Many employers that sponsor group health plans have portions of their employee population that are not eligible for the group health plan, typically because they are part-time employees. Employers sometimes wish to give these part-time employees something to assist them with their health care needs or expenditures, and it can be tempting to offer that population telemedicine benefits instead of the group health plan.
There are significant compliance concerns with this design however, as a telemedicine program can be robust enough to qualify as a group health plan subject to ERISA, COBRA, HIPAA, and other regulations. When telemedicine is coupled with a major medical program, this only raises minor concerns or compliance needs. When offered as a stand-alone service however, this raises more serious issues. This is because on its own, a telemedicine program cannot meet the ACA’s market reforms, such as offering preventive care like immunizations; or certain health screenings. A group health plan that fails to meet market reforms can be subject to penalties of up to $100 a day per employee.
Offering these employees telemedicine in the short term during the COVID-19 pandemic is likely less risky than a blanket offer of telemedicine coverage for an entire calendar or plan year, but it is currently unclear how regulators will respond to this approach. If an employer wishes to offer telemedicine to employees who are not eligible for the group health plan, they should consult with counsel to ensure they understand the potential risks. Alternatively, employers in this situation could offer part-time employees Individual Coverage HRAs (ICHRAs) to offset the cost of coverage the employee purchases individually. Alera Group will continue to monitor for any signals from Washington DC that telemedicine may be used in unique ways during the COVID-19 pandemic.
For the latest updates from the Alera Group team regarding coronavirus (COVID-19), please visit our live dashboard at aleragroup.com/coronavirus.
About the Author:
Danielle is the Director of Compliance for Alera’s Employee Benefits division. She previously served as the Senior Vice President of Compliance and Operations and Chief Compliance Officer at United Benefit Advisors (UBA). Additionally, she served as an Adjunct Professor at DePaul University. She worked as a Senior Writer Analyst at Wolters Kluwer and as a Law Clerk at Clifford Law Offices. Danielle graduated with a B.A. in Sociology, History, and Business at Tulane University. She earned her JD in Health Law from DePaul University College of Law.
The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers or our clients. This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered. Those reading this alert are encouraged to seek direct counsel on legal questions.
This alert was updated on 04/10/20.
As much of the country is locked-down due to coronavirus 19 (COVID-19), employers have concerns regarding their employee benefit programs. This may stem from a reduction in hours and, unfortunately, from terminating, furloughing, or laying-off employees – at least temporarily. The following are considerations for employers when addressing employees’ benefits during a layoff or other temporary separation from employment.
Plan Documents and Termination vs. Furlough vs. Lay-Off
Termination, furlough and lay-off are not defined terms under ERISA or the Affordable Care Act. A furlough is generally considered to be a mandatory leave with limited or no pay, with the expectation that employees return to work once regular business resumes. A termination and a lay-off are more similar, but an employee who is temporarily laid off will likely be asked to return to work. The problem from an employee benefits perspective is that plan documents do not usually differentiate between an employee who is terminated versus one who is laid off versus one who is furloughed. For benefits purposes, eligibility is generally described as an active full-time employee or an employee who works at least a minimum number of hours per week (e.g., 30). If an employee is under protected leave—such as FMLA—benefits continue during leave. This means that any employee who is not meeting the hours requirement or is not actively at work (work from home is considered actively at work) based on being terminated, furloughed, or laid off–even temporarily—will generally have their benefits terminated and receive an offering of COBRA, state continuation, or no offer of continuation depending on the employer’s size and state in which they are located.
It is important to review the plan documents from the carrier to determine whether it’s relevant whether leave is paid or unpaid, and to determine how long benefits may continue during a furlough or layoff. It is also important to determine if the carrier will allow coverage to continue as long as premiums continue to be paid, during a public health emergency. For a self-funded/self-insured plan, the employer should look at its own summary plan description, plan document, and the stop-loss policy to determine if there how coverage is affected during a furlough or layoff.
A reduction in hours, which includes a temporary lay-off and furlough, is considered a COBRA qualifying event if it results in a loss of coverage. If an employer has fewer than 20 employees, state continuation law (“mini-COBRA”) may apply. The IRS COBRA regulations provide that a reduction in hours for a qualifying employee occurs when there is a decrease in hours an employee is required to work or actually works, and is not accompanied by an immediate termination of employment. If a group health plan eligibility depends on number of hours worked in a given period—such as 30 hours per week—and the employee is not working or has not worked those hours, it is considered a reduction in hours.
If there is no difference in the plan documents for furloughed, laid-off, or terminated employees and the carrier will not grant a concession, then a reduction in hours or no longer working is a qualifying event and employees should be terminated from the group health plan. We understand this can be hardship and difficult decision to make during a public health emergency.
Also keep in mind that loss of coverage opens a HIPAA special enrollment period for an employee to enroll in a spouse’s plan, if one is available.
