Most employers know that health coverage generally must continue during Family and Medical Leave Act (FMLA) leave. The more difficult questions tend to arise later when premiums were never collected, or an employee fails to return from leave. Here are a few FMLA rules employers should keep in mind.
Employees Still Need to Pay Their Share
The FMLA requires employers to maintain health coverage during leave, but it does not require employers to absorb the employee's share of premium costs. Employees generally remain responsible for their normal premium contributions. Employers have flexibility regarding how those contributions are collected, but any approach should be administered consistently with comparable non-FMLA leaves. If an employer does not collect premiums during leave, however, the unpaid amounts do not necessarily disappear. In many cases, unpaid employee contributions may be treated as a debt recoverable after the leave ends, subject to applicable state-law limitations.
Getting the Employer’s Share Back Is Harder
Employers are sometimes surprised to learn that different rules apply to the employer portion of premiums. The FMLA permits recovery of employer-paid premiums during certain periods of unpaid FMLA leave when an employee does not return to work. However, that recovery right is subject to several exceptions, including when the employee’s failure to return is due to the continuation, recurrence, or onset of a serious health condition or other circumstances beyond the employee’s control, or when the premiums were paid during a period in which the employee was using paid leave benefits. The right to recoup employer-paid premiums also generally does not apply when paid leave benefits were being provided during the leave.
Coverage Does Not End Automatically
Even when required premium payments are not made, employers cannot immediately terminate coverage. Under the FMLA, an employer generally may stop maintaining an employee’s health coverage if the employee’s premium payment is more than 30 days late, unless the employer has an established policy allowing a longer grace period. Before coverage may be dropped, however, the employer must provide written notice that payment has not been received and that coverage will end on a specified date unless payment is made; that notice must be mailed at least 15 days before coverage is scheduled to end. Certain notice requirements must be satisfied before coverage may lapse for nonpayment. In addition, employees who return from FMLA leave generally must be reinstated into the health plan, even if their coverage was canceled during their leave for failure to pay their premiums.
Premium collection procedures often receive little attention until an employee takes an extended leave or fails to return to work. Reviewing how employee premiums are collected, when coverage may be terminated, and whether existing procedures align with FMLA requirements can help employers avoid unpleasant surprises later. If you have any questions on these provisions or any other matter concerning the administration of your health and welfare plans, please contact any of our employee benefits team members.
