Many employers are facing business shutdowns, closures, or reduced operations due to the COVID-19 pandemic. As a result, employers may need to reduce staff hours, or lay off or furlough employees, which may have an impact on benefit eligibility. Many of the decisions individuals will make are time sensitive and employers and brokers may want to help employees understand their options when faced with loss of health plan coverage.
A special enrollment event is created when coverage is lost, where employees have a few continuation options to consider.
- A spouse’s health plan (or parent’s health plan, if under age 26)
- COBRA coverage (or state continuation coverage)
- Marketplace coverage
- Individual policies
Loss of coverage creates a special enrollment/permitted election change event that provides an opportunity to join another group health plan mid-year. If an employee’s spouse is covered under an employer-sponsored group health plan (including through COBRA), that plan may allow the employee to join the plan mid-year based on a permitted election change event. Additionally, employees under age 26 may still be eligible to join a parent’s health coverage upon loss of coverage.
COBRA Coverage (or State Continuation Coverage)
A loss of coverage due to reduction in hours or termination is a COBRA qualifying event. Generally employees who experience this qualifying event should be offered COBRA for themselves and any dependents who were also on the plan the day prior to the loss. When coverage is elected and the premium paid timely, the coverage is retro-active to the date of loss.
A loss of employer coverage opens a special enrollment period (SEP) for the Marketplace. Coverage under the marketplace is prospective, so unless an individual applies PRIOR to their last day of coverage, they will have a gap in coverage between the end of their group health plan and the start of the marketplace coverage.
Many insurance carriers offer individual policies. Individuals should check with their local carriers to see what is available to them.
Determining the Best Coverage
The best coverage for one person is not always the same as the best coverage for another. Encourage employees to consider all options to determine what is best for their individual and family circumstances. It is important to consider not only the cost of coverage based on the monthly premium, but also the cost for services under the plan.
For purposes of COBRA and state continuation, the employee will be offered the same plan that they had the day before the qualifying event. For individuals enrolling in a spouse’s employer sponsored health plan, options are limited to what the other employer sponsors. In considering the plan’s out-of-pocket costs, individuals should consider if they have already satisfied some of all of their employer’s plan deductible or out-of-pocket limit for the year, as this reduces their exposure for services for the remainder of the plan year. Further, individuals that want to maintain care with a particular doctor or medical care facility may opt for coverage that can maintain the same providers.
Individuals should consider if they expect to return to work and rejoin the employer plan. While no one has a crystal ball, if there is a reasonable expectation that they will return to work within the same plan year, they may want to continue the same plan to maintain the same deductible and out-of-pocket accumulators for the entire year.
Individuals and families looking at coverage on the Marketplace or individual market may have additional options. If they do not generally utilize much care, they may be better with a higher deductible, coinsurance, and/or copayments and a lower premium. Individuals and families that have chronic or acute conditions and tend to utilize a lot of care may be better with a lower deductible, coinsurance, and/or copayments and a higher premium. However, it is important to know that once a plan is selected, the plan cannot be changed based on a change in medical conditions until the plans’ renewal or open enrollment period. This means that if an individual opts for the lower premium and later develops a medical condition, they are still locked into that plan and may pay higher expenses for treatment and care. In addition to the plan’s out-of-pocket costs, individuals may want to review the provider network available under the various plan options to ensure they are able to seek care with the doctors and hospitals they prefer. Another feature of Marketplace plans is that individuals may be eligible for premium credits based on their income level. This tax credit may result in a better overall financial position and be an incentive for an individual to consider the Marketplace options.
Individuals can consult with an insurance agent for guidance.
COBRA Interaction with Marketplace
Individuals may also want to consider a combination of options. Reasons could include ensuring that there is no gap in coverage or an employer offering a short-term COBRA premium subsidy.
Closing the Gap
If an individual researches options and determines that the best plan for them is a Marketplace plan, they can enroll in that coverage, but only on a prospective basis. Doing this will often result in a gap in coverage if they apply for the Marketplace plan after their group health plan coverage has already ended.
If the individual cannot afford to have a gap in coverage between the employer’s policy and the new Marketplace policy, they can elect COBRA for a limited time to cover the gap.
Employer COBRA Subsidy
If an employer offers a subsidy on the COBRA premium for a limited period of time, COBRA coverage may be more appealing than moving to other coverage. When the COBRA subsidy ends, this would open another SEP for the Marketplace, and the individual would again be able to look for coverage elsewhere. Because individuals should know when the subsidy is going to end, they would have time to apply in advance so that there is no gap in coverage.
Premium Credits through the Marketplace
Premium tax credits are only available to some individuals who enroll in coverage through the Marketplace and separately qualify based upon their household income. If eligible, individuals can get advance payments of the tax credit. Individuals should be careful with advance premium credits—if they return to work and drop Marketplace coverage to go back on the employer’s plan, the advance credit may have to be repaid.
Returning to an Employer’s Plan after a Leave or Return to Full-Time Status
Individuals should carefully review each plans to determine if and when they will be eligible to rejoin the employer’s plan after returning from a lay off or furlough or returning to a full-time status following a reduction in hours.