Layoffs, furloughs and group health insurance amid the coronavirus outbreak

The question I’ve received the most in the past week is the difference between a layoff and a furlough.

Both are reductions in force caused by economic conditions. There is one key difference.

• A layoff is a permanent job loss, usually with no expectation of recall to full-time employment.
• A furlough is a temporary and short-term reduction of one’s hours (in this case down to zero) with an expectation of a return to full-time employment.

One issue that keeps recurring is what happens to employees’ health insurance if they lose their jobs related to coronavirus-related job cuts.

Until last Friday, I’d have told you that there wasn’t much of a difference. A layoff always terminates an employee’s group health coverage. And because the Affordable Care Act speaks in terms of 30 hours per week for coverage, employees who drop under that threshold in a furlough would typically also lose their health insurance.

In my state, the Ohio Department of Insurance has come to employees’ rescue.

Effective March 20, employers no longer have to worry about employees’ group health insurance in choosing between layoffs and furloughs.

ODI Bulletin 2020-03 [pdf] makes several key coronavirus-related changes to employee group health coverage.

Relating to furloughed employees:

• Insurers must permit employers to continue covering employees under group policies even if the employee would otherwise become ineligible because of a decrease in hours worked per week.
• Insurers are required to permit employers to continue providing coverage to employees under group policies regardless of any “actively at work” or other similar eligibility requirements in the policy.
• Insurers are prohibited from increasing premiums based on a group’s decreased enrollment or participation related to coronavirus.

• Insurers must give their insureds the option of deferring their premium payments interest-free for up to 60 days from each due date.
• Eligible employees are able to elect COBRA coverage as long as one person remains actively employed.
• There is a special enrollment period for employees who lose coverage to purchase plans on the federal exchange.