The coronavirus pandemic has brought layoffs and furloughs to millions of workers across the United States. This bad news can be complicated for individuals with health care coverage through their employer. These employees are asking questions, such as “Do I still have health care coverage?,” “Am I eligible for COBRA?” and “What are my options if I don’t choose COBRA?”.

Here’s a look at how layoffs and furloughs impact a worker’s health care benefits.

When it comes to differentiating between layoffs and furloughs, are there differences in how the two relate to benefits?

Yes. An employee’s health coverage during a furlough or layoff is determined by the employer’s health plan. The employer’s health plan document indicates how many hours an active employee must work to be eligible for health insurance coverage. The employer’s policies, if any, say how employees can keep their health insurance active even if they are not working enough hours.

When an employee is not working enough hours to be eligible for health insurance coverage, they experience a COBRA qualifying event. The employer could have a policy about maintaining active coverage for a limited time, even during unpaid leaves, and it would spell out who pays the premiums during that time. Employers can decide whether to pay monthly health insurance premiums on behalf of furloughed or laid off employees. If an employer pays premiums for a while, and then they stop making payments, health plan coverage would also end and the employee would experience a COBRA qualifying event. We have seen many employers offering to cover premiums during this unprecedented time. Of course, the employer’s financial state plays a major factor in its ability to do so.

What can an employee expect if he/she gets laid off? 

When an employee gets laid off, their employment is technically considered terminated, even though the employer may intend for the situation to be temporary. The employee therefore cannot necessarily expect to return to work with the employer that laid them off. Their health plan coverage would generally end on the last day of the month in which the layoff occurred. The employer would offer COBRA based on termination of employment. In some cases, like the current coronavirus pandemic, an employer may provide other options to continue health care benefits.

The new International Foundation report Employee Benefits in a COVID-19 World found that of employers who laid off employees, the majority 62% are providing health care benefits through COBRA with the worker paying the full costs. Smaller numbers of employers are continuing health care for laid off employees for the entire period as if the employee was actively employed, either with the usual cost-sharing between worker and employer (11%) or with the employer paying full cost (7%). Other employers are continuing health care for a limited period as if the employee was actively employed, either with the usual cost-sharing between worker and employer (15%) or with the employer paying full cost (6%).

E-Learning Course: COBRA | Enroll Today!

What can an employee expect if he/she gets furloughed? 

Furloughed employees may have their hours reduced or they may not be working at all. Therefore, their pay will be reduced or will end. However, furloughed employees can expect to return to work again “as usual” when the furlough period is over. Furloughed employees often get health insurance coverage during the furlough period, but it varies depending on employer policy and how long the furlough period lasts. A furloughed employee can expect a few different scenarios:

• An employee can expect their health plan coverage to end, and the employer will offer COBRA based on reduction of hours.
• An employee can expect their health plan coverage to continue during the furlough, without making a COBRA election. In this scenario, who pays for the health coverage? An employee can expect that:
  • they will be responsible for their share of health plan premiums even though they are not receiving paychecks, or
  • their employer will temporarily waive employee contributions and pay all of their premium.

The report Employee Benefits in a COVID-19 World found that of employers who furloughed employees only a small number (8%) are providing health care benefits to furloughed employees through COBRA. Instead, 39% of employers are continuing health care for furloughed employees for the entire period as if the employee was actively employed with the usual cost-sharing between worker and employer. Additionally, 23% are continuing health care for the entire period as if the employee was actively employed with the employer paying full costs. Other employers are continuing health care for a limited period as if the employee was actively employed, either with the usual cost-sharing between worker and employer (23%) or with the employer paying full cost (7%).

What employee questions should an employer be ready to answer?

If your organization has made changes to your staffing, or might make changes in the future, be prepared to answer these employee questions:

• Am I staying active on health insurance? For how long?
• Am I expected to pay my share of premiums, or is the employer covering my share of premiums?
• How is the employer going to collect my premium payments?
• When do I have to elect COBRA?
• How much would I have to pay for COBRA?
• If I don’t want or cannot afford COBRA, when do I have to enroll in a federal or state ACA marketplace plan? When do I have to enroll in a spouse/partner’s health plan (if available)?

The Impact of the Coronavirus on the Workplace

Download the full report: Employee Benefits in a COVID-19 World: April 2020 Survey Report to learn more about how employers are reacting to the COVID-19 pandemic.

Visit the International Foundation Coronavirus (COVID-19) Resources page to find even more resources for plan sponsors and register now to attend these upcoming Foundation webcasts:

• Pension Trustees and Effective Governance of Climate-Related Risks | May 14, 2020
• Capping Medical Plan Costs and Improving Care in the Aftermath of COVID-19 | May 21, 2020
• Current Accounting and Auditing Issues in Employee Benefit Plans | May 27, 2020

Jenny Lucey, CEBS
Manager, Reference/Research Services at the International Foundation

The latest from Word on Benefits:

• Congress Passes Two Laws Allowing ACA Employer Reporting Relief
• Top Five Risks for Fiduciaries in 2024
• Student Loan Repayment Benefits on the Rise
• 17 Tips for 401(k) Loan Program Design
• Promoting Health Equity: Six Best Practices for Employers