Alternative Group Plan Funding Gets a Second Look

Watching their group health plan premiums climb higher with each passing year, some employers start looking into alternative funding strategies in hopes they can get a better handle on their employees’ health costs.

While group plans are the standard, larger employers have typically had more options for funding their group health coverage. But now even small and medium-sized employers – even companies with fewer than 100 employees – can benefit from alternative funding approaches.

There are three main types of alternative funding strategies that are available to employers:

  • Captives
  • Private exchanges
  • Full and partial self-funding.

Captives

With a captive, multiple employers pool their resources and share the risk in providing health insurance to their employees. It is essentially a self-insured pool built into a captive insurance company (an insurer that is owned by the entity that created it). The captive has staff that will administer the health plan.

Captives are also multi-year agreements, so once an employer commits to make it worth their investment, they need to stick with it for a period of time.

Group captives will often have a specific funding mechanism that is broken down into four layers:

Layer 1: The employer is responsible for the first $25,000 of any claim made by one of its employees.

Layer 2: All employers involved in the captive will share the costs of that claim if it exceeds $25,000, up to $250,000.

Layer 3: For claims that cost more than $250,000, the captive will secure reinsurance coverage to cover amounts above that level. This reinsurance is also called “stop-loss” insurance.

Layer 4: Another layer of protection known as “aggregate stop-loss” coverage protects each employer in the captive for the total claims of their employees, ranging from 115% to 125% of expected claim costs in a year.

Private exchanges

Typically, businesses using a private exchange will offer employees a credit that can be applied toward the purchase of a health plan. Employees can then access a variety of health plans through an online portal and can chose and enroll in plans that meet their needs.

Private exchanges are run by insurance carriers or consultancies, and plans on the exchange are regulated as group coverage. Employees shopping on these exchanges are not eligible for the Affordable Care Act’s tax credits or cost-sharing subsidies.

Most employers currently using private exchanges are large; therefore, most private exchange plans are regulated as large-group coverage and are not part of the ACA’s single risk pool. However, to the extent that smaller employers participate in private exchanges, they are subject to the ACA’s small-group rating regulations and risk-pool requirements.

One of the main features of private exchanges is that they enable employees to comparison-shop among multiple health insurance plans.

Self-insuring

There are many different types of self-insurance, from minimum-premium or risk-sharing arrangements to a fully self-funded plan, in which the employer is responsible for all claims.

Employers can choose from:

Retrospective premium arrangements – The insurer will credit back a portion of the unused premium to the employer (typically as a credit for the following year). This is often used in a fully insured arrangement.

Minimum premium arrangements – The employer pays fixed costs (administration charges, stop-loss insurance and network access fees) and claim costs up to a maximum liability each month.

Partial self-funding -The employer takes on more liability and pays fixed costs (administration, network access, stop-loss premiums and some fees and taxes). It’s partial self-funding because the employer will purchase individual stop-loss insurance, which caps the employer’s liability on any given claim to a certain amount, say $50,000.

That way, the employer is self-insuring most of their employees’ medical needs, but is protected in case some of those claims become catastrophic.

Full self-funding – This is like partial self-funding except that there is no stop-loss insurance and the employer is responsible for all costs that are not shared by its employees.  This kind of arrangement is usually only available to large employers.

The takeaway

These alternative funding approaches are what is available now. But the industry is innovating to making health care and insurance more affordable for all involved.

Protecting Your Firm from Employee Benefit Lawsuits

Employment practices and employee benefit-related lawsuits are on the rise – and employers have to be eternally vigilant when it comes to meeting their compliance obligations as plan sponsors.

Take the case of Visteon, a global automotive industry supplier, which outsourced its payroll and enrollment/disenrollment functions to outside plan administrators. 

But because of internal mistakes at the firms that Visteon outsourced these noncore HR functions to, some of its former employees who should have received COBRA eligibility notices after leaving the firm never received them. At first it was just a handful, but ultimately 741 co-workers signed on to a class-action lawsuit

Visteon argued in court that it was not its own mistakes that had caused the error, and that it had made a good-faith effort to hire outside experts to take over this function for them. Payroll and enrollment, after all, are not core competencies for an auto parts supplier, the company said, and it had been relying on the expertise of these other payroll companies to properly execute these functions and provide these notices.

