative care.  The IRS has provided relief in the form of Notice 2020-15 which states that a qualified HDHP may cover the costs of health benefits for testing and treating COVID-19 without applying the associated costs to the deductible.

HIPAA & GINA Considerations.  Federal laws such as Health Insurance Portability and Accountability Act (HIPAA) and the Genetic Information Nondiscrimination Act of 2008 (GINA) require covered entities such as employers and health plans to maintain the privacy of protected health information.  Although it has been declared a pandemic, there is no exception to these rules for information related to the coronavirus.  Employers are required to take the same steps to protect health information about an employee’s coronavirus status as it would any other protected health information.  GINA prohibits employers from discriminating against an employee based on the employee’s family member’s illness (such as whether an employee’s family member has or had coronavirus).

COBRA Coverage.  Employers should be aware of the coverage requirements under the health plans made available to their employees.  If an employee’s schedule is reduced such that the employee is no longer entitled to health insurance coverage and coverage is lost, then a COBRA notice must be sent to the employee.  Employers should check with their health plan insurer if the employer wishes to modify any employment requirements for coverage to avoid a lapse of coverage for employees who have reduced schedules.  Before changing coverage provisions, employers with self-insured plans (i.e., benefits are paid for with the employer’s general assets) should check with their stop-loss insurer to be certain that the insurance will apply to benefits paid to employees or former employees who would not have received benefits under the existing coverage provisions.  

ACA Shared Responsibility Payments and Employees on Leave.  Under the Affordable Care Act (ACA), applicable large employers (employers with 50 or more full-time employees as defined by the ACA) may be subject to shared responsibility payments (SRP) for not offering full-time employees health care coverage.  Employers with employees on leave will need to determine whether: (a) coverage must be offered while an employee is on leave; and (b) if coverage is terminated during the leave period, when it must be offered after an employee returns from leave.  Paid leave should be treated as active employment for ACA purposes.  Paid leave should be counted as hours worked during a lookback period.  If employees are receiving coverage in a stability period when they go on paid leave, then they should continue to be covered until they go on unpaid leave or reach a new stability period in which they do not qualify for coverage in the preceding lookback period.    

If an employee is not on paid leave, then upon the employee’s return to work, it needs to be determined whether the employee is treated as a new employee or a continuing employee.  In general, under the ACA, when employees return from an unpaid leave within 13 weeks, they will be treated as a continuing employee (the 13-week period is extended to 26 weeks for certain educational employees) and employees returning after 13 weeks of unpaid leave are deemed to be new employees (26 weeks for educational employees).  Of course, employers or health plans may treat employees more favorably than the ACA requires—employers should review their health plan documents to determine when employees are entitled to coverage during unpaid leaves of absence or upon returning from an unpaid leave.