Employer’s Obligation to Continue Health Insurance Coverage During Leave or Extended Absence
When employees are absent from work for an extended period of time due to injury, illness, or other reason, a common question that arises is whether employers must continue providing health insurance during the absence. The answer depends upon the circumstances, including the reason for the employee’s absence, the size of the employer, the terms of the health plan, and the applicability of one or more federal laws, including FMLA and COBRA. In many cases, the issue is resolved by answering three questions:
Does the FMLA apply?
For employers with more than 50 employees, the Family and Medical Leave Act applies to eligible employees who have been employed for at least 12 months, who have accumulated at least 1,250 hours of service in the past 12 months, and who work where the employer has at least 50 employees within 75 miles. Eligible employees who have a serious health condition, or who take leave to care for a qualifying family member, are entitled to continue employer-sponsored health care during FMLA leave. The employer must continue to pay its share of health care premiums for the employee during FMLA leave.
If an employee exhausts FMLA leave or is otherwise not eligible or entitled to FMLA leave, the employer’s obligation to continue paying its share of health insurance premiums stops. But there may remain an obligation to continue health care coverage under COBRA or analogous state law.
If the FMLA does not apply, is COBRA or a similar state law triggered?
COBRA gives employees and their qualified beneficiaries the opportunity to continue health insurance coverage under the company’s health plan at the employee’s expense when a “qualifying event” would normally result in the loss of eligibility. “Qualifying events” include not only resignation and termination of employment, but also reduction of an employee’s hours or a leave of absence causing the employee to lose coverage under the terms of the employer’s health plan.
The threshold for reduced hours or absences disqualifying an employee from plan coverage depends upon the terms of the particular health insurance plan. Where the employee loses coverage under the terms of the plan, COBRA provides an opportunity for the employee to purchase continuation coverage at the employee’s expense. Employers with fewer than 20 full and part-time employees are not subject to federal COBRA, but may be subject to state COBRA laws for small employers.
Is there another source of payment?
Whether or not an employer must continue health coverage under the FMLA or provide continuation coverage under COBRA or a similar state law, the reason for the employee’s absence could trigger other obligations or sources for payment of medical expenses and insurance premiums. For example, if an employee is unable to work due to a workplace injury, workers’ compensation may cover injury-related medical expenses and lost wages. At the same time, the terms of the employer’s health plan may require coverage to continue during a workers’ compensation leave of absence.
Finally, even where the employer’s coverage obligations cease, short- and long-term disability policies may provide an employee a source of funding for payment of insurance premiums.