Keeping Active Employee Coverage for Furloughed or Terminated Employees
There have been instances where a furloughed employee or a terminated employee may remain active on a group health plan or can change their elections. If the health plan is fully-insured, an employer may have a discussion with the insurance carrier if employees that are not working or not meeting hourly requirements for eligibility can remain active on the plan, as long as the premiums are paid. For a self-funded (also known as self-insured) plan, the discussion should be had with the stop-loss carrier. If the carriers approve, the plan documents can be amended to allow this continuance of coverage due to the pandemic. Employers should set forth an expiration date for this offering and consult with counsel or their broker to make these types of changes. Approval from the insurance carrier or stop-loss carrier is required, in order ot make sure claims will be paid for members who would be otherwise ineligible to continue participating on the plan.
For employees that are unpaid during this time, employers have a few different options to consider in having the members pay for their contribution amounts. The employer can choose to undertake the cost in full and choose not to have members repay even if they return to work. The employer can also set-up a repayment agreement, where members will repay any contributions when they return to work. In this regard, employment or benefits counsel should be retained to help create the document and mitigate risk. Finally, the employer can request that the members send in their contribution post-tax, such as with a check or cash that is mailed in. Employers who take this route should make sure that such contributions go directly towards the plan cost and are not retained by the employer to pay for other operations costs.
Election Changes for Employees
Employers are choosing to take a wide range of action during this time, which may also include reducing pay for employees as well as furlough or termination. If an employee experiences any of those events, they may be able to make particular changes to their elections for group health plans. As a few specific options are discussed below, an employer must keep in mind that cafeteria plan (Section 125 plan) qualifying events, as well as HIPAA special qualifying events, continue to apply. Employers should review the plan documents to help determine if an employee is eligible for an election change under either Section 125 or HIPAA. For example, an employee who is enrolled in a Dependent Care Flexible Spending Account (DCFSA, also called a DCAP) can make a contribution change if the cost of coverage has changed, such as a childcare provider not being available. A change in cost to zero dollars due to a closure is considered a qualifying event to make a mid-year change to a contribution amount for a DCFSA. Likewise, an employee that is unpaid may be able to suspend certain payments or pay for them post-tax.
If an employee is not necessarily eligible for an election change under Section 125 or HIPAA, state law should be reviewed. Under some state laws, furloughed employees may continue to be eligible for benefits even if they are not meeting hourly requirements for eligibility due to furloughed status.
Finally, some carriers are allowing special open enrollment. Although the carriers are allowing it, employers are not necessarily required to offer it. Likewise, a carrier allowing a special open enrollment is not a qualifying event under cafeteria plan rules or HIPAA. The IRS may be less likely to penalize plan sponsors that allow a special open enrollment given the unprecedented circumstances; however, employers need to be aware that there is still risk and provide it on a uniform and reasonable basis. As there is potential risk, an employer should consider having contributions be post-tax as it can help reduce risk of allowing employees enroll in a plan without having a qualifying event. If employers choose to allow a special open enrollment due to COVID-19 concerns, they may want to update their plan documents to reflect this period.
COBRA Offering and Assistance
If an employee is eligible for COBRA, an employer must follow COBRA requirements including sending election notices and allowing grace periods. One concern for employers is whether employees will be able to afford COBRA while not working during a public health emergency. An employer does have options in regards to offering COBRA payment assistance to employees.
COBRA sets the premium limit at 102% of the cost of coverage; however, an employer is not required to charge the full 102%. An employer can set a COBRA rate to reflect the amount an active employee pays for benefits and the employer can continue to pay their portion. Employers should consider applicable nondiscrimination requirements when deciding whether to change the contribution for all COBRA participants or just those who have a reduction in hours due to a public health emergency. One caveat is, of course, that the payments made by the employee during unpaid leave will be paid post-tax. This may also pose an issue for employees that may not be able to afford their portion of a premium while not receiving a paycheck.
As mentioned, an employer may subsidize all or a portion of the COBRA premium while employees are laid off or on furlough. An employer could also set up a repayment plan, where employees repay an employer for a portion of the COBRA premium when they return to work. Employers may wish to have employees agree to repayment terms and a schedule before providing subsidized COBRA. Employers should consult with benefits counsel when drafting a repayment agreement.
Applicable Large Employer and Stability Periods
Another situation is when an employee is in a stability period as full-time, meaning they should be treated as full-time for purposes of the ACA’s employer shared responsibility provision (ESRP) and continue to be offered health coverage even if they are not working full-time. Under the “look-back” measurement method, an employee that worked full-time hours during the measurement period generally must be treated as full-time for their entire stability period unless they are terminated. An employer may design its plan to terminate coverage (and offer COBRA) to employees who are in a stability period but have experienced a recent reduction in hours. If an employer chooses to terminate health benefits for an employee in a stability period (but the employee is still employed), the employer may be exposed to the “affordability” penalty if an employee receives a premium tax credit for Marketplace coverage (as COBRA coverage is unlikely to be “affordable” in these situations). One way to help with potential exposure is to subsidize COBRA, to make sure that the offering still meets affordability under the ACA.
