All employers—including public agencies—are required to maintain existing health insurance coverage under a group health plan for employees during FMLA leave, and they can require the employee on leave to pay his or her share. But that’s not always easy.
Employers who provide group healthcare coverage typically require employees to pay a portion of the premium for the health plan, typically collected by the employer through an authorized payroll deduction.
For guidance, we consulted BLR’s Family and Medical Leave Act Compliance Guide, which states: An employee on FMLA leave is required to make that same contribution towards the healthcare coverage as if he or she had remained at work. Where FMLA leave is paid or where paid time is substituted for unpaid time, employers may continue to collect healthcare premiums through payroll deductions.
FMLA leave, however, is generally unpaid. The fact that leave is unpaid does not relieve an employee of his or her obligation to make payments for healthcare coverage. Where an employee is not receiving a paycheck, alternative methods for collection of the healthcare premium must be used.
Alternative Payment Methods
If FMLA leave is unpaid, the employer may collect the employee’s premium payment by one of the following methods:
- The employee may pay on the same schedule as if payments were deducted from payroll
- The employee may pay on the same schedule as payments are made under COBRA
- The employee may pay pursuant to an employer’s existing rules for payment by employees on leave without pay
- The employee may make prepaid payments pursuant to a cafeteria plan, provided the employee consents
- The employee and the employer may agree to any other system, provided such a system is permissible under state wage and hour laws.
Where possible, prepaid payments or postpaid payments through payroll deductions may be beneficial to both the employer and employee.
The employer must provide the employee with advance written notice of the terms and conditions under which these payments must be made.
Note: An employer may not require more of an employee using FMLA leave than the employer requires of other employees on “leave without pay.”
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Employee Failure to Pay Premiums While on Leave
In the absence of an employer policy that creates a longer grace period, an employer’s obligation to maintain health insurance coverage ceases if the employee’s co-payment is more than 30 days late.
In order to drop the employee’s coverage, however, the employer must send the employee a letter stating that continuation of coverage depends upon its receipt of the employee’s premium payments within 15 days. The employer cannot drop the employee’s coverage for at least 15 calendar days after the date of the letter.
When coverage so lapses, the employer may be able to cease coverage retroactively, in accordance with its own policies. In absence of such a policy, coverage for the employee may be terminated at the end of the 30-day grace period, where the required 15-day notice has been provided.
May Be Better to Pay Employee’s Portion
Even if insurance coverage lapses because an employee has not made the required premium payments, upon the employee’s return from FMLA leave the employer must still restore the employee to coverage/benefits equivalent to those the employee would have had if leave had not been taken.
The employee may not be required to meet any qualification requirements or wait the normal waiting period for coverage.
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The “no preexisting condition requirement” for employees who have a lapse in coverage because of failure to pay their share of the premium is not a problem for employers that are self-insured. However, employers who use outside carriers for health insurance may have difficulties with the third-party insurer in restoring health insurance benefits in this situation.
If the insurance carrier is unwilling to restore, the employer may be compelled to pay the employee’s premium portion to ensure that coverage can be restored.
The employer may recover the employee’s share of any premium payments missed by the employee for any FMLA leave period during which the employer maintains health coverage by paying the employee’s share after the premium payment is missed.
In tomorrow’s Advisor, recouping company monies when the employee fails to return from leave, plus an introduction to the guide many call the “FMLA Bible.”