As many employers discovered during the COVID-19 pandemic, one of the most complex components of leave can be whether an employee’s health insurance is continued throughout the leave or whether, according to the health insurance contract, it ends if an employee doesn’t meet certain minimum weekly hours worked. Issues of this type can occur during any extended leave, including accommodations under the Americans with Disabilities Act (ADA), during layoffs, or for personal leaves.
Extended Leave
As a way to address concerns regarding coverage, insurance carriers may suggest putting specific time limitations on any leave that will be extended after Family and Medical Leave Act (FMLA) leave is exhausted. Because of FMLA requirements, insurance companies frequently extend eligibility for a 12-week period even though the employee isn’t working the required minimum weekly amount to qualify under insurance. The issue becomes complicated when the FMLA no longer applies.
When no FMLA or other state-mandated leave (such as pregnancy leave under Iowa Code 216) is involved, insurance companies don’t have the same limitations in terms of disqualification from insurance. Extended leave outside of the parameters of any kind of legally mandated leave can result in the employee being disqualified from coverage under the insurance policy, which isn’t a surprise you or your employee wants.
As noted, many insurance companies may suggest mandated minimums for leaves, but this may not typically be allowable under the ADA or the Pregnant Workers Fairness Act (PWFA) because all extended leave requests based on an employee’s healthcare condition or pregnancy must be assessed on an individualized basis.
Remember, accommodation is an interactive and individualized discussion, which means flat leave limitations without any wiggle room can be problematic. They make a good baseline but aren’t necessarily appropriate as a hard stop.
One way to address this is with your policies, shifting from covering the insurance if the employee remains otherwise qualified during the term of leave to COBRA or other benefit continuation once they are outside legally mandated leave. For example, employees on FMLA leave would continue to be offered insurance as if they were employed, but when the mandated timeframe (12 or 26 weeks) lapses, they may be extended additional leave under COBRA.
It’s reasonable to be concerned about the effect of these types of policies because they are likely to place an additional cost burden on the employee. Alternatively, it would address some of the more common insurance disqualification issues that occur.
Severance
A similar insurance issue may occur when offering severance to a terminated employee. Some employers offer continued benefit coverage as part of the severance package. Unless your insurance contract allows you to continue covering people who no longer work for you, however, this may invalidate coverage under the existing insurance contract.
You could be better served, depending on the structure of your insurance, to simply offer a lump sum payment or something else to offset the cost of COBRA rather than attempting to continue the insurance.
Big Picture
Each insurance contract can be different, and the type and nature of the insurance you use can also affect leave issues. It’s important to remember that most insurance contracts don’t look at whether you consider someone an employee, but if they are, in fact, working and how many hours per week they are averaging. So, the insurance company is looking at hours worked. As such, you need to understand the terms of your insurance policy before offering extended leaves or severance that include benefits.
Jo Ellen Whitney is an attorney with Dentons Davis Brown in Des Moines. You can reach her at joellen.whitney@dentons.com.