What FMLA Leave Does to Employer Health Coverage

Answer first: coverage is maintained, on the same terms, for the duration of the leave

The maintenance regulation states the rule in one sentence. "During any FMLA leave, an employer must maintain the employee's coverage under any group health plan ... on the same conditions as coverage would have been provided if the employee had been continuously employed during the entire leave period." It adds that all employers covered by the Act, including public agencies, are subject to that requirement.

The statute says the same thing. During any period an eligible employee takes leave, the employer "shall maintain coverage under any 'group health plan' ... for the duration of such leave at the level and under the conditions coverage would have been provided if the employee had continued in employment continuously for the duration of such leave."

"On the same conditions" is the operative phrase, and the overview regulation spells out its practical meaning: "If an employee was paying all or part of the premium payments prior to leave, the employee would continue to pay his or her share during the leave period." Maintenance is not the same as free coverage.

The entitlement itself is 12 workweeks of leave during any 12-month period for the listed reasons, with 26 workweeks in a single 12-month period for leave to care for a covered servicemember with a serious injury or illness. The employer chooses the method for measuring the 12-month period from the options the regulation lists, including a calendar year or any fixed 12-month leave year.

What 'the same benefits' actually covers

The regulation is specific about scope. The same group health plan benefits provided before the leave must be maintained during it, and family member coverage must be maintained if family member coverage was provided. It lists categories to make the point unmistakable: "medical care, surgical care, hospital care, dental care, eye care, mental health counseling, substance abuse treatment, etc., must be maintained during leave if provided in an employer's group health plan, including a supplement to a group health plan, whether or not provided through a flexible spending account or other component of a cafeteria plan."

Plan changes follow the employee onto leave. If an employer provides a new plan or changes benefits while an employee is on leave, "the employee is entitled to the new or changed plan/benefits to the same extent as if the employee were not on leave," and other plan changes in coverage, premiums or deductibles that apply to the workforce apply to the employee on leave as well.

So do enrollment opportunities. Notice of any opportunity to change plans or benefits must be given to an employee on leave, and if the plan permits a change from single to family coverage on the birth of a child or otherwise adding new family members, "such a change in benefits must be made available while an employee is on FMLA leave." If the employee requests the changed coverage, the employer must provide it.

The regulation carves out one thing from the definition of a group health plan for these purposes: an insurance program under which employees purchase individual policies from insurers, provided all five listed conditions are met — no employer contributions, completely voluntary participation, the employer's role limited to permitting publicity and collecting and remitting premiums without endorsement, no employer consideration beyond reasonable compensation for payroll deduction services, and no premium increase if the employment relationship ends.

Benefits other than group health benefits are treated differently. An employee's entitlement to those during leave — the regulation's example is holiday pay — "is to be determined by the employer's established policy for providing such benefits when the employee is on other forms of leave."

The employee can decline, and can still come back in

An employee "may choose not to retain group health plan coverage during FMLA leave." What matters is what happens next. On return from leave, "the employee is entitled to be reinstated on the same terms as prior to taking the leave, including family or dependent coverages, without any qualifying period, physical examination, exclusion of pre-existing conditions, etc."

The same protection applies where coverage lapsed because premiums went unpaid. Upon the employee's return, 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." In that case the employee "may not be required to meet any qualification requirements imposed by the plan, including any new preexisting condition waiting period, to wait for an open season, or to pass a medical examination."

The regulation attaches a consequence to getting that wrong. If an employer terminates coverage under the nonpayment rules and then fails to restore it as required on return, "the employer may be liable for benefits lost by reason of the violation, for other actual monetary losses sustained as a direct result of the violation, and for appropriate equitable relief tailored to the harm suffered."

The cafeteria plan rules recognize the same interaction from the tax side. The permitted election change regulation contains a dedicated provision stating that an employee taking FMLA leave "may revoke an existing election of accident or health plan coverage and make such other election for the remaining portion of the period of coverage as may be provided for under the FMLA."

The nonpayment rules, and the notice they require first

This is the most procedural part of the framework, and the procedure runs in the employee's favor before it runs against them. "In the absence of an established employer policy providing a longer grace period, an employer's obligations to maintain health insurance coverage cease under FMLA if an employee's premium payment is more than 30 days late."

But an employer cannot simply drop the coverage at that point. "In order to drop the coverage for an employee whose premium payment is late, the employer must provide written notice to the employee that the payment has not been received." That notice "must be mailed to the employee 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."

Retroactive cancellation is possible only where the employer already has a policy for it. Where the employer has established policies for other forms of unpaid leave that provide for ceasing coverage retroactively to the date the unpaid premium was due, it may do the same here — but only if the 15-day notice was given. Absent such a policy, coverage may be terminated at the end of the 30-day grace period, again only where the required 15-day notice was provided.

The employer has an alternative to dropping coverage: it "may recover the employee's share of any premium payments missed by the employee for any FMLA leave period during which the employer maintains health coverage by paying the employee's share after the premium payment is missed."

And dropping health coverage does not suspend the rest of the Act. "All other obligations of an employer under FMLA would continue; for example, the employer continues to have an obligation to reinstate an employee upon return from leave."

When the employer can get its own premium share back

The recovery rule is narrow and conditional. An employer may recover its share of health plan premiums paid during unpaid leave if the employee fails to return to work after the entitlement has been exhausted or expired — unless the failure to return is due to the continuation, recurrence or onset of a serious health condition of the employee or a family member, or a covered servicemember's serious injury or illness, or "other circumstances beyond the employee's control."

The regulation illustrates that last category rather than defining it, and the examples are broad: a parent staying home with a newborn who has a serious health condition; a spouse unexpectedly transferred more than 75 miles from the employee's worksite; a relative or other individual who is not a covered family member developing a serious health condition requiring the employee's care; the employee being laid off while on leave; or a key employee who declines to return after being notified of an intended denial of restoration and is not reinstated. It also names two situations that do not qualify — remaining with a parent who no longer requires care, and staying home with a well newborn.

Where the reason is a serious health condition, the employer may require medical certification, at the employee's own cost and without pay for the time or travel involved, to be provided within 30 days of the request. If the certification is not timely provided, or the stated reason does not meet the "circumstances beyond the employee's control" test, "the employer may recover 100 percent of the health benefit premiums it paid during the period of unpaid FMLA leave."

Several limits sit around that. An employee "who returns to work for at least 30 calendar days is considered to have returned to work," and someone who transfers directly from leave to retirement, or retires within the first 30 days back, is deemed to have returned. Where paid leave was substituted for FMLA leave, the employer may not recover premiums for any period covered by that paid leave, and paid leave under a temporary disability plan, including workers' compensation, is not unpaid for this purpose. For self-insured employers, the recoverable amount "is limited to only the employer's share of allowable premiums as would be calculated under COBRA, excluding the two percent fee for administrative costs."

Any recoverable premium is a debt owed by the non-returning employee, and its existence "does not alter the employer's responsibilities for health benefit coverage and, under a self-insurance plan, payment of claims incurred during the period of FMLA leave." The employer may deduct from sums due to the employee where doing so does not violate wage payment or other laws, or bring legal action.

For non-health benefits an employer chose to maintain by paying the employee's share, the rule is different: at the conclusion of leave 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."