The court didn’t buy Visteon’s argument. Rather, it held the company responsible in 2013 for poor internal tracking systems, negligence in overseeing its third party administrators, and failure to accept responsibility for its COBRA notification efforts.

That exposed them to the statutory penalty of $110 per worker per day for failure to provide notification.

In the end, for doing what tens of thousands of employers are doing nationwide – relying on third party administrators to handle payroll functions that are regulated under COBRA – Visteon was slapped with $1.8 million in penalties.

Employers are frequent lawsuit targets

As much as companies rely on their employees to generate profits, simply having them around and administering their benefit plans potentially exposes employers to significant possible liability.

According to a survey from insurer CNA, employment-related disputes are the fastest-growing category of civil lawsuits in America.

Employers face risk from the potential of lawsuits employees may bring for alleged failure to fulfill their fiduciary duties as sponsors of retirement plans under ERISA, for example, or for accidental or unauthorized leaks of personally identifiable information, which carries significant penalties under HIPAA.

Sponsors of defined contribution pension plans, such as 401(k)s, are particularly frequent targets of lawsuits for various fiduciary failures, errors or omissions.

Protecting your firm from legal action

So how can employers protect themselves against the potential costs of employee benefit-related litigation? You should:

  • Carefully monitor your plan third party administrators. Insist that they document their own compliance practices to you. Don’t take their word for it.
  • Reconcile your own lists of recently departed employees with your payroll company’s COBRA notifications.
  • Understand that your commercial general liability insurance policy usually will not cover you against liability arising from improper administration of employee benefit plans, ERISA, COBRA, USERRA, wage and hour laws, Title VII related lawsuits, and the like.
  • Consider employment practices liability insurance. This coverage will often protect against lawsuits like this and cover legal expenses, and even judgments.
  • Conduct regular reviews with advisers of investments in pension and 401(k) plans. Investments should be reviewed at least annually – and quarterly is not unusual.
  • Ensure that fees paid to 401(k) and other plan administrators are not excessive. You don’t have to go with the cheapest provider (that can be trouble, too). But if you do choose a higher-fee vendor, document why you made that decision so that you can show your reasoning in court and defend your decision-making as sound and prudent.
  • Invest in data security and HR compliance expertise.

Testing Workers for COVID-19 Raises Privacy, Discrimination Issues

Employers whose businesses continue to operate are obviously concerned about the coronavirus spreading through their worksites, so many have started testing their workers.

Recent U.S. Equal Employment Opportunity Commission guidance authorized employers to conduct COVID-19 testing and check temperatures of employees. But doing so could expose a business to a number of employee legal actions from invasion of privacy to discrimination and wage and hour charges, say employment law attorneys.

While the EEOC guidance refers to existing Americans with Disabilities Act regulations requiring that any mandatory medical test of employees be “job related and consistent with business necessity,” it left many questions unanswered.

So, if you decide to start testing workers, you will have to navigate a number of issues, such as:

  • Which tests are appropriate?
  • What are the standards for protecting workers’ privacy?
  • Should employees be paid for the time they wait in line to be tested?
  • Should you get written consent?
  • How will you ensure that the policy is applied consistently?

Employment law experts say there is often a surge in employee lawsuits when new rules or guidance are being issued, and more so with such a sensitive issue as one’s health during a pandemic. 

 The kinds of claims that employers may see as a result of employee testing include:

  • Invasion of privacy
  • Failure to protect employees’ personal health information
  • Discrimination
  • Retaliation
  • Wage and hour actions if waiting for testing takes time.

What you can do

Typically, employers would not be allowed to test a worker’s temperature for a specific disease, but these are unusual times and the threat of infection is too great.

Most lawyers are interpreting the EEOC guidance as meaning that employers may take steps to determine whether employees entering the workplace have COVID-19 because an individual with the coronavirus will pose a direct threat to the health of others. Therefore, an employer may choose to administer COVID-19 testing to employees before they enter the workplace to determine if they have the virus. 

To cover your bases, you should plan your testing in detail, including:

  • How you will be conducting tests (providing at-home test swab kits, testing upon arrival, or offsite).
  • Designate a person who is authorized to conduct tests.
  • Document how you will be administering tests.
  • Plan for how you will account for false positives or false negatives.
  • Decide how often should you be testing.
  • Budget for the testing.
  • What will you do if a worker tests positive or has a fever (if you are just checking temperatures)?
  • Don’t have exceptions to the policy or, if you do, keep them to a minimum. The more exceptions to a policy, the more likely you are to be sued.
  • The policy should comply with guidance from the Centers for Disease Control and Prevention, such as using non-contact thermometers and ensuring social distancing during the process.

