Employer-sponsored group health plans have drawn attention regarding coverage for certain coronavirus-related costs.
Under the FFCRA, all group health plans are now required to provide coverage for COVID-19 testing without imposing deductibles, copayments, or other cost sharing — and without requiring prior authorization or imposing other medical management standards. This coverage must include both the cost of the test and related services, such as charges for office, telehealth, urgent care, or ER visits and charges for the collection of testing samples. The testing mandate applies to all types of group health plans, including fully insured plans, self-insured plans, high deductible health plans (HDHPs), and plans that are otherwise “grandfathered” from certain ACA requirements. The mandate also applies to fully insured plans sold in the individual insurance market.
This mandate only applies to coverage of COVID-19 testing and related services. Coverage of treatment for COVID-19 remains subject to the terms of each plan, including applicable cost sharing requirements.
IRS Notice 2020-15 clarifies that an HDHP may provide benefits for COVID-19 testing or treatment prior to satisfaction of the minimum deductible without jeopardizing the plan’s status as an HDHP. Individuals covered under an HDHP may receive no-deductible or low-deductible coverage for these costs and remain eligible to contribute to a health savings account (HSA).
A new package of proposed federal legislation, currently called the CARES Act, would provide additional flexibility with respect to HDHPs and HSAs:
- An HDHP could provide for coverage of telemedicine visits even if the HDHP deductible has not been met.
- A qualifying direct primary care arrangement costing less than $150 per month ($300 for a family) could be used in connection with an HDHP without impairing the ability to contribute to an HSA. The cost of the qualifying direct primary care membership could be paid from an HSA.
- HSAs and other account-based plans (HRAs and health FSAs) could reimburse the cost of over-the-counter drugs without a prescription and could treat expenses for menstrual care products as reimbursable expenses.
The CARES Act remains proposed at this point, so these items are subject to change, but they indicate the types of additional things Congress is thinking about.
Employers taking steps to manage workforce needs in light of economic changes resulting from the coronavirus pandemic, such as through reduced work schedules, furloughs, or layoffs, will want to remain mindful of the impact on eligibility for health plan coverage (and other employee benefits).
Most plans and policies provide that eligibility is lost when an employee ceases working or reduces his or her hours of work below the minimum threshold for eligibility. Even if a reduced work schedule or layoff is expected to be temporary, eligibility may still be impacted.
For group health plans, COBRA would be available to continue coverage when eligibility is lost due to a termination of employment or reduction in hours. An employer could choose to subsidize COBRA coverage, although that is not required.
Employers wanting to temporarily extend coverage beyond the date it otherwise would be lost may be able to do so, but only if the governing plan documents are amended to provided for extended coverage and approval is obtained from any insurance carrier providing insurance coverage in connection with the plan (including a stop-loss insurer in the case of a self-insured plan).
To date, no specific relief or changes with respect to qualified retirement plans has been provided, although various types of relief are being considered. This may include permitting individuals to withdraw up to $100,000 from a 401(k) or 403(b) account without paying the 10% excise tax on early withdrawals. There has also been a proposal to expand from $50,000 to $100,000 the maximum loan that may be obtained from a qualified retirement plan. Whether these and other changes will occur will depend on the status of the federal legislation that would be needed to implement the changes.
In the absence of changes, 401(k) and 403(b) plans continue to have the ability to allow for loans (up to $50,000), hardship withdrawals (for qualifying hardship events, including medical expenses), and in-service withdrawals after age 59.5, which may provide some assistance to employees who find themselves in a financial hardship. For plans that do not currently offer one or more of these options but want to do so, an amendment to the plan document will be required to implement the new option.
Employers facing their own economic challenges may be considering a reduction or suspension in employer contributions (e.g., matching or profit-sharing contributions) under their retirement plans. This is generally permissible, if done on a prospective basis and with an appropriate plan amendment. However, there can be nuances to consider, such as whether employees have already met the accrual conditions for an employer contribution and thus have an earned right to receive the contribution.
Employers with “safe harbor” 401(k) plans must follow a specific process to reduce or suspend safe harbor contributions, which includes providing at least 30 days' advance notice and a reasonable opportunity for employees to change their deferral elections. Plans that give up safe harbor status during a plan year by reducing or suspending safe harbor contributions must perform ADP and ACP nondiscrimination testing for the entire plan year and may become subject to “top heavy” requirements for the plan year.