COBRA, FMLA and the ACA Employer Mandate

Let’s assume you have diligently designated initial and standard measurement and stability periods to take advantage of the opportunities provided by the final employer mandate regulations to minimize the risk of incurring employer mandate penalties under the ACA (if you have not, let’s do it now – better late than never). But you may not yet have figured out how these designations may impact your FMLA and COBRA administration. To help you do that, let me tell you a story….

Joe Blow worked as a full-time employee for Acme, Inc. for several years. As such, he and his family were covered by Acme’s medical plan. In 2014, Acme designated a November 1 – October 31 standard measurement period, and a January 1 – December 31 standard stability period for ongoing employees such as Joe. In November 2014, Joe was diagnosed with cancer and went out on FMLA leave. In accordance with its long-standing practice, Acme continued Joe’s coverage under the medical plan while Joe was on FMLA leave, until the later of February 28, 2015 (the end of the month in which the 12 week FMLA leave period ended), or the date Joe indicated he would not return to work.

In January 2015, Joe let Acme know that he would return to work on March 1, 2015, but that due to his medical condition he could only work 20 hours per week. Joe was a valuable employee, and Acme wanted Joe to return to work in whatever capacity they could have him. So Acme welcomed Joe’s return.

Now, before the ACA, Acme would have:

  • terminated Joe’s medical coverage upon his return to work,
  • retroactively collected from Joe the employee portion of the premium for his coverage for the FMLA leave period, and
  • offered Joe and his qualified beneficiaries COBRA coverage. The COBRA period would have started running as of March 1, 2015 (the end of the FMLA leave period).

What about after the ACA? When Joe returns to work in March 2015, Acme can no longer terminate his employee coverage, because Joe worked full time during the measurement period that ran from November 1, 2013 to October 31, 2014 (and therefore he satisfies the requirement to be considered a full-time employee for the stability period that runs from January 1, 2015 to December 31, 2015). This would remain true, even if Acme had extended Joe’s leave beyond the FMLA period, into March and April 2015. For example, if Acme had agreed to extend Joe’s leave through April 1, 2015 as an accommodation under the ADA, or if Acme had voluntarily permitted Joe to extend his leave (without terminating employment) through April 1, 2015, Acme would still not be able to terminate Joe’s coverage at the end of the FMLA leave, because of its ACA measurement and stability period designations. Acme needs to continue offering Joe coverage under the Plan through the end of 2015.

What about COBRA after the ACA? Joe works 20 hours per week for the remainder of 2015. Therefore, he does not work sufficient hours during the November 1, 2014 – October 31, 2015 measurement period to be considered a full time employee for the stability period that runs from January 1, 2016 to December 31, 2016, and Acme terminates Joe’s employee coverage as of January 1, 2016.

Under COBRA, the coverage period runs from the date of the qualifying event that leads to a loss of coverage (not from the date of the loss of coverage). Therefore, Joe’s standard 18 month COBRA period would end on August 31, 2016 (18 months after March 1, 2015). So under COBRA, Acme cannot terminate Joe’s COBRA coverage before August 31, 2016.

Alternatively, Acme could design its medical plan to start the COBRA period as of the date coverage is lost (as opposed to the date of the qualifying event). Here, that would give Joe 18 months of COBRA after January 1, 2016. Before it does so, however, Acme needs to make sure that its stop loss insurer is on board (Acme’s plan is self-funded, with a stop loss policy).

As this little tale teaches, regardless of whether Acme’s plan is self-insured or fully insured, and regardless of whether it decides to run the COBRA period from the original qualifying event, or from the loss of coverage at the end of the stability period, Acme should make sure that its insurance policies, plan documents, summary plan descriptions, medical plan eligibility administration, COBRA administration, and leave policies all account for the implications of its designated measurement and stability periods.

EEOC Proposes Amendments to ADA Regulations regarding Employer Wellness Programs

On April 20, 2015 the EEOC released proposed amendments to regulations under the Americans with Disabilities Act (ADA) related to employer wellness programs. The proposed rule provides guidance on the extent to which employers may use incentives to encourage employees to participate in wellness programs that are part of their group health plans, and that include disability-related inquiries and/or medical examinations.  The proposed rules explain how a wellness program that includes incentives for participation can satisfy the “voluntary medical examination” exception to the ADA’s prohibition on “making disability-related inquiries or requiring medical examinations”.  The exception allows “voluntary medical examinations, including voluntary medical histories, which are part of an employee health program available to employees at that work site.”

This is the latest action in an ongoing turf battle between the EEOC (which administers the ADA) and the Departments of Labor, Treasury, and HHS (which administer the HIPAA nondiscrimination rules).  HHS has taken a liberal approach, allowing wellness programs to impose a 30% penalty for failure to participate in wellness programs (and up to 50% in the case of tobacco prevention or reduction programs), in accordance with the Affordable Care Act’s policy of encouraging wellness programs.  The EEOC has traditionally taken a more conservative view, holding such a large incentive would violate the ADA because it would render the program not voluntary.

The proposed rules permit incentives as high as 30% to encourage participation in a wellness program that includes disability-related inquiries or medical examinations, as long as participation is voluntary.  Voluntary means that the employer:

(1) does not require employees to participate;

(2) does not deny coverage under any of its group health plans or particular benefits packages within a group health plan for non-participation or limit the extent of such coverage (except pursuant to allowed incentives); and

(3) does not take any adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees who do not participate.

In addition, an employer must provide a notice that clearly explains what medical information will be obtained, who will receive the medical information, how the medical information will be used, the restrictions on its disclosure, and the methods the covered entity will employ to prevent improper disclosure of the medical information. Finally, the proposed rule allows the disclosure of medical information obtained by wellness programs to employers only in aggregate form, except as needed to administer the health plan.

icon   The Proposed Rules

icon   EEOC Q&As on the Proposed Rules