Insurance

The risk of being sued when administering testing is real and you should do everything you can to make sure it’s carried out fairly and consistently. But even if you do everything by the book, you can still be sued.

During bad economic times when people are losing their jobs, employee lawsuits tend to rise and, even if you are eventually found to have acted within the confines of the law, you still have to pay the legal fees.

One type of policy that could step in to protect you is employment practices liability insurance. EPLI will cover awards and legal costs in employee-initiated lawsuits. Each policy is different though, so it’s best to consult with us first.

If you are testing or are considering testing your staff, you may want to consider it.

How to Handle Group Health Coverage for Laid-off, Furloughed Staff

As the COVID-19 pandemic wears on, many employers have had to lay off or furlough staff due to a tremendous drop-off in business. Besides the loss of income they face, these workers will often also lose their employer-sponsored health insurance.

With this in mind, many employers have been wondering if they can permit coverage to continue during the time the staff is temporarily laid off or furloughed due to the COVID-19 outbreak. If you are looking at options for keeping these employees on your group plan, you’ll need to read your policy to see if it’s possible and explore all of your options.

The options

Most group health plans will define what constitutes an eligible employee. Typical requirements include working at least 30 hours a week. The policy may also address how long an employee can be absent from work before they lose eligibility for the plan. Some policies allow coverage to continue for a furloughed employee, but not for someone who is laid off.

Another option is to approach your group health plan provider and ask them to amend policy language to allow for laid-off or furloughed staff to continue coverage. If your policy doesn’t address these workers or prohibits keeping them on the plan, you will need to approach the insurance company about this.

Due to the COVID-19 pandemic, several states have issued orders requiring or encouraging insurers to let employers make changes to their eligibility requirements.

Some states have extended grace periods to give employers and workers more time to make their premium payments if they are under financial duress. You can check with your state’s insurance department to see what accommodations are available.

If you maintain health insurance for furloughed employees, you need to decide if you will require them to continue paying for their share of the premium. Some employers allow employees to defer their contribution until they are working again.

Whatever you decide, you will need to have the appropriate documentation and administrative procedures in place.

COBRA and exchanges

Most employers who have staff they cannot keep on the group health plan, will be required to offer them and their covered beneficiaries continuation coverage through COBRA.

But COBRA can be expensive, and most workers are better off purchasing coverage on an Affordable Care Act insurance exchange. 

They can qualify for a premium tax credit if they have seen their income fall or disappear, and shop for a plan that will likely cost them less than COBRA continuation coverage. If any employee is laid off, they qualify for a special enrollment period to sign up on the exchanges.

Additionally, about a dozen states have also opened up special enrollment periods during the coronavirus crisis for people who are suddenly uninsured to sign up for coverage.

The dangers

Whatever you do, you should not try to game the system by continuing to keep laid-off or furloughed staff on the group health plan if the plan prohibits it. Some of the risks you would face include:

  • Your plan potentially losing its tax-exempt status (health benefits are usually not taxed). This would cause both you and your employees to potentially be saddled with back taxes.
  • The insurance company could deny claims for employees it determines were ineligible to participate in the plan.
  • COBRA violations, in particular for failing to send out notices to laid-off staff who are no longer eligible for the group plan.
  • A possible fiduciary breach under the Employee Retirement Income Security Act) if plan assets were used to pay for benefits of non-eligible individuals.

COVID-19 Changes to Health Plans Must Be Documented, Circulated

A number of plan sponsors have made changes to their group health plans in response to the COVID-19 pandemic, such as covering testing and sometimes treatment without any cost-sharing by the plan enrollee.

But any changes that are made must be followed up by amending the plan and communicating the changes to the enrollees.

Under the Employee Retirement Income Security Act, all health plans are required to deliver a Summary Plan Description (SPD) to enrollees to inform them of the full spectrum of coverage and their rights under the plan.

Whenever a plan sponsor makes a material modification to the terms of the plan or the information required to be in an SPD, they must amend the plan and let participants know about the change through a Summary of Material Modification (SMM).

