Benefits, Leave Management, Policy, and Compliance

Health Benefits During FMLA Leave: Who Pays?

For many HR professionals, Family and Medical Leave Act (FMLA) administration is near—or at—the top of the list of most-hated-things-about-the-job. And given that the law is confusing and burdensome and nitpicky, it’s no wonder.healthcare

While the law has various components, today we’re going to focus on just one aspect of it: What happens to benefit premiums when an employee goes on FMLA leave? If, for example, an employee has his or her benefit premiums paid (in whole or in part) by the company, is the company required to keep paying the premiums even when the employee is out?

The short answer is “yes.”

What Constitutes a ‘Group Health Plan’?

A “group health plan” is defined as a “plan of, or contributed to by, an employer (including a self-insured plan) to provide health care” to employees (IRS Code §5000(b)(1)).

Employers must maintain employees’ group health insurance benefits for the entire duration of FMLA leave (29 C.F.R. §825.209), as long as the employee continues to make any required premium payments, and must reinstate coverage when the employee returns from leave on the same terms as before the leave began. That means there can be no qualifying period, exemption of a preexisting condition (except exemptions that were in place prior to leave) or required physical examination.

During leave, coverage must be kept at the same level and under the same conditions it would have been if the employee had continued working continuously for the duration of the leave. This means that if the employer is paying, for example, 80% of the benefit premiums before FMLA leave is taken, it must continue doing so for the duration of the leave.

Keep the Status Quo

If the employee normally pays a share of the insurance premiums, he or she may be required to continue doing so to the same extent as if there were no leave. An employer must tell an employee in advance and in writing about any requirements to make payments to keep health plan coverage during FMLA leave, and the terms and condition required for making payment as well as the consequences of not making timely payments.

Because of the requirement that benefits be reinstated when employees return from FMLA leave, some employers pay the employee’s share of premiums during unpaid leave. Those premiums may be recovered when the employee returns to work.

Employers also may recover their portion of premiums paid for maintaining an employee’s health coverage if the employee fails to return to work at the end of FMLA leave for reasons other than the continuation, recurrence or onset of a serious health condition, or other circumstances beyond the employee’s control.

This, of course, is far easier said than done. Many states place restrictions on the deductions that can legally be made from an employee’s paycheck. And, of course, once an employee terminates employment, there are no more paychecks to deduct from in any event. Employers do have the option of taking the former employee to court to try to recover those premium payments, but many conclude it is not worth the time, effort, and hassle to do so.

What About Other Benefits?

Even when an employer normally does not provide benefits other than its group health plan to employees on other kinds of unpaid leave, it may want to maintain those other benefits during unpaid FMLA leave because it must provide equivalent benefits when the employee returns to work.

A lapse in coverage could prevent the employee from qualifying for equivalent benefits when he or she returns. The employee’s share of any premiums can be recovered regardless of whether the employee returns to work (29 C.F.R. §825.213(b)).

Your Best Course of Action: Plan Ahead

While some FMLA leaves don’t come with a lot of lead time, others do—maternity leaves, for example. Whenever possible, plan ahead and be sure both you and the employee are on the same page about what’s going to happen in terms of benefits payments and coverage both during, and after, the employee’s leave.

JenJennifer Carsen, JD,is a Senior Legal Editor for BLR’s human resources and employment law publications, focusing on benefits compliance. In the past, she served as the managing editor of California Employer Resources (CER), BLR’s California-specific division, overseeing the content of CER’s print and online publications and coordinating live events and webinars for both BLR and CER.

Before joining CER in 2005, Ms. Carsen was a Legal Editor at CCH, Inc. and practiced in the Labor & Employment Department at Sidley & Austin, LLP in Chicago. She received her law degree from the New York University School of Law and her B.A. from Williams College. She is a member of the New Hampshire Bar Association.

Questions? Comments? Contact Jen at jcarsen@blr.com for more information on this topic