Insurance Payments During Leaves

“Sam is going on a leave of absence and I want to know if I have to pay his portion of his health insurance while he’s gone.”

My HR Survival Tip

No, you don’t but only if you take the proper steps. If your employees pay part of the premium for their coverage, you typically have their monthly portion deducted on a pre-tax basis equally between paychecks that month. So what happens when they aren’t receiving a paycheck and you’ve got no way to deduct their share of the premium?

Health insuranceWhat you have in your Employee Handbook about how insurance is handled during leaves really matters. Your policy should explain the process, such as how long coverage will last, how the employee makes his payment, and what happens next.

You will likely want to continue paying Joe’s premium for at least a full month but it’s not uncommon to use 2 or 3 months as your max. Joe will need to send you a check for his share of the full month’s premium on or before the first of the month of coverage and he has a 30-day grace period. You are basically following the same rules the carrier has imposed on you.

Your company is responsible for the whole premium every month. That premium payment is due by the first of the month of coverage. For example, January’s premium is due on or before January 1st. If you haven’t made the premium payment by January 30th, you’ve used up the 30-day grace period and will be getting a cancellation notice.

If Joe fails to pay his share by the end of his grace period or you have now continued the coverage to the maximum stated in your policy, Joe is provided COBRA paperwork. This allows Joe to choose to keep the same insurance but he will be paying the full premium while on COBRA. Once Joe returns to work, he goes back on your insurance the same as before his leave.

Don’t create a policy or go through this on your own without professional guidance. When someone is on a medical leave, it looks extremely bad for you if you terminate an employee’s health insurance without doing it correctly with the proper documentation before and during their leave.

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