Last updated April 10, 2020.
|This general guidance is based on U.S. federal employment law and the current medical assessment of COVID-19. State and local laws may apply, and medical assessments may change, resulting in different conclusions.|
Question 1. May an employer waive deductibles and co-pays in its health plan for testing and medical treatment relating to COVID-19? (Updated March 20, 2020)
Answer 1. Yes, in fact, the new Families First Coronavirus Response Act, which took effect on March 18, 2020, requires all group health plans (including grandfathered health pans) to provide coverage for novel coronavirus testing without any cost-sharing charges or plan limitations. In addition, an employer may choose to waive out-of-pocket expenses for its employees relating to medical treatment related to COVID-19. The Internal Revenue Service (IRS) has confirmed that doing so in a high-deductible health plan will not make employees ineligible to contribute to a health savings account. Many plans are offering this waiver, as well as waiving pre-certification and pre-authorization requirements for hospital stays relating to the virus. To the extent the plan is insured, the employer will want to vet any such changes with the insurance company prior to announcing those changes to employees. For self-funded plans, employers will want to confirm the administrator can support the changes and vet any changes with its stop-loss insurer. Any changes should be documented in writing, with formal plan amendments to follow for plans governed by ERISA.
In addition, on March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act requires group health plans and health insurance issuers to cover any “qualifying coronavirus preventive service,” without cost-sharing. The term “qualifying coronavirus preventive service” means an item, service, or immunization that is intended to prevent or mitigate COVID-19 and has a rating “A” or “B” in the current recommendations of the United States Preventive Services Task Force recommendations or is recommended by the Advisory Committee on Immunization Practices of the U.S. Centers for Disease Control and Prevention. This requirement takes effect 15 business days after a recommendation is made.
Q2. How should an employer communicate health plan changes to employees during this crisis? (Updated March 20, 2020)
- A2. All communications should be made to employees in the manner most likely to ensure actual receipt of the information under the circumstances. In addition, the employer should always offer the employees a paper copy of any plan information upon request, and upon receipt of any such request, providing such paper copy. While ERISA would allow 30 days to respond to such a request, many employers are trying to respond to any plan document requests as soon as administratively feasible. Plan changes in this context could be material changes to the Summary of Benefits and Coverage, so in addition to communicating with employees through the normal course, employers will want to consider updates that will be needed to their plan documents, Summary Plan Descriptions (SPDs), and Summary of Benefits and Coverage (SBCs).
Q3. What is the impact on an employee’s health coverage if the employee’s hours are reduced during this period? (Updated April 10, 2020)
- A3. The answer depends upon the terms of the employer’s group health plan and any continued coverage the employer may provide during a reduction in hours. Also, for employers that use the Affordable Care Act look-back rule to determine eligibility for coverage, a reduction in hours will not immediately trigger a loss in coverage for employees who remain in the current stability period. A reduction in hours would be factored into the current lookback period that includes this period of time and may cause an otherwise full-time employee to have hours below the 30-hour per week threshold during the current lookback period. In that case, unless the employer adopts a different eligibility rule to apply to this situation, the reduction in hours may cause a loss of coverage at the end of the current stability period. If the reduction in hours causes a loss of health care coverage, that is a COBRA event, triggering a COBRA notice obligation and opportunity for the employee and covered family members to continue coverage for up to 18 months.
Q4. May an employer encourage employees to use telemedicine or subsidize those services? (Updated April 10, 2020)
A4. An employer could encourage or induce employees to use telemedicine for treatments where that is appropriate. Employers should consider whether their health plans currently cover telemedicine services, and if not, what changes need to be made in order to provide that coverage. It is administratively difficult if not impossible for telemedicine vendors to sort visits based upon whether they are coronavirus-related in this context, so employers that are considering covering telemedicine and/or waiving fees relating to those services should discuss with their administrators how best to accomplish that. Note that waiving co-pays for treatments not related to COVID-19 treatment or testing may jeopardize an employee’s eligibility to contribute to a health savings account, without further IRS guidance. Employers will also want to consider whether similar coverage will be provided for mental health uses of telemedicine in order to remain in compliance with mental health parity laws.
The CARES Act creates a safe harbor for health savings account (HSA) eligible high deductible health plans (HDHP). For plan years beginning before December 31, 2021, a HDHP may provide telemedicine services without cost-sharing before a patient meets his or her deductible, regardless of whether the telemedicine services relate to COVID-19.
Q5. Does the new Families First Coronavirus Response Act provide tax credits for wages? (Updated April 8, 2020)
- A5. Yes, employers with fewer than 500 employees are eligible for tax credits on amounts paid to employees who go out on qualified sick leave or qualified family leave. For a detailed analysis, please see our article, “COVID-19 Relief Bill Provides Payroll Tax Credits for Emergency Paid Leave.” In addition to the tax credits available for payment of wages, eligible employers (again, employers with fewer than 500 employees) are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for employees during the period of leave for qualified sick leave or qualified family leave. Employers can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form. The IRS has issued the Form 7200, along with instructions, and a series of frequently asked questions (FAQs) that explain the process for claiming these tax credits.
Q6. Does the CARES Act allow account-based plans to reimburse individuals for the purchase of over-the-counter medical products without a prescription from a doctor? (Updated April 10, 2020)
- A6. Yes, the CARES Act allows account-based health plans (health savings accounts (HSAs), flexible spending accounts (FSA), and health reimbursement arrangements) to reimburse for the purchase of over-the-counter medical products without a prescription from a doctor. Account-based plans can now also reimburse for the purchase of menstrual care products. The CARES Act amends the Internal Revenue Code and reverses restrictions previously imposed by the Affordable Care Act on the use of these tax-free accounts for over-the-counter medical products without a prescription. These changes apply to amounts purchased in 2020 and all subsequent years.
For more answers to your frequently asked questions, please select a topic below:
- Compensation and Tax Issues
- Disability Related Inquiries and Medical Examinations
- Employees with Symptoms or Exposure
- Families First Coronavirus Response Act (FFCRA)
- Health coverage
- Hiring During the COVID-19 Pandemic
- Reduction in Force/WARN
- Retirement Plan Issues
- Short-term disability coverage
- Tax Credits Under FFCRA and the CARES Act
- Vacation, Paid Time Off, and Paid Sick Leave
- Wage and Hour
- Workers’ Compensation
- Workplace Safety