Return to Work and Reinstatement of Benefits
For group health plans, the ACA requires that benefits be reinstated, if the employee was enrolled prior to leave, and the unpaid leave did not extend for more than 13 consecutive weeks (26 for educational institutions). If an employee was not enrolled in benefits at the time they left (i.e., because they previously waived an offer of coverage), they are not required under the ACA to be reinstated on benefits. If an employee was in a waiting period, then their time on the waiting period is usually added to whatever remains upon their return. For example, assume an employer’s waiting period is first of the month following 60 days. An employee is temporarily laid off on day 31, due to COVID-19. Upon return to work, 30 days are credited towards the waiting period and the employee should be able to enroll the first of the month following 30 days (because he served 30 days previously). The facts and circumstances, along with terms of the plan should be reviewed to confirm how waiting periods and reinstatement works in specific situations. If leave extends for a longer duration, the waiting period may reset.
Non-COBRA Eligible Benefits
For benefits that are not COBRA eligible, such as disability and life insurance, an employer should discuss options with its carrier and broker. A carrier may allow temporary continuation of coverage for employees that are furloughed, laid-off, terminated, or not meeting hour requirements for eligibility if the premiums continue to be paid.
Public Health Emergency as Qualifying Event to Enroll
Carriers should be contacted to determine if they will allow the public health emergency to be considered a qualifying event to allow employees to enroll on a plan. Some carriers are allowing this. New state regulations and emergency declarations should also be reviewed, to determine if fully-insured plans are required to allow enrollment or if the Marketplace Exchange is allowing a special enrollment onto an individual plan during this time. If an employer has a self-funded plan, it should review its own plan documents if it is considering amending to allow a special enrollment to occur during public health emergencies. The employer should ensure their stop-loss carrier agrees, and they should also consider any potential Section 125 issues (employee contributions may need to be after-tax for the remainder of the plan year, if mid-year enrollment is not pursuant to a change in status event). Note that section 125 permits employees to make a new election to participate upon a return from unpaid leave that lasts more than 30 days.
Employees Paying Premiums
If an employer has terminated, furloughed, or laid-off employees but has allowed them to continue benefits, the employer needs to determine if and how they want employees on unpaid leave to pay for their premium contribution. An employer can require a weekly or monthly check to be sent in for any benefit offering—including medical, dental, vision, disability, life, etc., as long as coverage continues. It also includes voluntary products that an employee wants to continue. Pay-as-you-go should be offered as an option to employees, although an employer could also set-up a repayment plan with employees where the employer subsidizes the entire premium and the employee repays a portion on return to work. Counsel should be consulted to help write a repayment agreement and employers should ensure that employees understand what it entails.
Closed Business- What Now?
Some employers are having to close down their entire businesses and no longer operate at all. When a business closes, benefits also end. This is for businesses that are completely closed—not just temporarily. Without any active employees, the insurance carriers may not be willing to maintain coverage. There may be options for employees to convert certain policies into an individual policy, and carriers should be contacted to help make this determination. If conversion is possible, this should be communicated to former employees so they are aware of their choice. If COBRA and state continuation does not have to be offered because the group health plan has ceased altogether, an unavailability of COBRA notice should be provided. For those who are experiencing this, a business closing its doors and employees—as well as owners—no longer working (and losing coverage) is a qualifying event to enroll for individual coverage or other employer-sponsored coverage (such as if an employee’s spouse has employer coverage). If the business reopens, it can start a new group health plan as well as other benefits.
What Employers Should Do
If an employer has questions, they should ask their broker and carrier to see what options are available to continue to maintain employees’ or former employees’ benefits, as well as if they want to terminate coverage. During a public health crisis, there are options to help elevate concerns with benefit offerings. There may also be tax credit and financial assistance available for some employers at the state level, as well as potentially the federal level.
About the Authors. This alert was prepared for Alera Group by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act. Contact Stacy Barrow or Alyssa Oligmueller at sbarrow@marbarlaw.com or aoligmueller@marbarlaw.com.
The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers or our clients. This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered. This agency and Marathas Barrow Weatherhead Lent LLP are not obligated to provide updates on the information presented herein. Those reading this alert are encouraged to seek direct counsel on legal questions.
© 2020 Marathas Barrow Weatherhead Lent LLP. All Rights Reserved.
A commonly asked question in response to the COVID-19 pandemic is, how can we encourage our employees who are working remotely to stay physically AND mentally well while at home?
Many companies are currently offering free access to their wellbeing apps and content during the COVID-19 outbreak. Take advantage of the apps below to give your health a boost!
Peloton App – Peloton has extended its free trial membership to 90 days. As a Peloton rider myself, I can tell you this app is amazing! Best part? You don't have to own a Peloton bike. You can enjoy resources on cycling, outdoor running, treadmill runs, strength training, HIIT classes, yoga classes, boot camp, meditation, strength training and stretching. You can find more information here.
Grokker – Grokker is known for their high-end video content and wellbeing programs. This includes fitness classes, yoga classes, nutrition and cooking classes for your physical wellbeing. The app also includes stress reduction, meditation and sleep programs that can support you with your mental health. Access your free trial here.
