Can employer cancel health insurance while on disability

From: Benefits

Can An Employer Recover The Medical Premiums Paid For An Employee If The Employee Goes On Long-term Disability?

From the facts presented, this employee has been on short-term disability and federal Family and Medical Leave Act (FMLA) leave and is now applying for long-term disability based upon her inability to return to work. The employer does not have a specific policy regarding payment of health premiums, except for the condition that the employee pays a percentage of the cost of the medical premium while out on disability. There has been no past precedent set in the handling of other leaves. The employee in question has not paid any health care premiums to date.

1. Continuing medical insurance on extended leaves. Under FMLA rules, an employer is obligated to continue medical insurance while the employee is on an approved FMLA leave for up to 12 weeks as long as the employee continues to pay his/her share of the premiums and/or makes arrangements with the employer for those premium payments.

So unless the employer plan provides for more generous coverage of employer-subsidized medical insurance under the short-term disability or long-term disability plans, the employer must provide the coverage for up to 12 weeks. After that period of time, the employee may be entitled to health care continuation coverage under COBRA (Consolidated Omnibus Budget Reconciliation Act) where the employee may continue health coverage at full cost plus an administrative surcharge. In this particular situation, although the FMLA leave does not require employers to continue health insurance unless the employee pays his/her share of the premiums to remain covered, there is the employer obligation to provide the employee with notice of this requirement and to make arrangements for the premium payment during any unpaid portion of the leave.

2. Recovery of health insurance costs made on the employee’s behalf. An employer may recover the cost of group health insurance premium payments made during any unpaid part of a FMLA leave if the employee: (a) fails to return from leave when the leave entitlement expires; or (b) returns from leave but fails to work 30 calendar days after returning. However, if the reason for the failure to return is either beyond the control of the employee or because of a serious health condition starting, continuing, or recurring, the employer cannot recover its costs. In this particular situation, this would appear to be the case. So while it would appear that the employer would not be able to recover health insurance payments made on the employee’s behalf, the employer may be able to terminate coverage at the end of the FMLA leave and offer COBRA unless there are specific provisions made to continue coverage under the employer’s STD or LTD plans.

Your health insurance rights depend on how big your employer is. Under the Affordable Care Act, large employers are obliged to provide health insurance to employees. If your employer is a small business, it has the freedom to cancel your health insurance. The law is murky on whether you are entitled to a warning in advance.

ACA Requirements

The ACA was implemented to reduce the number of uninsured Americans. One of the rules is that "applicable large employers" must provide group insurance to full-time workers. Defining an ALE gets complicated but the rule of thumb is that companies qualify if they have 50 full-time employees. Yanking your insurance away, with or without telling you, violates the law. Smaller companies are not obliged to provide you with insurance unless it's in your contract or union agreement.

The ACA counts you as full-time if you average more than 30-hours-per-week at your job. If your average hours are less, the law does not require your employer to provide insurance. The company is free to cancel any coverage it does provide. If you are full-time it can cut your hours until you no longer qualify.

ERISA

One of the many federal laws covering worker benefits, the Employee Retirement Income Security Act says your employer must notify you about any major changes to the plan, such as an upcoming cut in benefits. Surprisingly, some courts have held that canceling the plan outright is not a modification, so the company does not have to notify anyone. Still, many companies and business organizations recommend notifying employees to stay on the safe side of the law.

State Law

Federal law is not the only game in town. Some states have added laws on coverage and notifying employees if there is a material change in your benefits. Your state department of labor or the insurance commissioner's department should be able to tell you the law.

If You Lose Coverage

If you discover your employer has covertly stopped your health insurance, contact your boss or human resources and ask why. It might be they have a valid reason but made a mistake in the notification process. Suppose your health benefits covered your unemployed spouse, who is now back at work. Many companies will not cover a spouse who can take out insurance through her own employer.

If the company does not have a valid reason, you may have grounds for a lawsuit. To sue someone under ERISA you must take administrative steps first, such as filing a complaint with the federal Department of Labor. If you exhaust that process without getting justice, then you can turn to the courts.

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