HCW Benefits Blog

You offer a more generous leave policy than the Federal requirements of the Family Medical Leave Act (FMLA).  Big deal, right?  While this may not sound like anything unreasonable, does your health insurance carrier or reinsurance (stop-loss) vendor agree with your decision to allow employees to continue coverage outside of COBRA under your company health plan for an extended period of time?

Medical Insurance Carriers and reinsurance carriers follow strict federal guidelines, especially with FMLA and COBRA.  If an employer allows an extended leave period, including health plan coverage continuation (Non-COBRA) after the 12-week (or 26 week) FMLA maximum has been exhausted, then the employer loses the protection of the group health plan and reinsurance policies.  In essence, the employer just became fully self-funded; paying all the medical claims incurred under the terms of the medical plan after FMLA was exhausted for each individual.  Ouch!

If claims are incurred, an employer may end up with many very large unbudgeted claims and legal expenses.  Plus, an untimely offering of COBRA continuation after the fact may not satisfy the health insurance or reinsurance carrier contract provisions and certainly opens up the employer for expensive COBRA rights violations.

Take action to avoid finding your company in an unfavorable legal and financial position:

1. No policy is a bad policy.  What is the company policy?  Understand when health benefits are supposed to end to avoid a dispute should the employee not return to work at the end of the leave.  Not only should the health contracts be reviewed, but also dental, vision, life and disability.
2. Check your policies, procedures, and handbooks.   Make sure the company is not making promises to continue coverage that doesn’t coordinate with the health insurance and reinsurance contracts.  Make it clear when coverage ends and when COBRA coverage will begin.
3. Negotiate with the health insurance or reinsurance carrier to amend the contract and add the appropriate language around continuation of coverage after exhausting FMLA if the policy is more generous than Federal Regulations require.
4. Review contracts annually.  Make sure when changing carriers, the policy is submitted for approval and the new contract is updated with the appropriate language.

For more information or if you have any questions, feel free to call Hill, Chesson & Woody at (919) 403-1986, or contact us via email.