If an employee on FMLA leave fails to make premium payments for health insurance, what are the employer's options?

If an employee on FMLA leave fails to make premium payments for health insurance, the employer has two options to address this situation.

The first option is to cancel the employee’s coverage. The employee must have been given a due date for the premiums and a 30-day grace period to make a payment. If a payment is not made on time, the employer must notify the employee in writing that the insurance will be canceled for failure to pay premiums if not received by the specified date (29 CFR 825.212). This written notification must be done no less than 15 days before the end of the grace period. The cancellation does not constitute a qualifying event (26 CFR Part 54.4980B-10) under the Consolidated Omnibus Budget Reconciliation Act (COBRA). Upon return from leave, the employee must be reinstated to the plan as if he or she had never left it.

The other option is to maintain the employee on the plan instead of canceling coverage for nonpayment of premiums. The employer may recover the premiums when the employee returns to work (29 CFR 825.212). If the employee decides not to return to work after taking FMLA leave, the employer may or may not have recourse to collect premiums from the employee (29 CFR 825.213). Additionally, not returning from FMLA leave is a COBRA-qualifying event, and COBRA notification would be sent out at that time.