Headspace – Headspace is known for its app for mindfulness and meditation. During the COVID-19 outbreak, they are offering a limited subset of content completely free to all. This content can be accessed online or on the app. Click here for details.
Down Dog – This is a collection of apps including Yoga, Yoga for Beginners, HITT, Barre, and 7 Minute Workout. These apps are all free through April 1st. Start your class here.
Additionally, there are a variety of other apps that aren’t offering specials but do have their usual free trials available for first-time users!
About the Author
Andrea Davis, Director of Wellbeing
Andrea joined CBP, an Alera Group company, in July 2013, bringing over 15 years of experience in management consulting and strategic solutions. As the Director of Wellbeing, she is responsible for assisting with the development, implementation and evaluation of comprehensive wellness strategies for existing and prospective CBP clients. She provides assistance and support to CBP clients by developing personalized programs that fit clients’ unique health management needs, wellness program implementation, committee development, promotion and marketing of their programs to encourage participation. In addition, Andrea conducts program analysis and generates reports related to program participation, health assessment and client utilization. She interfaces with CBP’s Chief Medical Officer, Dr. Terrence Fitzgerald, to leverage clinical and analytic data in support of CBP’s health management solutions.
A commonly asked question in response to the COVID-19 pandemic is, how can we encourage our employees who are working remote to stay physically AND mentally well while at home?
Many companies are currently offering free access to their wellbeing apps and content during the COVID-19 pandemic. Take advantage of the apps below to give your health a boost!
Peloton App – Peloton has extended its free trial membership to 90 days. As a Peloton rider myself, I can tell you this app is amazing! Best part? You don't have to a Peloton bike. You can enjoy resources on cycling, outdoor running, treadmill runs, strength training, HIIT classes, yoga classes, boot camp, meditation, strength training and stretching. You can find more information here.
Grokker – Grokker is known for their high-end video content and wellbeing programs. This includes fitness classes, yoga classes, nutrition and cooking classes for your physical wellbeing. The app also includes stress reduction, meditation and sleep programs that can support you with your mental health. Access your free trial here.
Headspace – Headspace is known for its app for mindfulness and meditation. During the COVID-19 outbreak, they are offering a limited subset of content completely free to all. This content can be accessed online or on the app. Click here for details.
Down Dog – This is a collection of apps including Yoga, Yoga for Beginners, HITT, Barre, and 7 Minute Workout. These apps are all free through April 1st. Start your class here.
Additionally, there are a variety of other apps that aren’t offering specials but do have their usual free trials available for first-time users!
About the Author
Andrea Davis, Director of Wellbeing
Andrea joined CBP, an Alera Group company, in July 2013, bringing over 15 years of experience in management consulting and strategic solutions. As the Director of Wellbeing, she is responsible for assisting with the development, implementation and evaluation of comprehensive wellness strategies for existing and prospective CBP clients. She provides assistance and support to CBP clients by developing personalized programs that fit clients’ unique health management needs, wellness program implementation, committee development, promotion and marketing of their programs to encourage participation. In addition, Andrea conducts program analysis and generates reports related to program participation, health assessment and client utilization. She interfaces with CBP’s Chief Medical Officer, Dr. Terrence Fitzgerald, to leverage clinical and analytic data in support of CBP’s health management solutions.
States and the federal government have issued (or re-issued) guidance for employers in response to the recent novel coronavirus disease 2019 (COVID-19) pandemic. As of March 14, 2020, the Centers for Disease Control and Prevention (CDC) has reported more than 2,000 cases from 49 states and Washington, DC. Agency guidance includes the following:
We expect additional guidance in the coming weeks. There will likely be COVID-19 related legislation as well. On March 14, the House of Representatives passed the Families First Coronavirus Response Act (with adjustments on March 16) which includes emergency paid sick leave and job-protected paid family and medical leave. The Act will head to the Senate the week of March 16, where it’s expected to pass. The Act applies to employers with less than 500 employees, primarily because there are tax credits to assist employers in paying employees. In the meantime, below are highlights of state action and other guidance for employers related to COVID-19.
State Mandates and Related Guidance
Some states have begun directing insurance companies to eliminate cost-sharing for COVID-19 testing. These insurance mandates apply directly to fully insured group health plans; self-insured ERISA plans would not be subject to any state insurance mandates, although third party administrators may be making certain changes automatically unless the employer opts-out. Likewise, some health insurance carriers in non-mandated states have indicated that they will voluntarily waive charges for COVID-19 testing for participants in fully insured group health plans or individual market plans.
IRS / HSA-Qualified HDHPs
The IRS has provided that, until further guidance is issued, a high deductible health plan (HDHP) will not fail to be HSA-qualified merely because the health plan provides health
benefits associated with testing for and treatment of COVID-19 without regard to whether the minimum deductible has been satisfied. This extends to all medical care services received and items purchased associated with testing for and treatment of COVID-19 that are provided by a health plan.
