Q&A: Can We Terminate Coverage for an Employee on Extended Leave?

Question:

We are putting together a policy explaining when and for how long employees can keep their benefits while out on various types of leave. The one thing I don’t understand is whether we can terminate an employee’s health insurance when they are out for an extended time due to a work-related injury. I have seen and heard different opinions on this. Can you help?

Answer:

The short answer is that I strongly recommend you work with an attorney not only in putting together this policy, but also when you are deciding how to handle benefits for a specific employee who is off work for an extended leave due to a work-related illness or injury.

While it may seem risky to terminate coverage for employees who have suffered a work-related accident, it is usually the best course of action for both you and your employees. Worker’s compensation leaves of absence can last for months or even years. Allowing employees to remain on your plan after they no longer meet its eligibility requirements could result in the insurance carrier denying claims for both them and any covered family members. The much safer bet is to offer them COBRA to ensure continuity of coverage.

With that said, keep the following in mind when developing your policy:

1. Employees who qualify for FMLA-protected leave must be allowed to keep their medical benefits for the duration of their leave. The FMLA prohibits requiring employees to pay more for such benefits than an employee who is not on leave.
2. For employees who do not qualify for FMLA protections, you will want to review your insurance certificates or plan documents to see if they state how long employees can keep their benefits during a prolonged leave. Typically, there will be a 90-day limit.
3. Once the employee exceeds any such time limit, you will likely need to offer COBRA (for qualifying benefits) or terminate coverage (for those that don’t).
4. Some state laws require employers to maintain employees’ health insurance when they are out on workers’ compensation. These are rare, but you should check your state’s law just to be sure.

With that said, I strongly recommend you consult an attorney before taking any such action.