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Employee Benefits in the Age of COVID-19: Brief Answers to Some Common Health Plan Questions

March 31, 2020

As we are all now intimately aware, the coronavirus pandemic has changed the nature of the workplace, and all of the benefits, rights, and responsibilities arising out of employment.  We are operating under a new set of rules, and those rules are changing daily.  We hope that you are managing as well as possible.

The various legislative efforts to address the pandemic have immediate effects on the health and retirement benefits that most employers make available.  Employers’ efforts to manage their workforce in order to maintain fiscal viability while protecting the health of employees also affect benefits.  The cascading effect of these factors raises many thorny benefits questions.

We will summarize – and attempt to answer – a few of those questions here (based on the legal landscape as of March 31, 2020).  Please be aware, however, that your particular circumstances and the terms of your own plan documents may result in different answers.  We encourage you to use these Q&As as a tool to identify some of the issues that may be implicated by some common employer strategies, but you should seek individualized guidance as appropriate.


  1. May high deductible health plans (HDHPs) cover COVID-19 testing and/or treatment with no (or a lower-than-normal) deductible and still constitute HDHPs?
    • The IRS provided guidance in Notice 2020-15 clarifying that HDHPs may provide first-dollar coverage (i.e., before satisfaction of the plan’s deductible) for COVID-19 testing and treatment without disqualifying the plan as an eligible HDHP.  In other words, participants in HDHPs that provide such coverage are still eligible to contribute (or have contributions made on their behalf) to a health savings account (“HSA”).  First-dollar coverage of telehealth services for COVID-19-related diagnosis and treatment is also permissible.  The Coronavirus Aid, Relief and Economic Security (“CARES”) Act extended this relief to telehealth services for issues unrelated to COVID-19.  It includes a new safe harbor that permits HDHPs to provide telehealth or other remote-care services before the deductible is met (effective March 27, 2020, for plan years beginning on or before December 31, 2021). It may be necessary to amend affected HDHP documents accordingly.
  2. When a coronavirus vaccine becomes available, will it be treated as preventive care that may be paid on a first-dollar basis by an HDHP?
    • The CARES Act requires all group health plans and health insurance issuers to cover any “qualifying coronavirus preventive service” without employee cost sharing, when such services become available.  Group health plans will need to be amended to provide such benefits.
  3. Must self-funded health plans waive their standard coinsurance/copay requirements for COVID-19 testing and treatment expenses?
    • Although mandatory coverage for COVID-19 testing had been limited to state regulated, fully insured insurance contracts initially (because such mandates were handed down by state regulators), the federal Families First Coronavirus Response Act extended that mandate to self-funded plans that otherwise would not have been subject to state insurance regulation due to ERISA preemption.  The CARES Act clarified that this requirement applies to both in-network and out-of-network providers, and further extended this mandate to include mandatory first-dollar treatment of COVID-19, in addition to testing.
  4. Must fully insured health plans waive their standard coinsurance/copay requirements for COVID-19 testing and treatment expenses?
    • The Families First Act superseded the previously enacted state-law requirements to impose mandatory first-dollar coverage of COVID-19 testing, and the CARES Act extended that requirement to COVID-19 treatment.
  5. If an employee is on a leave of absence necessitated by COVID-19 and is unable to satisfy a health plan’s hourly eligibility requirement, will the individual maintain health plan coverage during the leave?
    • This will depend on the plan’s specific terms and the nature of the leave. Some plans (g., multiemployer, Taft-Hartley plans) extend eligibility when participants become unable to work.  Moreover, if the leave of absence qualifies as “emergency family medical leave” under the expanded FMLA provisions of the Families First Act, coverage must generally be extended during the leave.  For a description of the emergency family medical leave provisions, click here.  Leaves that do not qualify as “emergency family medical leave” but that otherwise satisfy the standard FMLA requirements also may require the employer to maintain coverage for the employee.  See Q&A-16.
  6. May we waive copays and deductibles for the telehealth benefit offered under our plan?
    • Waiving copays and deductibles for telehealth services to diagnose and treat COVID-19 is required by the CARES Act.  In order to encourage remote treatment and compensate for the anticipated lack of access to physicians, some plan sponsors are considering a broader waiver of copays and deductibles for telehealth treatment, to include ailments other than the coronavirus.  Sponsors of fully insured plans should consult with their insurers about such an extension.  Self-funded plan sponsors should be able to offer such an extension, but a plan amendment and notice to participants likely will be required.  The temporary relief afforded under the CARES Act for first-dollar coverage of telehealth services by HDHPs extends to non-COVID-19 testing and treatment.  (See Q&A-1)  Thus, HDHPs also may waive employee cost sharing for non-COVID-19 issues.
  7. If our health plan does not currently offer telehealth services, must we add those services to the plan?
    • No.
  8. May we extend our health plan’s telehealth benefit to all employees, regardless of whether they participate in our health plan?
    • Generally, yes, but doing so might create a separate ERISA “plan” for those employees.
  9. May a health plan sponsor adjust or subsidize COBRA rates for employees who lose coverage due to COVID-19?
    • Self-funded health plans that regularly set their own COBRA rates may be able to soften the blow of lost coverage for employees who are downsized or who lose hours by reducing the rates for continued coverage under COBRA. Plans may not charge more than 102% of the cost of coverage (as determined pursuant to Tax Code regulations), but they may charge less than the cost of coverage.  Subsidized COBRA rates may not favor highly compensated employees over non-highly compensated employees.  It may be more practical to reduce rates for all participants – rather than only those who are directly affected by COVID-19.  We suggest that you consult with the plan’s actuary before implementing this strategy.
  10. Must we offer COBRA continuation coverage to employees who are furloughed because of COVID-19?
    • If the employees lose health plan coverage because of the furlough, yes. A furlough itself is not a qualifying event, absent such a loss of coverage.  The Department of Labor has not issued any specific guidance regarding COBRA coverage for employees who are furloughed because of COVID-19.  Under general principles, however, COBRA requires plans to offer continued coverage to employees who lose coverage due to a termination of employment or reduction in work hours.  The maximum coverage period for such a qualifying event is 18 months, unless there is a second qualifying event or the employee qualifies for a disability extension.