Part of the government’s response to COVID-19 is removing barriers to testing for and treatment of COVID-19. Therefore, the IRS has extended this relief due to the nature of this public health emergency, and to avoid delays or financial disincentives that might otherwise impede testing for and treatment of COVID-19 for participants in HDHPs.
All other HSA eligibility requirements are maintained at this time. Employers sponsoring HDHPs or other health plans should consult with their broker to determine how their insurance carrier or third party administrator will handle benefits for testing and treatment of COVID-19, including the potential application of any deductible or cost sharing.
Note that the IRS did not go so far as to change HDHP rules to except telehealth generally for non-COVID-19 related illnesses. In other words, employers who waive all telehealth copays may during the pandemic may jeopardize HSA eligibility. That said, we have seen some insurance carriers and telehealth vendors willing to waive copays for all telehealth visits for a limited duration (e.g., 2-3 months). Those employers with HSA-qualified plans who wish to broaden their telehealth program to include all visits should consider doing so only for a limited duration and understand that the IRS does not seem to be fully on board with that approach yet. In addition, an employer extending no-cost telehealth for all visits should consider whether to extend the same treatment for virtual behavioral health visits.
Note that many physicians, providers, and health care systems are extending (or have already extended) telehealth visits to their patients. These are coded the same or similar as an office visit and require copay or deductible amounts to be met. A virtual visit with a member’s own primary care physician may not have the same HDHP restrictions as a telehealth visit with an external vendor.
CMS / Essential Health Benefits (EHBs)
EEOC / ADA
Now that COVID-19 is a pandemic as reported by the World Health Organization and the CDC, employers may take certain actions without violating the ADA, which applies to employers with 15 or more employees.
Department of Labor / FMLA
The DOL released an FAQ to assist employers who are subject to the Family and Medical Leave Act (generally, an employer with at least 50 employees within 75 miles). Employees are eligible to take FMLA leave if they have worked for their employer for at least 12 months and have at least 1,250 hours of service over the previous 12 months (and work at an FMLA-covered location). As a reminder, under the FMLA, covered employers must provide employees job-protected, unpaid leave for specified family and medical reasons. Employees on FMLA leave are entitled to the continuation of group health insurance coverage under the same terms as existed before they took FMLA leave.
What Employers Should Expect Next
In addition to the federal guidance noted above, employers who are reducing hours or laying off employees should review the terms of their plans to determine how benefits are affected. Group health plan coverage may terminate due to the reduction in hours; if so, COBRA must be offered. Employers may generally subsidize COBRA premiums, and employees may wish to avail themselves of premium tax credits, should they opt for Marketplace coverage. Subsidizing COBRA coverage has the added benefit of ensuring that employees who are in a stability period as full-time continue to be offered “affordable” coverage for purposes of the ACA’s employer shared responsibility provision.
Ancillary plans (e.g., life insurance, long-term disability) may terminate once employees are no longer actively at work, or the policy may contain an extension of coverage for a certain period of time (typically one or two months). Employers who would like to extend coverage to laid-off employees should consult with their broker or consultant and ensure the carrier agrees with their approach.
We expect additional guidance at the state and federal levels that may impact employee benefit plans as well as employee leave requirements. It is also important for employers to stay up-to-date on their state notices, as some are providing for required paid leave, as well as other insurance requirements. In addition, employers need to be cognizant of local and state emergency regulations that may affect how employers in certain industries, such as food services, operate during a public health emergency.
For more information on COVID-19, see:
About the Authors. This alert was prepared for Alera Group by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act. Contact Stacy Barrow or Alyssa Oligmueller at sbarrow@marbarlaw.com or aoligmueller@marbarlaw.com.
The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers or our clients. This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered. This agency and Marathas Barrow Weatherhead Lent LLP are not obligated to provide updates on the information presented herein. Those reading this alert are encouraged to seek direct counsel on legal questions.
© 2020 Marathas Barrow Weatherhead Lent LLP. All Rights Reserved.
Saturday night, the House of Representatives passed the “Families First Coronavirus Response Act.” The Bill still needs to pass the Senate and then be signed by President Trump, so plenty of unknowns and possible changes could occur to the Bill including it not being passed at all. However, if it were to pass as is, the following would be particularly important to all government employers and businesses with less than 500 employees.
Employees working for all government employers and businesses with less than 500 employees would be:
It also appears under Division G – Tax Credits for Paid Sick and Paid Family Medical Leave, employers impacted by Division C & E (above) would be eligible for a tax credit.
What Should Employers Do Now?
None of this has been passed into law at this time. However, employers may want to start planning for how to implement these measures which if passed, would become law 15 days after the Bill is signed. We will continue to monitor and issue a legal alert if these mandates do become law.
Disclaimer: This blog was written by Michelle Turner, MBA, Compliance Consultant, Alera Group Central Region. This blog post intends to provide general information regarding the status of, and/or potential concerns related to, current employer HR & benefits issues. This blog should not be construed as, nor is it intended to provide, legal advice. The opinions expressed herein are based upon the author’s experience as a Compliance Consultant and may not reflect the opinions of your counsel.
