How to Collect Health Insurance Premiums During an FMLA Leave

We are very thankful to Tim Murphy from Skoler, Abbott, & Presser, P.C. for being our guest writer this week.  The question about health and other insurance premiums during FMLA and other types of leaves comes up often, and I’ve found Tim to be an excellent partner in sorting through this complex issue.  Tim’s contact information is contained in the links below.  Please reach out to him if you have questions on this or other labor or employment law matters.

Skoler-Abbot Website

Tim’s Linked In Profile

As you probably know, during any FMLA leave, employers must maintain the employee’s group health plan coverage on the same basis as if the employee never took the leave. (29 CFR §825.209).   This means that any share of the premiums which had been paid by the employee before FMLA leave must continue to be paid by the employee during the FMLA leave. (29 CFR §825.210(a)). When the employee uses paid time off (vacation, etc.) during the FMLA, the employee’s share of premiums must be paid by the method normally used, usually payroll deduction.

Unpaid FMLA Leave

However, collecting premiums may only become a problem when the FMLA leave is unpaid, as it often is. In that case, the employer may require employees to pay their share of premium payments in any of the following ways:

(1) by payroll deduction;

(2) on the same schedule as payments are made under COBRA;

(3) prepaid pursuant to a cafeteria plan at the employee’s option;

(4) consistent with the employer’s existing rules for payment by employees on leave without; or

(5) another system voluntarily agreed to between the employer and the employee.

The employer must provide the employee with advance written notice of the terms and conditions under which these payments must be made. (See §825.300(c)). An employee who is receiving payments as a result of a workers’ compensation injury must make arrangements with the employer for payment of group health plan benefits when simultaneously taking FMLA leave.

When Employees Fail to Pay Their Premiums

An employer’s obligations to maintain health insurance coverage cease under the FMLA if an employee’s premium payment is more than 30 days late.

To drop the coverage for an employee whose premium is late, the employer must give written notice that the payment hasn’t been received at least 15 days before coverage is to cease, advising that coverage will be dropped on a specified date at least 15 days after the date of the letter unless the payment has been received by that date. So coverage may be terminated at the end of the 30-day grace period, if the required 15-day notice has been provided.

Of course, all other FMLA obligations would continue, like job reinstatement.

If coverage lapses because an employee has not made 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 and the premium payment(s) had not been missed, including family or dependent coverage.

If the employee fails to return to work

An employer may recover its share of health plan premiums during a period of unpaid FMLA leave from an employee if the employee fails to return to work after the employee’s FMLA leave entitlement has been exhausted or expires. But watch out because there are several exceptions to this.

Sometimes employers maintain other benefits, e.g., life insurance, disability insurance, etc., by paying the employee’s (share of) premiums during periods of unpaid FMLA leave. In that case, the employer is entitled to recover only the costs incurred for paying the employee’s share of any premiums whether or not the employee returns to work.

As a practical matter, it may be difficult to collect money from a former employee. The best approach is to minimize your losses by keeping an eye on non-payments and terminating coverage before the losses get too big. The FMLA can be tricky, so you should consult with your labor and employment expert before you get too far.

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