Most benefit plans have a provision requiring a certain number of hours worked to be eligible for coverage. If an employee experiences a furlough, a layoff, or an unpaid leave of absence, has that employee failed to work the required hours for plan eligibility? If your plan is self-funded, what do the plan documents say? What about when you're fully insured? Who pays for coverage?

While the answers to these questions often require a review of specific facts and circumstances, it may be helpful to address some of these scenarios. For fully insured plans, there are usually active provisions that require coverage to be continued or coverage eligibility to be continued. That should be looked at on a state-by-state basis. For a self-funded plan, this can be dependent on the terms of your governing plan document.

Some employees, even though they have experienced a reduction in hours, may continue to be eligible for coverage. For example, for purposes of the shared employer responsibility provisions of the Affordable Care Act (ACA), an employer may count an employee's hours of service in one period (referred to as a measurement period) to determine that employee's full-time status (and plan eligibility) for a subsequent period (referred to as a stability period). In this case, an employee who experiences a reduction of hours during the stability period could continue to be covered for the remainder of her "locked-in" status as a full-time employee for the remainder of this stability period.

A recurring request lately is for voluntary standalone expansions of pandemic-related benefits beyond a company's group health plan footprint. In an effort to help people, companies want to extend free COVID-19 testing or to extend telehealth to all employees irrespective of their eligibility for or enrolment in other employment-based health plan coverage.

Unfortunately, this is problematic. If an employer extends coverage under the ACA, they generally have to provide benefits otherwise compliant under the ACA. This generally includes all of the preventative mandates, prohibitions on limits on coverage, and no annual or lifetime caps. Therefore, all of the provisions of healthcare reform would apply, which essentially means that a standalone benefits plan limited to pandemic-related benefits only, generally is not going to work.

As was the case prior to COVID-19, the group health plans of private and public employers with 20 or more employees employed on a typical business day during the previous calendar year are generally required to comply with COBRA. An employee of such an employer who loses job-based health coverage – by either termination of employment or a reduction in hours worked – may, in most cases, elect to continue this group health plan coverage for a limited time and at the full cost to the plan (both the employer and employee portions) if coverage is lost due to certain events.

If a furloughed employee loses health care coverage, that employee will also be eligible for COBRA continuation. Since the employee who must pay the full premium is currently without a paycheck, it will be difficult for that person to afford to pay that premium. That is why one of the issues that may be considered as part of any new legislation is a subsidy for the affected employees for their continued cost of coverage.

When it comes to a furloughed employee, how does that affect the employer's COBRA obligations? Keep in mind that a COBRA qualifying event is composed of two parts: (1) a loss of coverage as a result of (2) one of the events listed in the COBRA statute.

These events include termination of employment and reduction in hours. So, if an individual loses coverage because of a reduction in hours, that would be a COBRA qualifying event. In addition, if somebody goes on unpaid furlough and no longer has a salary from which to make pre-tax premium contributions (meaning that [s]he must pay premiums on an after-tax basis), conservatively approaching that scenario, it could treat that as a COBRA event.

With many of these potential employee qualifying events in the wake of the pandemic, continued health coverage is critical, irrespective of the reason an employee's "at-work" status changes. Whether necessary for employers to furlough employees for a period of time and continue coverage (with employees paying only the employee portion of the applicable premium or some other amount) or for them to terminate employees outright, continuation coverage may be more important than ever for qualified beneficiaries impacted by COVID-19.

With recent relief affording additional time in which to make these elections and to remit premiums, COBRA may be a much more enticing option to allay concerns about finding a new provider and establishing new provider relationships, and any deductibles or out-of-pocket maximums that may have been satisfied.

Overall, it is important that employers and employees understand the impact of changes in employment status on eligibility for job-based health coverage. The threat of COVID-19 adds additional complexity with respect to the ever-important matter of maintaining continuity of care.

William Sweetnam is the legislative and technical director for ECFC, a non-profit organization dedicated to maintaining and expanding employee benefit programs on a tax-advantaged basis.

Read more: 

• COBRA continuation benefits: Furlough vs. layoff
• 10 steps to take after a layoff or furlough
• 7 best employee benefits to provide in a recession