While employers (and individuals) should always hope for the best, it is always a good idea to plan for the worst. In this alert, your Alera Group, Inc. (“Alera”) team is providing general guidance to its clients and friends, including advice focused on their employees and a review of important insurance considerations.
The coronavirus (“COVID-19”) is here. On January 31, 2020, the U.S. Department of Health and Human Services (“HHS”) declared a public health emergency relating to COVID-19. As of March 2, 2020, six people in the U.S. have reportedly died from the virus and there have been at least 65 other confirmed cases reported.
As of March 2, 2020, the U.S. Centers for Disease Control (“CDC”) consider the “the immediate health risk from COVID-19 [as] low” but encourages employers and individuals to prepare and take appropriate steps to protect against the spread of the disease.
Among its various guidance, the CDC recently published its Interim Guidance for Businesses and Employers (“Interim Guidance”). In the Interim Guidance, the CDC provides the following common-sense advice to employers:
• Encourage sick employees to stay home:
• Separate sick employees:
• Emphasize staying home when sick, respiratory etiquette and hand hygiene by all employees
The CDC recommends that employers do not require a healthcare provider’s note for employees who are sick with acute respiratory illness to validate their illness or to return to work, as healthcare provider offices and medical facilities may be extremely busy and not able to provide such documentation in a timely way. Employers should maintain flexible policies that permit employees to stay home to care for a sick family member.
In addition, the Interim Guidance reminds employers to perform routine environmental cleaning of all workplace surfaces, but does not recommend additional disinfection beyond regular cleaning at this time. All employers should read the Interim Guidance which contains additional information.
The CDC provides clear guidance that when enacting preventative protocols employers should remember to follow all requirements of federal, state and local law. For example, imposing travel-based restrictions should not be based on race, country of origin or other legally protected factors. Also, while the CDC recommends advising non-affected employees of the presence of COVID-19 among work colleagues, privacy laws must be respected. An employer should never identify employees who are sick by name, as this could be a violation of the U.S. Americans with Disabilities Act (“ADA”) or a state law counterpart.
In addition to checking the Interim Guidance regularly, employers should monitor local developments. In addition to monitoring the CDC and other federal, state and local guidance, employers should contemplate their preventative strategies as they relate to their group health plan as well as human resources policies and procedures. They should also become familiar with their insurance coverage, and, if possible, enhance coverage as necessary.
Employer/Employee Concerns
As it relates to their group health plan and employee’s health, employers should:
Of note, “Applicable Large Employers” should consider how their chosen measurement method (monthly method or measurement method) would impact benefit eligibility under the Affordable Care Act (“ACA”) if an employee were quarantined for an extended period of time while traveling and is unable to complete work remotely during that time (such as on a cruise ship).
As it relates to their human resources policies, employers should:
Employers that are subject to the federal Family and Medical Leave Act (“FMLA”), or a state counterpart, should ensure they are prepared to receive an influx of FMLA requests if employees or their family members are exposed or become ill from the virus, or have to care for family members who are ill.
Employers that have a disaster response policy in place should review the communication protocols in the event of widespread absences. These protocols will come in handy when communicating with employees. Management should anticipate and prepare for how you will answer the plethora of questions that will almost certainly be raised.
Employers should not panic or overreact but rather engage in sound business contingency planning. Begin by developing contingency plans based upon the industry you are in, the size of your business and how you will operate in the event absenteeism rates greatly exceed those of a normal flu season. Use this opportunity to communicate with your employees about seasonal flu prevention strategies, such as minimizing contact and engaging in sound hygiene and sanitation.
Proper planning for and dealing with individualized employee situations implicates a whole range of employment laws, such as ADA, GINA, OSHA, Title VII and ERISA, as does the nature of your business. To deal with these legal issues, you should consult with your attorney.
Insurance Concerns
A major concern for all business owners is whether a wide-spread epidemic will cause businesses, government agencies and schools to close. This will interrupt business. An important question to ask is whether the company’s insurance policies provide coverage for the loss of income and extra expense incurred during the crisis. The short answer is that traditional property and casualty insurance policies have limited coverage for outbreaks and epidemics like the COVID-19. The longer answer to this question varies by the type of coverage, policy and situation, so it is a good idea to talk with your insurance broker or consultant as part of your planning process.
Property Insurance
Within a Property Insurance Policy, “Business Income” and “Extra Expense” are the two coverages that potentially cover loss of income or extra expense claims. That extra expense may have allowed you to keep your business running at another location. The challenge is that insurance coverage is typically triggered when the physical officer incurs a “direct physical loss” or damage, for example, in the form of a fire or water damage. Dealing with the presence of a virus on the property would therefore not normally trigger coverage. With that said, courts have ruled that contamination which renders a property unusable for its primary purpose may establish direct property loss or damage. Fortunately, from what is known right now, damage to property is probably not very likely. What is more likely is that a company’s business will be disrupted because employees along the supply chain are either out sick or caring for others who are sick. Standard commercial insurance does not cover financial losses an insured company experience when its suppliers experience loss and cannot supply key materials or goods. Similarly, standard commercial insurance typically will not cover your company if your customers cannot accept goods due to a loss that they incurred. Companies may want to talk with their brokers about “Contingent Business Income Insurance” and “Contingent Extra Expense” coverage. This coverage reimburses lost income and extra expenses resulting from damage or operational disruption at the location of a customer or supplier. Existing policies and endorsements or supplemental coverage policies should be read and reviewed carefully to understand what coverage is available and, importantly, what is not.