  1. Do school closings constitute life events that justify new dependent care reimbursement account (DCAP) elections?
    • Yes, if your cafeteria or DCAP plan document otherwise permits it. You will need to review the terms of your plan carefully, but generally the IRS interprets the DCAP change in status events liberally, such that a school or daycare closing would authorize a new election.
  2. Does the pandemic itself constitute a life event that justifies changes to cafeteria plan elections?
    • Generally no, unless the pandemic otherwise causes a loss of, or change in, coverage. Tax Code regulations under Code Section 125 and the terms of individual cafeteria plans determine when participants may make mid-year alterations to the elections they made at the beginning of the year.  Changes that might permit a new election include the loss of a job (for the employee, his or her spouse, or dependent), reduction in work hours to make a participant ineligible for a benefit, or the employer’s decision to offer a new benefit or special enrollment period.  We encourage you to review the terms of your cafeteria plan carefully, because not all plans permit election changes in these circumstances.
  3. What COVID-19-related drugs and medical supplies may be purchased through a health flexible spending account (FSA) or HSA? Facemasks? Hand sanitizer? Toilet paper?
    • The CARES Act eliminates Tax Code rules that otherwise prohibit health plans, FSAs, and HSAs from reimbursing expenses for most over-the-counter drugs. Thus, participants will not need a prescription to receive reimbursement for OTC drugs (and even menstrual care products).   Reimbursement for products such as facemasks, hand sanitizer, toilet paper, and other products that are in short supply because of the pandemic are more problematic. Permissible HAS/FSA reimbursements are limited to expenses for medical care, which is generally defined to mean the amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure of the body.  A facemask might fit that description, but it is hard to put hand sanitizer and toilet paper in the same category.
  4. If we furlough employees, does this constitute a change in status event that would permit them to change their cafeteria plan elections?
    • The cafeteria plan change in status rules generally include the commencement of, or a return from, an unpaid leave of absence.  Again, check the terms of your own cafeteria plan carefully.


