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Nearly 20% of the labor force in the U.S. have filed for unemployment benefits in the past six weeks, according to the U.S. Labor Department. If you are in that number, health insurance may be a significant concern. Can you keep your benefits if you are furloughed or laid off from your job?
A furlough is like a temporary layoff. You are no longer working for your employer, but the intent is for you to come back to your same position in the future. Furloughs are mandatory and strictly enforced, which means you cannot do any work for your employer while furloughed.
Furloughs offer benefits to both employers and employees over layoffs. For the employer, a furlough is a way to save on costs during a time of economic hardship. The current COVID-19 crisis has produced financial challenges for many companies, which is why the number of furloughed employees has increased tenfold in recent weeks. Employees can be brought back when the financial climate changes, without the need for a re-hiring process.
Employees that are furloughed have some reassurance that they will likely return to their companies at a set point in the future. In most cases, employees are given their same position and salary that they had before the furlough. Some employer benefits may still be offered during a furlough, such as health insurance eligibility.
A layoff is different from a furlough. When a company lays off employees, they are dismissed from their jobs. While there is a possibility of being re-hired in the future, a layoff is considered permanent. Layoffs usually occur because the company can no longer afford to pay employees or for other financial reasons. Mass layoffs occur when a company dismisses many employees at one time.
In most cases, employees do not receive a salary while they are furloughed. However, they often keep their employment benefits like health insurance during the time they are not working. If you do maintain your health insurance, you must continue to cover your share of the contribution. Some employers allow employees to defer their contribution until they are working again.
You may be able to apply for unemployment benefits while you are furloughed. Some employers also allow furloughed employees to take temporary jobs during that time. Check with the policies of your company to see if a second, short-term job is an option for you.
If you are laid off, your employer benefits like health insurance are also terminated. However, a federal program known as COBRA (Consolidated Omnibus Budget Reconciliation Act) allows you to keep your group plan for up to 3 years after your employment ends.
In most cases, you will need to pay the full cost of the plan once you are no longer employed. Some employers have been willing to subsidize COBRA coverage for a time. You can ask for that option at the time of your layoff, understanding that it is usually the exception rather than the rule.
You may be eligible for COBRA if you had an employer-sponsored group plan and experienced a qualifying event, such as:
If you are eligible for COBRA, your employer must notify you of your eligibility when your employment changes. You then have 60 days to decide whether you want to take advantage of COBRA or look elsewhere for your health coverage. If you sign up for COBRA, you will need to make your first premium payment within 45 days.
If you choose COBRA, your coverage may continue for anywhere from 18 months to 3 years, depending on your specific circumstances.
COBRA offers the advantage of a seamless transition from your job without the need to change health insurance plans right away. You keep your same coverage, which means you can continue to see your health providers and use the same pharmacy. Family members are also eligible for COBRA coverage.
The biggest drawback to a COBRA plan is the cost. In addition to paying your own contribution, you will need to cover the costs your company paid while you were employed. You will also be subject to any changes your company makes to the health plan.
An alternative to COBRA would be to purchase an individual health insurance plan, which can be very affordable depending on your situation. Under the Affordable Care Act, also known as Obamacare, your drop in income could qualify you for a tax credit that will substantially bring down premiums. The ACA also prohibits insurers from denying coverage or charging higher premiums if you have a pre-existing condition.
During challenging times, it is important to understand your rights and options when it comes to your employment and your benefits. By getting the facts, you can make the best possible choices for yourself and your family.
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For information and guidelines specific to the coronavirus outbreak, visit cdc.gov
This article is for general information and should not be relied on as legal advice. Check with a legal professional for legal advice.