Nearly half (45%) of companies anticipate layoffs in 2025, while some economic analysts also predict an increase in furloughs. Many people do not understand the key differences between layoffs and furloughs. There is also a significant difference between the two regarding eligibility for COBRA continuation coverage.
Furlough vs. Layoff: What’s the Difference?
Both furloughs and layoffs involve a reduction in work, but they differ significantly regarding employment status and benefits eligibility.
- Furlough: A furlough is a temporary, unpaid leave of absence with a planned return date. (The return date later may be extended or converted into a layoff.) Furloughed employees remain on the company’s payroll but do not receive wages during the furlough period.
. - Layoff: On the other hand, a layoff is a permanent or indefinite termination of employment. Unlike a furlough, there is no guaranteed return to work, and the employer-employee relationship officially ends.
If unsure whether your situation qualifies as a layoff or furlough, review your employer’s policies or consult an employment law attorney.
COBRA Eligibility: Who Qualifies?
COBRA (Consolidated Omnibus Budget Reconciliation Act) allows employees and their dependents to continue employer-sponsored health insurance coverage (including some benefit accounts, in particular circumstances) after experiencing a qualifying life event. Eligible individuals typically have at least 60 days to elect COBRA coverage after losing their health benefits.
Are Furloughed Employees Eligible for COBRA?
COBRA eligibility is straightforward for laid-off employees; the full benefits continuation is available. However, for furloughed employees, COBRA eligibility depends on how the employer classifies the furlough and the company’s health plan policies. Some furloughed employees may retain their healthcare benefits through their employer for a certain period, while others may need to elect COBRA. Employers typically consult with their health insurance carriers to determine whether furloughed employees qualify for COBRA coverage.
What Counts as a Qualifying Life Event?
Job loss is just one of the events that may make an individual eligible for COBRA coverage:
- Job loss (except in cases of gross misconduct)
- Reduction in work hours that leads to loss of coverage
- Divorce or legal separation from the covered employee
- Covered employee becoming eligible for Medicare
- Death of the covered employee
How Much Does COBRA Cost?
COBRA coverage is generally paid for in total by the individual electing it. This means the former employee covers their share and the employer’s share of the health insurance premium. This usually means that COBRA insurance is much more expensive than the employer-sponsored coverage it’s based on. However, individuals can choose which parts of their coverage to keep and who to cover (themselves, dependents, or both), allowing some flexibility in managing costs.
Exploring Alternatives to COBRA
While COBRA ensures continuity of coverage, its cost can be prohibitive for many. Consider these alternatives:
- Marketplace Health Plans: The Affordable Care Act (ACA) Marketplace offers health insurance plans, and individuals losing employer coverage qualify for a Special Enrollment Period.
- Spouse’s Employer Plan: If you’re married, you may qualify for coverage under your spouse’s employer-sponsored health insurance. (In some cases, non-married domestic partners may also be eligible.)
- Medicaid: If your household income has significantly decreased due to a layoff or furlough, you may be eligible for Medicaid, which provides low-cost or free health coverage.
Take Timely Action
Understanding your health insurance options during a layoff or furlough is crucial for financial stability and well-being. If you’re affected, review your employer’s policies, compare COBRA costs with alternative coverage options, and take timely action to ensure uninterrupted healthcare access.
For more detailed guidance, consult your HR department or COBRA benefits administrator to explore the best path forward for you and your family.
For 40 years, DataPath has been a pivotal force in the employee benefits, financial services, and insurance industries. The company’s flagship DataPath Summit platform offers an integrated solution for managing CDH, HSA, Well-Being, COBRA, and Billing. Through its partnership with Accelergent Growth Solutions, DataPath also offers expert BPO services, automation, outsourced customer service, and award-winning marketing services.