Who pays Insurance on during a Leave of Absense?

When an employee takes a leave of absence, questions often arise about health benefits. Who is responsible for paying the insurance premiums during the absence? Let's unravel this step by step.

Paid Leave: Deduct 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: A Few Options

When it comes to unpaid leave, the situation becomes more complex. In this case, there are three choices available for managing the employee's health insurance costs. Since there is no universal solution, it is important to work together with your employee to devise a reimbursement strategy that is mutually beneficial.

Upfront Payment: Employees can handle the entire premium amount before their leave begins. They can do this in one big payment or increments and you can deduct it on their last paycheck.
Monthly Payments: By making regular monthly payments during their leave, they can ensure their premiums are up to date. This way, they can keep their coverage active without facing a high initial expense or falling behind on payments. This option would require some tracking outside of Payroll for the bookkeeper.
Future Repayment: Upon their return, employees have the option to establish a repayment schedule with the company, which helps alleviate the financial strain while on leave and distributes the expenses upon their comeback. Downside to this - what if they don't come back?

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

Managing employees who take FMLA leave, whether for maternity reasons or to attend to a critically ill family member, can sometimes result in them leaving the company without reimbursing the insurance premiums accumulated during their absence. Here are some strategies for addressing this situation:

Repayment

If an employee does not come back to work after using up their FMLA leave for reasons not related to their health or beyond their control, you have the option to recoup the portion of paid premiums. Employers can ask for evidence, such as medical certification, from the employee to exercise this entitlement. Failure to submit the required documentation within 30 days or not experiencing uncontrollable circumstances that hindered their return may lead the employer to seek full premium reimbursement.

Employee Debt and Recovery Options

If unpaid premiums are not returned, they may be considered a debt owed by the employee. As the employer, you have the option to deduct the amount from future paychecks or take legal measures to recover it. Nonetheless, fulfilling the FMLA "return" requirement by coming back to work for 30 days or more, or directly retiring after leave, will prevent any attempts to recover the premiums.

See the Department of Labor’s website for more details.

BEST TIP: Communication is Key

When chatting with your employees, remember to be clear with the options while keeping the conversation open and honest. This will ensure a smoother experience for eveyone.

ITS GOOD TO KNOW!