Massachusetts Division of Insurance Encourages Health Insurance Carriers to Be Flexible for Employers and Employees Impacted by the COVID-19 Crisis

Seyfarth Synopsis: On March 23, 2020, the Massachusetts Division of Insurance issued Bulletin 2020-5, which addresses the Division’s expectations for insurance carriers during the COVID-19 crisis.  The Bulletin does not mandate changes, but instead encourages carriers to be flexible with employers and employees to maintain access to insurance coverage, particularly in light of possible furloughs and temporary layoffs.  Employers considering such options are encouraged to communicate with their insurance carriers to maximize coverage.  Nonetheless, employers offering employer-sponsored health plans, which are governed by federal law, must assess the impact of potential changes in accordance with the Affordable Care Act.

On March 23, 2020, the Massachusetts Division of Insurance issued Bulletin 2020-5, which addresses the Division’s expectations for insurance carriers regarding maintaining coverage during the COVID-19 public health crisis.  The Bulletin can be found here.  The Division expects carriers to be flexible in the administration of insurance and “to take all necessary steps to preserve individual and employer access to insurance coverage” during this emergency.  While the Bulletin covers all lines of business, it contains specific guidance regarding employer-sponsored health plans.

Carriers are expected to be flexible in collecting premiums from employers.  The Bulletin advises carriers to relax due dates for premium payments and to extend grace periods for payment in order avoid termination of coverage.  Further, on a case-by-case basis, carriers are expected to work with employers experiencing financial hardship regarding the timing of premium payments in order to delay cancellation of coverage for non-payment.

A significant concern for employers has been how to bridge health insurance coverage for employees who are furloughed or laid off temporarily.  This is because the reduction in employees’ hours because of a furlough may result in an employee dropping below the minimum weekly work hours required for health plan eligibility.  These considerations are relevant whether workers are performing no work during a furlough or working reduced hours.  The Bulletin instructs health insurance carriers to be prepared to explain whether the carrier “may be willing to allow employers to continue to pay for employees’ health coverage during periods when the employees are on furlough or laid off.”  While the Bulletin does not mandate such continued coverage, it instructs carriers to consider this and other steps to protect both policy-holders and the solvency of the Massachusetts insurance market. 

Thus, employers who are assessing health insurance options in connection with a furlough should contact their health insurance provider to determine whether continuation is permitted.  The failure to do so could result in the carrier denying claims.  If continued coverage is not available, COBRA continuation coverage is likely available for laid off employees.  If employees’ work hours drop below the plan minimum and employees lose their coverage, a furlough will constitute a qualifying event (i.e., a reduction in hours resulting in a loss of coverage) for COBRA purposes.  The Bulletin instructs carriers to have personnel available to assist employees with purchasing COBRA continuation coverage or other options available to the recently unemployed.  

Lastly, the Bulletin provides guidance to health insurance carriers who act as administrators of employer-sponsored non-insured health benefit plans.  Carriers are expected to encourage plan sponsors to take steps consistent with the Bulletin.  

Taken together, the Bulletin encourages health insurance carriers to help employers and employees during the significant disruption caused by the pandemic.  However, it is important to keep in mind that while the Massachusetts Division of Insurance has the authority to regulate insurance and the Bulletin is generally consistent with that authority, employer-sponsored health plans are governed by federal law.  The Affordable Care Act (“ACA”) has its own analysis of whether a reduction in employees’ hours changes their status as “full-time” and eligible for benefits (e.g., if the employer uses a measurement/stability period approach for determining if an employee is full-time).  Employers should be aware that the failure to offer coverage to a person the IRS considers “full-time” under the ACA could trigger penalties (notwithstanding what the employer’s plan says).

Further, if an employer intends to bridge coverage for employees who otherwise would lose coverage as a result of a furlough, the employer will need to consider whether and how to collect premiums.  Employers can require employees to pay premiums (post-tax) on a periodic basis while on leave or can recoup premiums upon return.  Such recoupment might be subject to state wage withholding laws (which can usually be addressed by obtaining employee consent).  Generally speaking, if an employee fails to pay premiums when due, and no payment is received after a 30 day notice of delinquency, the employer can terminate the coverage.  These payment requirements should be part of the plan and communicated to employees.

The interplay of state insurance law and federal benefits law is complicated.  Employers trying to assess employees’ coverage during a furlough or temporary layoff would be well-advised to consult counsel.