Travel Insurance
Facing reduced bookings by business travelers who are uncertain about whether an upcoming business trip will be canceled because of the spread of the virus, some major airlines are starting to publicly announce that they will permit cancellations for flights booked in the near future. Not all airlines have extended this offer, however, and many hotels, car rental companies and other travel-related businesses that charge for, or do not permit, changes or cancellations have not relaxed their rules. Companies that rely on business travel should consider reviewing whether to obtain travel insurance or require business travelers to obtain travel insurance for near-future reservations.
Workers’ Compensation
Workers’ Compensation insurance policies generally cover job-related illnesses or injuries. This coverage provides medical treatment, lost wage replacement and disability compensation. Ordinary illnesses, such as the common cold and other infectious diseases, are not compensable under Workers’ Compensation.
However, there are situations in which an ordinary illness or disease may be covered if a direct connection can be established between the office or plant and the circumstances through which the disease was contracted.
If an infected employee comes to work and subsequently infects other employees through their daily interactions at an office, the employee originally carrying the disease would not be eligible for Workers’ Compensation benefits, but it could be argued that the resulting illness to other employees has been the result of an accident causing bodily injury.
Insureds should consider all potentially applicable insurance policies when assessing potential coverage for COVID-19 related claims. Consulting with your insurance broker or consultant should place a company in good position to understand and possibly maximize insurance recovery in the event of a COVID-19 related loss.
About the Authors:
Danielle Capilla, JD
Director of Compliance, Employee Benefits
847-582-4524 | danielle.capilla@aleragroup.com
Danielle is the Director of Compliance for Alera’s Employee Benefits division. She previously served as the Senior Vice President of Compliance and Operations and Chief Compliance Officer at United Benefit Advisors (UBA). Additionally, she served as an Adjunct Professor at DePaul University. She worked as a Senior Writer Analyst at Wolters Kluwer and as a Law Clerk at Clifford Law Offices.
Mark Englert
Property & Casualty Practice Leader
917-270-7681 | mark.englert@aleragroup.com
Mark Englert is the Property & Casualty Leader for Alera Group. In this capacity, Mark is responsible for leading the development of world-class Property & Casualty solutions for Alera Group clients. He works closely with firms across the nation to enhance client experiences, build out new capabilities and coordinate services and resources between firms.
As telecommuting continues to gain popularity with it comes a new set of compliance challenges for businesses.
Telecommuting occurs when employees do some or all of their work away from the company’s main office. Computers, laptops and cell phones, and the availability of high-speed internet connections and secure servers, make working from home, hotels, airports, libraries or coffee shops much easier.
According to the 2017 “State of Telecommuting in the U.S. Employee Workforce Report,” almost three percent of U.S. employees worked from home at least half of the time. This is a 115 percent increase in telecommuting jobs since 2005. Globally, the percentage of employees who work away from the office is higher. In 2018, IWG, a Switzerland-based service office provider, reported that 70 percent of professionals work remotely at least one day a week, while 53 percent work remotely at least half of the week.
Telecommuting’s appeal to employees is that the increase in flexibility creates better work-life balance and the decrease in travel time means less time on the road and less wear and tear on their vehicles.
The principal appeal to employers is that less office space is needed, meaning lower facility and infrastructure costs. Global Workplace Analytics reports that a typical business can save about $11,000 per person in reduced office space and associated costs when employees telecommute.
As good as that might sound, there are legal issues surrounding telecommuting. Consider talking to an employment law attorney to put in place a formal company policy before starting your telecommuting program.
Here are a few of the compliance issues you might face:
Time and Compensation
Although findings from the Champlain College’s Online Masters in Law degree program indicate that salaried workers are more likely to work remotely than nonexempt employees, that doesn’t mean you don’t need to monitor employees’ productivity. It’s particularly important when nonexempt employees telecommute. The Fair Labor Standards Act (FLSA) requires employers to keep accurate records of the hours employees work, as well as to pay employees for all hours worked — including overtime for more than 40 hours per week. Telecommuters also must be allowed rest and meal breaks.
Human resource experts recommend employers have a written telecommuting policy that employees sign off on. The policy can include the number of hours expected to be worked each day or week and how hours are recorded. It also should stress that non-exempt employees are prohibited from working off-the-clock.
In addition to possibly using an electronic system to track hours, mangers and supervisors should communicate regularly with employees who work off site.
Company Property
If you require your employees to use company-owned equipment, such as a computer or cell phone, you should determine ahead of time who will be responsible for any damage or theft of the equipment. Have your employees sign paperwork acknowledging their responsibility and whether the equipment can be used for personal reasons.