Material changes

To qualify as “material,” a change must be important to plan enrollees. Examples include adding or eliminating a benefit, changing insurance companies, or changing rules for dependent eligibility.

Plan changes related to the COVID-19 pandemic that would have to be included in the SMM and SPD could include:

  • Offering continuing coverage to staff who would otherwise lose coverage due to a furlough, layoff or reduction of hours.
  • Changing eligibility terms to allow workers who may not have been eligible for coverage before to secure coverage (this could include part-time workers).
  • Covering a larger portion of an employee’s premium share.
  • Adding an employee assistance program to provide counseling for workers who may be undergoing unusual stress.
  • Adding telemedicine coverage.
  • Using funds in health savings accounts (HSAs) and flexible spending accounts (FSAs) to purchase over-the-counter medications.
  • Covering COVID-19 testing with no cost-sharing. 
  • Covering COVID-19 treatment without cost-sharing.

Some of the above changes are required by new laws and health plans must respond accordingly by changing their SMMs and SPDs. For example, the Families First Coronavirus Response Act requires that group health insurance and individual health insurance plans cover coronavirus testing with zero cost-sharing.

And the Coronavirus Aid, Recover and Economic Stabilization Act reverses an Affordable Care Act rule that barred policyholders from using funds in HSAs and FSAs to pay for over-the-counter medications. 

When the plan sponsor adopts these changes, it must also amend its plan summaries.

And SMMs must be delivered to plan participants within 60 days after a change has been adopted. You can deliver the SMM by mail, e-mail or posting it on your company’s intranet site. It’s recommended at this time that you opt for e-mail delivery.

One of the issues that may come up with any changes implemented in response to the COVID-19 outbreak is that some of the changes may be temporary. 

If that’s the case, the plan needs to include the termination date of any benefits that are adopted on a temporary basis.

However, if you don’t know how long the temporary benefits will be in effect, their temporary nature must be communicated in the SMM. Employers need to issue another SMM when the temporary benefit or coverage term ends.

The takeaway

This is an unusual time and unusual times call for unusual measures. It’s unusual for changes to be made to a plan in the middle of a plan year but because of the way the pandemic crash-landed, many plan sponsors have had to make changes. 

That said, you should work with us and your carrier on ensuring that the amended documents are sent out to staff.

As the employer, you should be aware of all the changes that have been made in response to COVID-19 so you can discuss them with any employees that have concerns or questions.

Some Insurers Step Up Group Health Plan Assistance

Some health insurers are helping business workers in group plans maintain employee benefits during the COVID-19 pandemic, a new survey has found. 

Social distancing and stay-at-home orders have put the hurt on hundreds of thousands of businesses across the country, which has forced them to reduce employees’ hours, furlough them or lay them off.

Besides all those employees seeing their pay drastically curtailed or disappear altogether, it also affects their employee benefits, with health coverage topping the list.

With so many people concerned they may lose coverage and business owners equally worried about their employees, some insurers are stepping up by extending coverage for affected group plan participants. 

The survey by insurance research organization LIMRA found that 42% of group health plans are automatically continuing coverage for all employees for a specified period of time, and another 22% are extending eligibility on a case-by-case basis to employees whose status has changed.

About 35% of insurance companies have adjusted reinstatement rules to make it easier for those affected by COVID-19 to regain coverage, and a similar number are extending the timeframe in which employees may elect to pay or continue coverage if separated from their employer.

Nearly all carriers in the survey said they are offering premium grace periods of 60 days on average to workers unable to pay their premiums due to COVID-19, while others plan to reassess or extend those timelines if needed.

These moves are important, considering that about 70% of all workers in the U.S. receive health coverage from their jobs, according to LIMRA.

The typical scenario

When an employee is laid off or furloughed, their hours are essentially reduced to zero, which can result in a loss of eligibility to participate in their employer’s group health plan.

Group health insurers will have written documents that outline the rules for particular plans. These rules include a definition of eligible employees, including how long an employee can be absent from work before the employee will lose eligibility for insurance coverage.

Health plan documents do not usually differentiate between an employee who is terminated and one who is laid off and one who is furloughed.

To be eligible under the typical plan’s rules, an employee must work a minimum number of hours per week (usually at least 30). If an employee is under protected leave – such as Family Medical Leave Act protection – benefits continue during leave.

