When an employee takes leave that is not covered under the Family and Medical Leave Act (FMLA), employers often have questions about how to handle health insurance coverage. Unlike FMLA leave, which mandates continued health benefits, non-FMLA leave operates under different rules. Employers must navigate federal and state laws, company policies, and benefit plan provisions to ensure compliance. Here’s what you need to know. 

Can an Employer Terminate Health Coverage During Non-FMLA Leave?  

Yes, in some cases an employer may terminate health coverage during non-FLMA leave, but this depends on several factors:

    • Employer Policies: If company policies specify that health coverage continues during leave, the employer must follow its own           policies. 

    • Insurance Plan Rules: Some group health insurance policies have specific provisions about continued coverage during                    unpaid leave. Employers should review their plan documents to determine eligibility requirements. 

    • Americans with Disabilities Act (ADA) and Other Regulations: If the leave qualifies as a reasonable accommodations under          the ADA, the employer may be required to maintain health coverage 

Employers should be consistent in applying their policies to avoid discrimination claims. 

What Notices Need to Be Provided?  

If an employer decides to terminate or modify health coverage during non-FMLA leave, proper notice must be given to the employee. Notices may include: 

    • Plan Documents & SPD (Summary Plan Description): Employees should already have received details about health coverage        continuation in their SPD. 

    • COBRA Notification: If coverage is terminated and the employer has 20 or more employees, COBRA (Consolidated Omnibus           Budget Reconciliation Act) requires that the employee be notified of their right to continue health coverage at their own expense. 

    • State-Specific Notices: Some states have mini-COBRA laws that apply to smaller employers or provide additional protections. 

    • Internal Communication: Employers should send a written notification outlining the impact of the leave on benefits, deadlines        for premium payments, and any available options for continuation. 

How Can Employers Collect Premiums During Non-FMLA Leave?  

If an employer chooses to continue health benefits while an employee is on non-FMLA leave, they need a clear process for collecting premiums. Options Include: 

    1.  Prepayment Before Leave: Employees can pay their portion of premiums in advance before going on leave.

    2.  Payroll Deductions Upon Return: Employers may allow employees to catch up on missed premium payments through payroll          deductions once they return 

    3.  Direct Billing During Leave: Employers can set up a system where employees pay premiums directly to the company or the            insurer during their leave.  

    4. COBRA Enrollment: If an employee loses coverage due to non-payment or termination of benefits, they may elect                              COBRA to continue coverage.  

Should Employers Address This in Their Employee Handbook? 

Absolutely. A well-drafted employee handbook should include: 

    • Eligibility for Leave and Benefits: Clearly outline which types of leave are covered and how they impact benefits. 

    • Premium Payment Policies: specify how employees are expected to pay for their health coverage during unpaid leave.

    • COBRA and Continuation Coverage: Explain what happens if health coverage is terminated and how employees can                         maintain benefits. 

    •State-Specific Regulations: If applicable, include any state-mandated provisions for health benefits continuation. 

By having a clear and consistently applied policy, employers can ensure compliance and help employees understand their rights and responsibilities. 

Conclusion

Navigating health coverage during non-FMLA leave requires careful attention to company policies, insurance plan provisions, and legal requirements. Employers should provide clear notices, establish a fair premium collection process, and document policies in their handbook to prevent misunderstandings. By proactively addressing theses issues, employers can maintain compliance while supporting employees during their time away from work. If you have questions about your responsibilities or need assistance with non-FLMA leave, consult your Rose Street Advisors team for assistance. If you are not a current client of Rose Street Advisors, please feel free to contact us at 269-552-3200 or contact@rosestreetadvisors.com to speak to someone.