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Ask the Hotline | Employee on Leave Missed Health Premium

October 8, 2019
Question
 
What can an employer do when an employee fails to pay the required health insurance premiums while out on leave?
 
Answer
 
This situation can present a real challenge for employers. The U.S. Department of Labor (DOL) website provides helpful information on this issue in a document entitled: Employee Failure to Pay Health Plan Premium Payments.
 
According to the DOL, an employer's obligation to maintain health insurance coverage ceases under the federal Family and Medical Leave Act (FMLA) if an employee's premium payment is more than 30 days late, unless there is an established employer policy providing a longer grace period. There are certain procedures that the employer must follow to drop the coverage for an employee whose premium payment is late.
 
Notification
 
The employer must provide written notice to the employee that the payment has not been received. The notice must be mailed to the employee at least 15 days before coverage is to cease and must advise the employee 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.
 
Alternatively, the employer may drop the employee from coverage retroactively if the employer has established policies regarding other forms of unpaid leave that provide for the employer to cease coverage retroactively to the date the unpaid premium payment was due, provided the 15-day notice was given.
 
Is the employment relationship severed? 
 
No. If coverage lapses because an employee has not made the required premium payments, upon the employee's return from FMLA leave, the employer must still restore the employee to the same or similar position with 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.
 
If an employer terminates an employee's insurance in accordance with the FMLA and fails to restore the employee's health insurance upon the employee's return, the employer may be liable for:
  • Benefits lost by reason of the violation;
  • Other actual monetary losses sustained as a direct result of the violation; and
  • Appropriate equitable relief tailored to the harm suffered.
Companies typically try to address the issue in one of three different ways.
  • If the person knows about the need for FMLA leave in advance, work with employee to make advance payments on their insurance premiums to cover the duration for the leave. 
  • Have the person pay while on leave.
  • The riskiest strategy is to have the employee pay upon return to work. 
Communication with your employee while on leave will minimize the risk of unexpected situations developing.
 
AIM members with questions about this or any other HR-related issue may call the AIM Employer Hotline at 1-800-470-6277. 
 
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