How to handle insurance during leave of absence
Employee leaves of absence from work raise questions, especially about health benefits. Who shoulders the insurance premiums during the leave? Let’s untangle this knot one thread at a time.
Paid Leave: Business as Usual
Paid leaves are straightforward. Simply maintain regular benefit deductions from their paychecks as usual. It’s a seamless continuation of their coverage.
Unpaid Leave: Choices, Choices
Things get more nuanced with unpaid leave. Here, you have three options for handling the employee’s health insurance premiums. One size does not fit all, so collaborate with your employee to create a repayment plan that works for both of you.
- Upfront Payment: Employees can handle the entire premium amount before their leave begins. They can do this in one big payment or increments.
- Monthly Payments: They can stay on top of their premiums with regular monthly payments during their leave. This keeps their coverage active without a high upfront cost or arrears.
- Future Repayment: Employees can agree on a repayment plan with the company once they return. This eases the financial burden during their leave and spreads out the cost after returning.
Consider the Length of the Leave
Keeping an employee’s insurance active for a leave that spans longer than three months (even for extended illness or workers’ compensation injuries) can be tricky. Why? Health insurance companies may be wary.
Suppose the carrier finds out the employee has active coverage but isn’t an active employee. In that case, the health insurance company could drop the employee’s coverage. Not ideal! If facing this situation, contact your HR expert at Nextep for guidance.
FMLA, Maternity Leave, and Early Departures
Employees often take time off for FMLA leave, such as maternity or to care for a seriously ill family member. After finishing the leave, they could potentially leave the company before repaying the insurance premiums accrued during their time away. Here’s how you can handle it:
Repayment
Suppose an employee doesn’t return after exhausting their FMLA leave, and the reason isn’t beyond their control or health-related. In that case, you can recover your share of paid premiums. To claim this right, employers may request proof like medical certification from the employee. If the employee fails to provide requested documentation within 30 days or didn’t face uncontrollable circumstances to prevent their return, the employer may pursue full premium recovery.
Employee Debt and Recovery Options
Unpaid premiums may become an employee debt if they don’t return. As the employer, you can deduct it from any upcoming paychecks or pursue legal action for recovery. However, returning to work for 30+ days or direct retirement after leave satisfies the FMLA “return” requirement, preventing any premium recovery.
See the Department of Labor’s website for more details.
The Takeaway: Communication is Key
Clear communication is your best friend. Discuss all options with your employee upfront, lay out the rules, and answer any questions they have.
By approaching this process with transparency and understanding, you can ensure a smooth ride for you and your employees.
