A common question for many people, particularly during a layoff or furlough, is whether or not they are eligible for COBRA benefits. Learn more about the difference between a furlough and a layoff, COBRA eligibility, qualified events, and the cost of continuing coverage.
Furlough vs Layoff
A furlough is temporary, with a specific end date, although the furlough can be extended beyond the initial period or converted later into a layoff. In a furlough, the employee experiences a forced, unpaid leave of absence, but is still an employee.
A layoff does not include a planned date for returning to work. In a layoff, the employment relationship with the company is over.
To clarify whether your specific situation is a furlough vs layoff, we recommend consulting with an employment law attorney.
When an employee or dependent has a “qualifying life event” that causes the loss of healthcare 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 experienced a layoff are eligible for full COBRA benefits. For furloughed employees it is not as clear cut. The employer decides the extent of COBRA benefits available, usually after consulting their carrier and their group health plan documents.
Paying for COBRA
COBRA continuing coverage is usually paid for by the covered individual. That includes both their share and the employer’s share (i.e., the entire premium). People can pick and choose which coverages to keep and who to cover (themselves or dependents), which could vary the cost.
In response to the COVID-19 crisis, Congress is considering expanded COBRA options. A bill drafted by the House of Representatives proposes covering furloughed individuals in addition to those who were laid off. In its current form, the drafted legislation would also cover up to 100 percent of the premium. COBRA law currently allows up to 18 months of continuing coverage, and the proposed legislation could keep that time frame or adjust it. If approved, it would be significantly more than the American Recovery and Reinvestment Act (ARRA). ARRA was passed during the 2009 recession and covered 65 percent of COBRA premiums for up to 15 months.
COBRA Election Relief During COVID-19
On April 29, 2020, 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:
- 30-day period (or 60-day, if applicable) for special enrollment under ERISA
- 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