Is COBRA Eligibility the Same for Furloughs vs. Layoffs?

Many people who face layoff or furlough wonder if they are eligible for COBRA benefits. It can be scary to go from having group health coverage through work, to having to shop for new coverage. To help, we will explain the differences between a furlough and a layoff, how each one impacts your COBRA eligibility, what qualified events are, and the cost of continuing coverage.

Furlough vs. Layoff

Furloughs are usually temporary, with specific end dates. Furloughed workers experience a forced, unpaid leave of absence, but they are still employees. However, a furlough can later be extended beyond the initial period, or even changed into a layoff.

Layoffs are permanent. For workers who are laid off, their employment relationship with the company is over. There is no planned return-to-work date.

COBRA Eligibility

A “qualifying event” (QE) is an action that makes employees or dependents lose group health insurance coverage. People who have a QE have at least 60 days to choose whether they want to continue coverage on their own. Examples of a QE include:

• Job loss (for reasons other than gross misconduct)
• Reduction in work hours
• Divorce or legal separation from a covered employee
• Covered employee becomes eligible for Medicare
• Death of a covered employee

By law, if you have been laid off, you are eligible for full COBRA benefits.

For furloughed employees, it is not as cut and dried. Your employer decides what COBRA benefits to make available, usually after talking with the insurance carrier and reviewing health plan documents.

COBRA Premiums – Who Pays

Premiums for COBRA continuing coverage are usually paid by the covered worker. That includes the entire premium – both the employee’s share and the employer’s share.

In some cases, the employer share is larger than the employee share. As a result, the COBRA premium for group health insurance coverage could be more than twice what you were used to paying for the same coverage when employed.

When electing COBRA, you have the ability to pick and choose which coverages to keep. You can decide whether to cover yourself, your dependents, or both. To make premiums more affordable, choose only essential coverages.

If you have a Health Savings Account (HSA), you can use HSA money to pay your COBRA premiums. However, COBRA premiums are not an eligible expense for Flexible Spending Account (FSA) funds.

COVID-19 Changes to COBRA Rules and COBRA Eligibility

In April 2020, the Internal Revenue Service (IRS) and the U.S. Department of Labor (DOL) published relief rules for COBRA filing. According to the joint notice, employers “must disregard the period from March 1, 2020 until sixty (60) days after the announced end of the National Emergency … for all plan participants, beneficiaries, qualified beneficiaries, or claimants.” This rule applies to:

• 60-day election period for COBRA continuation coverage
• Date for making COBRA premium payments
• Date for people to notify the plan of a qualifying event
• Date a group health plan sponsor or administrator has to provide a COBRA election notice

As of this writing, the COVID-19 National Emergency period is still ongoing.

Congress enacted the American Rescue Plan Act of 2021 (ARPA) in March 2021. Among other provisions, ARPA provided government-funded premium subsidies for qualified COBRA recipients through part of 2021. The ARPA period has now expired.

If you have elected COBRA and can afford the premiums, you will benefit by paying monthly basis as you go along. Despite the extension of time to pay premiums during the National Emergency, your insurance carrier may not process claims if you are on premium payments. Also, staying current will help you avoid having to make a large, lump-sum payment to catch up once the National Emergency has ended.

For more information on the COBRA rules that apply to your specific furlough or layoff situation, contact your HR department or COBRA benefits administrator.

Captain Contributor is a benefits education and engagement program developed by DataPath, Inc.