Security
Businesses that deal in confidential and proprietary information must ensure that remote employees are working from a secure connection or through a VPN. Employees also should secure access to company information by using encryption, passwords and network firewalls and avoid the use of personal devices for company business.
Workers’ Compensation
Employees who are injured on the job — even when working at home — can file worker’s compensation claims because employers are responsible for the safety of their employees. To reduce the possibility of injuries, it’s helpful to have employees set aside the part of their home used as office space and reduce fatigue by designating set times for breaks and lunch.
ADA and FMLA Laws
Employees who are disabled often are better accommodated when they work from home. These employment situations are governed by the Americans with Disabilities Act; the Family and Medical Leave Act (FMLA); state workers’ compensation laws; privacy concerns; and workplace safety. Your managers and supervisors must ensure they are providing reasonable accommodations and are in compliance with those rules and regulations.
For more information on compliance issues and telecommuting, please contact us.
Some carriers are taking proactive steps that include:
Furthermore, some states have ordered insurance companies not to charge state residents who are tested for COVID-19. These states include California, New York, Vermont, and Maryland. The state of Washington is prohibiting copays or deductibles for COVID-19 testing and requiring insurers to allow early refills on prescriptions, and prohibiting insurers from requiring prior authorization for treatment or testing of COVID-19. More states are expected to follow suit.
The waiver of copays and the offering of telemedicine visits at no charge originally raised questions for employers who sponsored high deductible health plans (HDHPs) with accompanying health savings accounts, or HSAs.
An HSA is a tax-favored IRA-type trust or custodial account that is set up with a qualified trustee (a bank, credit union or insurance company) and is used to pay for qualified medical expenses. First available in 2004, they have become an exceedingly popular choice as employers design their benefit programs. HSAs are coupled with HDHPs and are the cornerstone of consumer-driven healthcare.
Only eligible individuals can establish an HSA. There are four requirements that an individual must meet:
Generally, being covered by an HDHP requires that a covered individual or family meet a specified minimum deductible before the HDHP begins providing benefits. However, an exception exists to this rule with respect to “preventive care.” This exception provides that an HDHP may provide preventive care benefits without regard to whether the minimum deductible has been met (i.e., “first dollar” coverage), or according to a different, lower minimum. Thus, an HDHP providing certain preventive care benefits before the minimum annual HDHP deductible has been met will still be considered an HDHP for purposes of establishing an HSA. Significant medical care that is not preventive and is provided prior to the HDHP deductible being met would be considered “disqualifying health coverage” and make an individual ineligible for an HSA.
The question arises as to whether or not the services being offered in relation to coronavirus could constitute disqualifying coverage for an HSA participant. The IRS has issued formal guidance permitting HDHP plans to provide all medical care services received and items purchased associated with testing for and treatment of COVID-19 that are provided by a health plan without a deductible, or with a deductible below the minimum annual deductible otherwise required under the regulations, to be disregarded for purposes of determining the status of the plan as an HDHP. In short, HDHP plan participants will maintain HSA eligibility even if testing or treatment for coronavirus is provided before their deductible is met.
Background checks allow employers to get a clearer picture of an applicant’s job and personal history. So, what happens if you find out that the applicant has a criminal background or has been convicted of drug use?
Denying an applicant a job based on what you discover during a background check — criminal or otherwise — has the potential of landing you in legal hot water.
Title VII of the Civil Rights Act of 1964 requires employers to prove that past criminal behavior would directly impede a candidate’s ability to perform a job. In addition, the Equal Employment Opportunity Commission (EEOC) guidelines recommend that to avoid complaint issues employers should “eliminate policies or practices that exclude people from employment based on any criminal record.” Thirty-five states prohibit employers from using criminal background checks during the application process, although there’s no federal mandate requiring this practice.
Plus, there are other kinds of information you cannot use to base a hiring or firing decision. While EEOC and Federal Trade Commission rules allow employers to check an applicant’s or employee’s work history, education, criminal record, financial history, medical history or use of social media — this type of information cannot be used to deny someone a job.
Federal laws protect applicants and employees from discrimination based on:
You also must stay in compliance with the Fair Credit Reporting Act (FCRA), which regulates how credit reporting agencies can collect, access, use and share the data they collect in consumer reports. States and municipalities also have laws regarding background reports.
One of the most important things you can do is remember to treat all applicants and employees equally. And, if you plan to do a background search, tell the applicant or employee in writing you might use the information to make decisions about his or her employment. You must get their permission in writing.
Social Media
Conducting a social media search on someone you may want to hire carries similar challenges.
A social media search can help you verify a candidate’s skills and employment history. It also can uncover whether an individual appears to be abusing alcohol or using illegal drugs or has posted racist and sexist messages.
However, like background checks, social media searches and how you use that information must be handled fairly and must follow EEOC guidelines.
Here are a few things you can do to stay in compliance when using social media to do your research:
A good way to control compliance risk to some extent is to purchase Employment Practices Liability Insurance.