  1. Have Form 5500 and related reporting deadlines been extended?
    • Not at this time. Although the CARES Act gives the Department of Labor the authority to extend certain deadlines, the DOL has not yet done so for Forms 5500.     


  1. How are health benefits treated for employees who must be quarantined and who are treated as taking paid or unpaid leave?
    • The Families First Act authorizes Emergency Paid Sick Leave and Emergency Family Medical Leave for certain employees of covered employers (generally those with fewer than 500 employees). (See Spencer Fane blog posts about the Families First Act.) The Emergency Family Medical Leave provision applies only for leave needed because of school or childcare closures due to COVID-19.  The first two weeks of leave will generally be paid (under the Emergency Paid Sick Leave provisions), and standard deductions for health and welfare benefits will continue to apply.  Employees who become eligible for Emergency Family Medical Leave due to a school or daycare closing, or those entitled to regular FMLA leave (g., because of their own exposure to COVID-19 and quarantine requirement) may be eligible for paid or unpaid leave, depending on the employer’s policies.  Benefits generally must be continued during a period of FMLA or Emergency Family Medical Leave, subject to the employee’s payment of his or her portion of the cost of coverage, unless the participant elects not to continue such coverage.  Employers should review plan language to determine how other leaves of absence affect eligibility for benefits under their health plans.
  2. Must we continue an employee’s health and other benefits while he or she is taking Emergency Family Medical Leave under the new Families First Act?
    • Yes, subject to the employee’s payment of any required employee premium (unless the employee elects not to continue such coverage).
  3. Should we continue to take normal payroll deductions for benefits when our employees take Emergency Paid Sick Leave under the Families First Act?
    • Administrators may arrange for direct payment from employees if the leave taken is unpaid.
  4. Must we offer COBRA continuation coverage to employees who are furloughed because of COVID-19?
    • See Q&A-10.


  1. What preventative measures should health plan fiduciaries consider to address potential business outages by service providers like third-party administrators?
    • Although TPAs and insurers are considered essential businesses that may continue to operate through federal and state stay-at-home orders, prudent fiduciaries might want to seek formal assurances from such providers that they are capable of processing claims on a timely basis and while maintaining appropriate security and confidentiality, especially as some staff members may be working from home. Ask about business continuity plans.  To the extent that service agreements contain performance guarantees, be alert to any deviations from those guarantees.  It may also be a good time to review any force majeure clause in such agreements to evaluate the extent to which the pandemic might excuse the service provider from meeting those service expectations.  Sponsors of self-funded health plans should consult with their stop-loss insurers before making any voluntary mid-year benefit changes.
  2. What benefits issues should we consider if the company is forced to shut down particular lines of business or locations due to COVID-19?
    • If the closure will cause employees to lose eligibility for health plan coverage, consider COBRA obligations. If other facilities or lines of business within the employer’s controlled group will remain open, employees affected by the closure may be entitled to COBRA coverage under a health plan that is available to other controlled group members.  Other benefit continuation provisions (g., life insurance conversion rights) also may be triggered.
  3. Will workers’ compensation laws cover employees who are exposed to the coronavirus while at work?
    • State law will govern this question. Generally, however, we do not believe that exposure to coronavirus while on the job will trigger workers’ compensation benefits.
  4. Can we set up a leave-sharing plan to allow employees to assist one another in light of the pandemic?
    • Such arrangements may be feasible. Tax-favored “qualified disaster relief payments” are generally authorized under Code Section 139, and “major disaster” leave-sharing programs are available under guidance issued by the IRS in Notice 2006-59.  Each program has its own limitations, and each is generally limited to situations in which the President has declared a disaster under federal law.

Your particular circumstances and plan terms will determine how these (and other) questions are answered (which may differ from the answers identified above).  Please contact any member of Spencer Fane’s Employee Benefits Group for individualized advice.

This blog post was drafted by Greg Ash, an attorney in the Spencer Fane LLP Overland Park, KS office. For more information, visit