In other words, an employee who is not meeting the hours requirement or is not actively at work (work from home is considered actively at work) based on being terminated, furloughed  or laid off – even temporarily – will generally have their benefits terminated. They should then receive an offer of COBRA or state continuation, unless state law does not require it due to an employer’s size.

However, if an employee continues to remain eligible for the business’s group health plan during an unpaid absence, the employer will need to determine how to handle their insurance premium payments.

The takeaway

If you are concerned about benefits continuation for laid-off, furloughed or terminated employees, you can call us to see if your health plan has made any special arrangements during the COVID-19 outbreak.

We can check to see if there is any way to continue coverage for any affected employees, and for how long and at what cost to you.

Pandemic Could Depress Health Care Costs

A new study predicts that employer health care costs will be stable or could fall this year because medical care for people who are not infected with COVID-19 has actually declined precipitously during the pandemic, all of which would bode well for insurance rates.

Because of the fear of contagion, health care practitioners have expressed concern that people who have had mild heart attacks or strokes or other ailments have not gone to hospital for treatment.

Additionally, the number of elective surgeries has plummeted during the pandemic. In other words, deferred medical care is pushing down overall medical expenses borne by employers and group health plan insurers.

Several factors at play

There are other factors at play besides deferred medical care. Because people are also social distancing to protect against contracting COVID0-19, they are not contracting other communicable diseases like the cold and flu. 

Also, because of shelter-at-home orders, people are not involved in as many accidents, like vehicle crashes and sports injuries. Violent crime, shootings and stabbings have also plummeted, meaning fewer people are coming to the emergency room with serious or life-threatening injuries. 

“With treatment for COVID-19 top of mind, people have been putting off non-emergency medical care, including routine office visits and elective procedures at hospitals,” said Trevis Parson, chief actuary of Willis Towers Watson. “Given this reduction in use of medical services, we expect cost reductions due to care deferral to more than offset projected cost increases associated with COVID-19 infections.”

The WTW study notes that infection levels vary greatly from city to city and region to region. Less densely populated areas are faring better than large cities. It estimates overall health care costs this year based on various infection rates and how much medical care is deferred as follows:

  • In areas with a 1% infection level (rural areas) – Employer costs could decline between 1% and 4%.
  • In areas with a 15% infection level (large cities and surrounding areas) – Employer costs could rise or fall by roughly 1%.
  • In areas with a 20% infection level (large metropolises) – Employer costs could rise between 1% and 3%.

WTW noted that ultimately the financial impact on group health care plans will depend on how much the virus spreads and how severe the illness is in those people who are hospitalized. 

The estimates in the analysis only reflect increases to employer medical and pharmacy claim costs for this year. Other health care plan costs, such as dental and vision, will likely see lower costs in 2020, as employees will likely eliminate some discretionary care.

The analysis also does not consider other impacts, including non-health benefit costs (e.g., disability and life insurance), increased mortality and broad negative economic impact.

The study is an update to a WTW analysis released in late March that estimated employers could see health care benefit costs rise by 7% due to the pandemic.

At the time, WTW estimated that at a 10% infection level, benefit costs could rise by 1% to 3%, while a 30% infection level could see costs rise by 4% to 7%. At the highest rate included in the analysis, a 50% infection level, costs could rise between 5% and 7%.

Another study by ehealth.com backs up WTW’s findings. An earlier poll of health insurers found that COVID-19 will have little effect on 2021 health insurance product menus or premiums. In fact, 83% of insurers polled said they did not anticipate raising rates in 2021 as a result of the crisis. 

Although 17% of the insurers said they thought COVID-19 could lead to an increase in rates, none predicted COVID-19 would increase 2021 rates by more than 5%, according to the survey.

Other positives

The ehealth.com survey of 33 insurance companies also found the following:

  • 32 insurers said they are waiving deductibles and other out-of-pocket costs for testing.
  • 19 insurers said they are waiving out-of-pocket costs for COVID-19 treatment.
  • 32 insurers are seeing enrollees make more use of telemedicine services.

How to Open Shop and Bring Staff Back to Work

If your business is preparing to open due to a relaxation of shelter-at-home orders, you should proceed with caution and make sure you have safeguards in place to protect your workers, as well as customers if they are entering your premises.

How can you take that first step back to a semblance of normalcy?

Here are some recommendations from the Los Angeles Department of Public Health and other sources that can apply to any municipality anywhere in the country. The advice mainly applies to establishments that will have customers, but most of the recommendations are relevant across a wide swath of sectors.

