Can an Employer Terminate an Employee’s Health Insurance During FMLA Leave?

For employers who provide health insurance to employees and are covered by the Family and Medical Leave Act (FMLA), a situation may arise in which health care premiums go unpaid and an employer must decide whether to cancel an employee’s health coverage while the employee is away on leave. This post will review the basic provisions of the FMLA, describe the scenario in which coverage termination might be necessary, and discuss the conditions that an employer must meet before coverage can be terminated. This is assuming that the employer wants to terminate coverage, which is also a question of workplace culture. Generally, we recommend that an employer try to support an employee through difficult times (and vice versa).

Family and Medical Leave Act

The FMLA entitles eligible employees of covered employers to take job-protected leave for specified medical and family reasons. FMLA leave is unpaid, but health insurance coverage continues under the same terms and conditions as if the employee had not taken leave.

Eligible employees are entitled to twelve work weeks of leave in a 12-month period in the following situations:

• The birth of a child,
• To care for a newborn child within one year of birth,
• To take in a foster care child or to adopt a child,
• To care for an immediate family member with a serious health condition,
• To recover from a serious health condition that makes the employee unable to fulfill his or her job responsibilities, or
• Any qualifying exigency due to the fact that an immediate family member is on active duty in the military.

Alternatively, employees may be eligible for 26 work weeks of leave in a 12-month period to care for an immediate family member who is a military service member with a serious injury or illness.

FMLA Benefits on Leave

Per the terms of the FMLA, employer-provided medical benefits should continue without interruption through an employee’s covered leave period. However, health care premiums are typically paid through payroll deductions, so when the employee is on unpaid leave, another payment method must be used or the premiums will go unpaid.

Consider this common scenario. An employee participates in the employer’s health care plan and pays his share of the premium payments through payroll deductions. Later, the employee goes on unpaid FMLA leave, during which time the premium payments are not covered by payroll deductions. The employee has never had to worry about paying his medical coverage premiums before, since they automatically came out of his paycheck, so he simply forgets to set up another method of payment.

In this situation, an employer may choose to maintain the employee’s benefits by paying the employee’s share of the premium payments, then recover the payments once the employee returns from leave (or not, depending on how generous the employer is). More commonly, however, employers decide to terminate the employee’s medical coverage.

Conditions for Terminating Coverage

Before an employer can terminate coverage, the employee must be given sufficient opportunity to maintain coverage. There are very specific notice provisions that must be followed. If you decide to do this, work closely with your attorney or HR professional. Wrongfully terminating someone’s medical coverage could lead to extensive legal liability as well as bad feelings.

Conclusion

Employee-provided health coverage can be canceled during FMLA if the employee does not pay the necessary premiums and notice provisions are followed. In any case, the employer must restore medical benefits immediately when the employee returns from leave at the end of the FMLA period.

While these are the employer’s strict legal rights, the employer should also consider what type of workplace it wants to have. When an employee is out on FMLA leave, presumably something has already gone fairly wrong in that person’s life. And the employee is likely not getting paid, either. Does the employer want to add to the burdens of employees by canceling medical coverage? While an employer is not legally obligated to be generous (such as covering the employee’s portion of the medical insurance for 12 weeks), generosity by an employer during a time of hardship may be repaid by a sense of loyalty by this and other employees. One final note: whatever approach an employer decides to adopt should be used consistently.

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Featured Image by Rebecca Sidebotham.