Our office pays a set amount for employee health benefits. Expenses beyond that amount (generally spouse and/or dependent coverage) are the employee’s responsibility and are deducted from the employee’s paychecks. If an employee is out on pregnancy leave or FMLA and there are no paychecks from which to deduct the employee share of the premium, how is this usually handled? What do we do if they don’t pay?
— Elin, HR Manager in Marina del Rey
Our HR Management & Compliance Report: How To Comply with California and Federal Leave Laws, covers everything you need to know to stay in compliance with both state and federal law in one of the trickiest areas of compliance for even the most experienced HR professional. Learn the rules for pregnancy and parental leaves, medical exams and certifications, intermittent leaves, required notices, and more.
Continued coverage under a group health plan is typically one of the most important concerns for any employee on a leave of absence. Before the federal Family and Medical Leave Act (FMLA) and the California Family Rights Act (CFRA) were enacted, there were no laws that required employers to continue group health coverage during a leave. However, with the enactment of these laws, employees gained certain rights to continued coverage.
FMLA and CFRA require covered employers to maintain an employee’s coverage under a group health plan on the same conditions as coverage would have been provided if the employee had been continuously employed during the FMLA/CFRA leave period. The continued coverage obligation begins on the date the leave first begins under FMLA/CFRA and extends through the employee’s FMLA/CFRA leave period up to 12 weeks, subject to exceptions described below.
California law regarding pregnancy disability leave does not require employers to continue an employee’s group health benefits. However, if a pregnant employee is eligible under FMLA, the continuation of benefits will apply during the pregnancy disability portion of her leave. If she then takes leave under CFRA for new child bonding, the obligation to continue her benefits is only required to the extent that she has not already been provided with 12 weeks of coverage. That is, the employee is not entitled to a second 12-week period of health coverage for the new child bonding leave.
The laws require that employers maintain the same type of benefits coverage, including benefits provided through a flexible spending account or other component of a cafeteria plan. If a new health plan is provided during the leave or there are changes to the plan, the employee on FMLA/CFRA leave is entitled to the new or changed plan or benefits. Notice of an opportunity to change plans must be provided to employees on FMLA/CFRA leave.
To maintain the continued coverage, the employer and employee both continue paying their usual portion of group health plan premiums as prior to the leave. Thus, if you pay a certain percentage of the cost of the employee’s coverage, you have to continue paying that portion during the FMLA/CFRA leave. You are not obligated to continue an employee’s dependents’ coverage. If premiums are raised or lowered during the leave, the employee pays the new premium rates.
How Payments Are Made
If your policy provides that employees are paid during an FMLA/CFRA leave, which is typically through payment of sick, vacation, or paid time off (PTO) credits, the employee’s share of premiums must be paid by the method normally used, e.g., through payroll deduction. If and when the employee’s leave is unpaid (e.g., when the employee runs out of paid time off credits), you may require that payment be made to you or directly to the insurance carrier, but no additional charge may be added to the employee’s premium payment for administrative expenses.
You may require employees to pay according to a particular payment schedule (such as the regular payroll schedule), the employee may elect to pre-pay the premiums under a cafeteria plan, or the employer and employee may agree that the employee pre-pay the premiums when the need for the FMLA is foreseeable.
Whichever payment option is used, employees must be provided with advance written notice of the terms and conditions of the payment plan. This is best accomplished at the time the leave is approved. General statements in an employee handbook are not adequate notice of when these payments are due.
When Coverage Ends
The obligation to maintain coverage ends if the employee’s premium payment is more than 30 days late. To drop coverage, you have to provide written notice to the employee that payment has not been received. The notice must be mailed to the employee at least 15 days before coverage is to end, advising that coverage will be dropped on a specified date at least 15 days after the date of the letter unless payment has been received by that date.
Employers may recover an employee’s share of any premium payments missed (or unpaid) by the employee for any FMLA leave period during which the employer paid the employee’s share. If coverage lapses due to nonpayment, when the employee returns from leave, the employer must restore the employee to coverage and benefits equivalent to those he or she would have had if the leave had not been taken and the premium payment had not been missed. The employee is not required to meet any qualification requirements.
The continued coverage obligation also ends when the employee provides notice that he or she does not intend to return from leave or the employee doesn’t return from leave or continues on leave after exhausting the maximum 12-week FMLA/CFRA entitlement. The employer may recover premiums it paid if the employee fails to return from leave (which includes working less than 30 days after returning from leave) unless the reason for not returning was the continuation of the health condition that triggered the leave.
Other Leaves
Although there is no comparable requirement to continue group health plan coverage under any type of mandated leave other than FMLA/CFRA, employers are always free to provide continued health plan coverage to employees who are not eligible under FMLA/ CFRA or to continue that coverage beyond the FMLA/CFRA leave period, which must be reflected in the employer’s policy and benefits plan documents.
As a cautionary note, many group health plans limit continuation coverage during a leave of absence to a 12-week period tied to FMLA/CFRA. If your policy provides more generous benefits, make sure that your group health plan insurance contract provides the coverage desired. If it does not, you will most likely be responsible for paying an employee’s insurance claim.
Mary L. Topliff is principal of the Law Offices of Mary L. Topliff in San Francisco, specializing in employment law counseling, training, and compliance.