FMLA Coverage and Missed Benefit Payments

yes-238374_1280An employee on unpaid Family and Medical Leave Act (FMLA) leave agreed to pay his share of premiums for coverage under the company’s major medical plan by sending in personal checks.  However, he has missed the due date for the first payment.  Can the company drop him from coverage, and if so, when?

The company’s obligation to maintain health coverage of an employee on FMLA leave generally ends if the employee’s premium payment is more than 30 days late, so long as you don’t have an established policy providing a longer grace period.

To drop coverage for an employee on FMLA leave whose premiums is late, however, the company must provide written notice the payment has not been received.  The notice must be mailed to the employee at least 15 days before coverage is to end and must advise that coverage will be dropped on a specified date at least 15 days after the date of the letter, unless payment is received by that date.

Thus, for the company to drop the employee’s coverage on the earliest possible due date, the notice should be mailed at least 15 days before the end of the 30-day (or longer) grace period.

If the company has established a policy regarding other forms of unpaid leave that provides for coverage to end as of the date an unpaid premium payment was due (in other words, retroactively), then the employee’s coverage may be dropped retroactively in accordance with that policy.  Otherwise, coverage may be terminated prospectively, effective at the end of the grace period.

Bear in mind that if coverage is dropped because of the employee’s failure to timely pay his share of the premium, and he later returns from the FMLA leave, his coverage generally must be restored.

Also, if the employee loses coverage for nonpayment of premiums, remember that a Health Insurance Portability and Accountability Act (HIPAA) certificate of creditable coverage should be issued to him, if applicable, and any dependents who also lose coverage.  (Proposed regulations would eliminate the requirement to provide HIPAA certificates as of December 31, 2014.)

A COBRA election notice generally would not be required to the extent the loss of coverage is due to a failure to pay premiums.  However, the employee’s failure to return to work at the end of the FMLA leave is usually a COBRA qualifying event, even if coverage was dropped during the leave.

Although health care reform’s prohibition on rescission of coverage will not apply to the extent that a cancellation of coverage is attributable to a failure to timely pay premiums, if there is another law with stricter standards as to when coverage may be rescinded or canceled (for example, a state law), that stricter law may apply.

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