Measures to protect employees

  • If someone can continue working from home, let them do so.
  • Tell employees not to come to work if sick.
  • If any employee tests positive for, or has symptoms consistent with COVID-19, you should:

– Ask that they isolate themselves at home, and

– Ask all employees who have come in contact with that colleague to immediately self-quarantine at home.

  • Check employees for symptoms or a fever before they enter the workspace. This must include a check-in concerning cough, shortness of breath or fever and any other symptoms the employee may be experiencing.
    These checks can be done remotely or in person upon the employee’s arrival. A temperature check should be done at the worksite, if feasible.
  • Offer at no cost to your employees cloth face coverings if they are going to have contact with the public during their shift. If they are disposable, masks should be thrown away at the end of every shift. If they are reusable, they should be washed after every shift in hot water.
  • Instruct employees not to touch the exterior of their mask when removing and handling it.
  • Disinfect break rooms, restrooms and other common areas frequently.
  • Place hand sanitizer in strategic locations.
  • Allow employees to take frequent breaks to wash their hands.

Signage

Place signs at each public entrance of your facility to inform all employees and customers that they should:

  • Avoid entering the facility if they have a cough or fever.
  • Maintain a minimum 6-foot distance from one another.
  • Wear a mask for their own protection, as well as for the safety of others.

Controlling crowds, lines

Limit the number of customers in the store at any one time, to allow customers and employees to easily maintain at least 6-foot distance from one another at all practicable times.

Post an employee at the door to ensure the maximum number of customers in the facility is not exceeded. If people are queueing up, mark the ground outside the store to ensure proper social distancing.

If you have a restaurant, encourage people not to crowd and wait outside. Set up a system to alert people by cellphone when they are next.

Spacing between employees

  • Require employees to work at least 6 feet apart. You may need to reorganize your office or workstations to ensure proper spacing.
  • In jobs where workers are on their feet, you can mark spots on the floor where they should stand to ensure social distancing between your staff.
  • Social distancing in break rooms and supply areas (such as device charging stations and packaging supplies) may be addressed temporarily by spacing out tables, chairs and microwaves.
  • Another option is to use partitions made of plexiglass so workers can communicate and make eye contact.
  • In addition, you may want to abandon the popular open workspace concept and revert to using cubicles, which gained popularity in the 1980s and 1990s as a way to increase productivity by putting barriers between office workers. Having that divider will make your staff feel safer and can offer some protection.
  • Reconfigure furniture placement in offices, public seating areas and other non-warehouse or production areas to support physical distancing.

Cleaning and circulation

A recent research study that analyzed superspreading events showed that closed environments with minimal ventilation strongly contributed to a characteristically high number of secondary infections.

If you have fans or air conditioning units blowing, take steps to minimize air from fans blowing from one worker directly at another. Also consider opening windows to improve circulation.

Also important are:

  • Disinfecting frequently touched surfaces in workspaces, as well as doorknobs, buttons and controls. More frequent cleaning and disinfection may be required based on level of use.
  • Providing workers and customers with tissues and trash receptacles.
  • Employees who are cleaning and disinfecting should wear disposable gloves.
  • Cleaning surfaces using soap and water, then using disinfectant.
  • Sanitizing any other personal protective equipment such as hardhats after every shift.

IRS Allows Mid-Year Changes to Health Plans, FSAs

The IRS has loosened restrictions on employees who want to make changes to their group health plans and flexible spending accounts (FSAs) in the middle of the policy year.

IRS rules are typically stringent and rigid, barring changes from being made to health plans except during open enrollment. Under the new rules, the employer would still have to approve letting staff make changes to their plans if they have more than one option to choose from.

The IRS issued the new guidance after employer groups lobbied the agency and Congress to loosen the rules because the COVID-19 pandemic has led to profound changes in employees’ health care needs as well as access to childcare.

The new rules are temporary and apply only to 2020. All of the following mid-year changes must be approved by the employer;

Health plan changes: Employers can let employees make mid-year changes that would be in effect for the remainder of the year. The new guidance allows employees to:

  • Drop out of their health insurance if they have another option,
  • Sign up for insurance if they have not done so,
  • Add family members to their plan, or
  • Switch to a different health insurance plan.

