Can Someone on FMLA Leave Lose Coverage for Nonpayment of Premiums?
Question: We have an employee on unpaid leave under the Family and Medical Leave Act (FMLA). He agreed to pay his share of premiums for coverage under our major medical plan by sending in personal checks. However, he’s missed the due date for the first payment. Can we drop him from coverage and, if so, when?
Answer: Your company’s obligation to maintain the health coverage of an employee on FMLA leave generally ends when the employee’s premium payment is more than 30 days late — unless you have an established policy of providing a longer grace period.
But, before dropping coverage, you must provide the employee with written notice that you’ve not received payment. You need to mail the notice to the employee at least 15 days before coverage is to end. The notice should also include a warning that, unless payment is received by the end-of-coverage date, you’ll drop his coverage on a specified date that’s at least 15 days following the date of the letter.
So, to drop the employee’s coverage on the earliest possible date, you should mail the notice at least 15 days before the end of the 30-day (or longer) grace period. If your 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), the employee’s coverage generally may be dropped retroactively in accordance with that policy. Otherwise, you may terminate coverage prospectively, effective at the end of the grace period.
When an employee loses coverage for nonpayment of premiums, a COBRA election notice generally isn’t required. 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.
Also, though the Affordable Care Act’s prohibition on rescission of coverage doesn’t apply to the extent that a cancellation of coverage is attributable to a failure to timely pay premiums, there may be a state law with stricter standards regarding when coverage may be rescinded or canceled. Finally, if you drop your employee’s coverage because he failed to timely pay his share of the premiums, but he later returns from the FMLA leave, you generally must restore his coverage.