Eligibility for COBRA Benefits – Furlough vs Layoff

A common concern for many people during a layoff or furlough is their eligibility for COBRA benefits. It can be a scary prospect to go from having group health coverage to having to shop for new insurance. Learn more about the difference between a furlough and a layoff, COBRA eligibility, qualified events, and the cost of continuing coverage.

Furlough vs Layoff

During a furlough, the employee experiences a forced, unpaid leave of absence, but is still an employee. A furlough is usually temporary, with a specific end date. However, a furlough may be extended beyond the initial period or later changed into a layoff.

With a layoff, the employment relationship with the company is over; there is no planned date to return to work.

Eligibility for COBRA Benefits

When an employee or dependent has a “qualifying life event” that causes the loss of group health insurance, they have at least 60 days to choose to continue coverage. Examples of a qualifying event include:

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

Employees who have been laid off are eligible for full COBRA benefits.

For furloughed employees it is not as cut and dry. The employer decides the amount of COBRA benefits available, usually after talking with its carrier and reviewing group health plan documents.

To clarify whether your situation is a furlough or a layoff, talk with your company’s HR. If you are unsure if about your eligibility for COBRA benefits, contact your benefits administrator.

COBRA Premiums – Who Pays

COBRA continuing coverage is usually paid for by the covered individual. That includes both their share and the employer’s share (i.e., the whole premium). You have the option to pick and choose which coverages to keep and who to cover (themselves or dependents); this could help make the coverage more affordable.

If you have a Health Savings Account (HSA), you can pay for COBRA premiums with that money. COBRA premiums are not an eligible expense for Flexible Spending Accounts (FSAs).

COBRA Relief Due to COVID-19

In response to the COVID-19 crisis, Congress is considering expanded COBRA options. Some proposals include covering furloughed workers in addition to those who have been laid off; plus, there may be some COBRA subsidies included to help with the cost.

Also, in late April, the IRS and the Department of Labor published relief rules for COBRA filing. According to the 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

To date, the COVID-19 period is still ongoing. If you have elected COBRA and can afford to make payments, it would benefit you to pay as you go along. If you do not stay current on premium payments, the insurance company may not process your claims. Also, staying current will help prevent a build up of payments when this is over.

Captain Contributor is an benefits education program produced by DataPath, Inc.