Allowing these changes could be beneficial to employees who have had their salaries cut, or were furloughed, but were able to retain their health coverage. Someone in this position, for example, may decide to switch to a lower-cost health plan if they are unable to afford the premiums on their current plan. 

Flexible spending accounts: Employees must decide before the plan year starts how much to set aside every paycheck into their FSA, the funds of which can be used to pay for health care-related expenses. Under the new guidance, they are allowed to make changes to their contribution levels mid-year.

Employees that expect more medical expenses and are able to afford it, can elect to increase their FSA funding. But those who may have been setting aside funds for an elective surgery that they may want to postpone, can chose to decrease the amount they put into their FSA every month.

Carryover amount: Regulations governing FSAs require employees to use all of the funds in their FSA in a given year or lose it. There are two exceptions: Employers can give employees a two-and-a-half-month grace period after the end of the plan year to spend remaining funds that are in the account at the end of the year, or they can let workers carry over up to $500 from one year to the next.

Starting this year, the carryover limit will be set at 20% of the maximum health care FSA contribution limit, which is indexed to inflation. That means that for 2020, employers can let employees carry over up to $550 into 2021.

The takeaway

While allowing your employees to make changes can help them better budget their health care spending, making the change will result in extra administrative expenses for you. Changing plans mid-year, signing up employees for new plans and adding dependents can involve a significant amount of paperwork and documentation.

That said, allowing employees to make these changes mid-year could help them better budget their health care spending and give them some extra peace of mind.

What COVID-19 Services Your Health Plan May Cover

Under two new laws new laws that took effect in March, all health plans must cover testing, preventative services and vaccines for COVID-19 without cost-sharing.

The Families First Coronavirus Response Act requires that group health insurance and individual health insurance plans cover coronavirus testing with zero cost-sharing. This includes deductibles, copayments and coinsurance for items and services provided during a provider visit, whether it is in-person, telehealth-enabled, at an urgent care center, or in an emergency room.

It also waives prior authorization and other “medical management requirements.”

That law was followed up 10 days later by the CARES Act, which requires group plans and individual market plans to cover preventative services and vaccines for COVID-19 without cost-sharing. The coverage applies both to the test itself and to the visit in which the test was administered.

Unfortunately, neither law requires that health plans cover COVID-19 treatment, which would include medication and in-hospital services if you or a member of your family needed to be hospitalized.

Telehealth services

The CARES Act greatly expands the availability of telehealth services beyond diagnosis and treatment for COVID-19 in order to expand access to care. 

As part of the law, the Federal Communications Commission will receive $200 million to provide telecommunications and information services and devices.

Also, restrictions on health savings accounts have been waived to allow high-deductible health plans to cover telehealth services without a deductible. 

The CARES Act also removes the existing requirement that a Medicare beneficiary have a pre-existing patient/provider relationship in order to be treated through telehealth.

The new law also authorizes federally qualified health centers and rural health clinics to be sites for telehealth consultations, and it enhances payments for such telehealth services provided during the emergency period.

The mandate that a number of Medicare services require face-to-face meetings (such as home dialysis patients, home health, and hospice care) has been waived for the duration of the outbreak. The CARES Act also appropriates $25 million for telemedicine and distance learning in rural areas. 

Beware of treatment costs

While most private health plans likely cover most items and services needed to treat complications due to COVID-19, there is no clear federal requirement to do so.

The essential health benefits standard under the ACA defines categories of services to be covered, but it is left to states to designate “benchmark” policies that define specific covered services.

As a result, coverage for at least some services needed to treat COVID-19 ― such as home-delivered care, telemedicine visits, or respiratory therapy visits ― are likely to vary under health insurance plans that are subject to the essential health benefits standard.

Nearly all private health plans use networks of participating hospitals, doctors, laboratories and other providers.

One issue that health plan enrollees have to watch out for is going out of network for coronavirus testing or care.

HMOs, for example, could deny claims for out-of-network services, other than emergency services. Under PPO plans that provide some coverage for out-of-network care, patients can face higher cost-sharing (e.g., patients might be required to pay 20% coinsurance for in-network claims and 50% coinsurance for out-of-network claims.)

In addition, out-of-network care exposes patients to “balance billing,” or the difference between the provider’s undiscounted charge and the amount the health plan considers reasonable. If you are seeking care, make sure you are going to an in-network provider to avoid any undue surprises.

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