by Derek Ross
Recently, we have been receiving many questions about health insurance continuation for employees who are out on a leave of absence. For example, you might have an employee that was injured at work and is out on a medical leave while collecting workers’ compensation benefits. Another example is an employee that is out for a surgery not related to any work injury who may or may not be collecting short term disability (STD). Employers are asking us if they are required to carry the employee on their group health insurance plan while the employee is out on leave.
The answer is … maybe.
The answer is definitely “yes” if they are placed on leave under the Family and Medical Leave Act (FMLA). Of course, that means your organization would have to be covered by FMLA and the employee would have to be eligible. If you have any questions regarding FMLA, please see Nancy Owen’s previous blog, FMLA: What to Know BEFORE It Happens.
To simplify the answer to this question, there are only three reasons an employee should be on your group health insurance plan:
- The employee meets the eligibility requirements to be an active participant as defined by your carrier and your particular plan (among other things, they need to meet the requirements for minimum hours worked per week) and have elected to participate in the plan.
- You’re required to continue coverage under an applicable law (i.e., FMLA).
- The employee elected COBRA (or equivalent state law) after experiencing a qualifying event that caused their coverage to be terminated.
Other than FMLA, no federal leave law requires an employer to continue group medical insurance coverage for an employee who isn’t otherwise meeting your plan’s eligibility requirements. In addition, workers’ compensation laws and short-term disability plans do not require continuation either. Think of it this way. Medical plans can only be offered by employers as part of an employee’s compensation package. The plan carrier sets the costs and terms of payments of these plans. The carrier also sets eligibility requirements for the plans, meaning it is the plan that determines who is eligible to participate and who is not. The employer is simply an intermediary and cannot make any of these types of determinations. For that reason, employers should not leave employees on any medical plan where the carrier has said that employee is not eligible.
If you are unsure of the eligibility requirements of your medical plan, you can read the plan documents provided by the insurance carrier or simply contact the carrier or your agent directly. If an employee is out on leave for more than is allowed by the plan, this will act as a qualifying event because the employee is not working enough hours to be eligible for benefits. Employers then have the legal responsibility to comply with state and/or federal COBRA laws. For more information on COBRA, please read Renee Mielnicki’s blog, COBRA: A Poisonous Bite for Employers Who Fail to Comply.
The penalties for carrying an employee on your group medical plan after the plan considers them ineligible can be huge!
- Your insurance carrier could deny the claims for that employee who was improperly on your insurance plan and then you, the company, can become liable for those claims. We all know how expensive medical costs can be.
- Second, if you failed to give an employee the proper COBRA notices when they were entitled to them, you could be penalized up to $110 per day. (The plan administrator is required to notify the individual of his or her COBRA rights within 14 days of receiving notification that an employee has experienced a qualifying event. If the employer is the plan administrator and issues COBRA notices directly, the employer has the entire 44-day period in which to issue a COBRA election notice.)
If you are an employer who would like additional guidance on this or any other HR-related issues, please feel free to contact us at HRHelpline@eastcoastrm.com.
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