Companies are making tough decisions to furlough employees, creating questions about offering COBRA. In response to COVID-19, companies with multiple divisions may decide to close a division for one month and place all employees in that division on temporary unpaid leave in a mandatory furlough.
During the one-month period, are companies required to offer COBRA to employees who lose coverage under their group health plan because they are not working during the furlough?
Assuming a company’s plan is subject to COBRA, all covered employees experiencing a reduction of hours and loss of coverage due to the furlough are entitled to a COBRA election, as are their covered spouses and dependent children, even though they will presumably elect and continue COBRA coverage for only one month. It is important employees receive timely COBRA election notices and a company follows its standard COBRA procedures.
A reduction of hours in a covered employee’s employment is a COBRA triggering event that commonly occurs when an employee goes from full-time to part-time, is temporarily laid off, takes a leave of absence, or has hours reduced due to a strike or lockout. If eligibility for the plan depends on the number of hours worked, and the employee fails to work the required hours, then the employee has experienced a reduction of hours for COBRA purposes. Keep in mind, if the reduction in hours does not cause a loss of health plan coverage, no COBRA obligation arises. For example, an employee on COVID-19-related paid sick or family leave who has not experienced a loss of coverage would not trigger COBRA.
As a practical matter, given the timeframes involved with offering COBRA, including at least 60 days to elect COBRA and 45 days to make the first premium payment, qualified beneficiaries can adopt a wait-and-see approach and elect coverage only if medical care is required before the election is due. They can wait to see if they incur any medical expenses within a month and then decide whether to elect COBRA.
We recommend consulting an attorney before making COVID-19 employment decisions.