Christy Showalter, JD, MBA
Senior EB Compliance Officer National Specialty Practices
If you have an employee on a leave of absence (LOA), you may be wondering how long you need to continue their medical insurance benefits. Can you terminate coverage after a certain period, or must you keep it going? The answer depends on several factors, including your insurance carrier’s rules, federal and state laws, and your company’s policies.
Key factors in LOA benefits continuation
Review your plan and carrier contract.
Before continuing benefits during an LOA, review your benefit plan documents and your insurance or stop-loss carrier contract. These documents define eligibility and how long coverage can continue when an employee is not actively working or working reduced hours. Some carriers require documentation for leaves, especially if there are large claims. If coverage is extended beyond what the carrier allows, your company could be responsible for those claims¹.
Understand federal and state leave laws.
According to the Family and Medical Leave Act (FMLA), employers generally must maintain health benefits for up to 12 weeks of protected leave. Some states, like California and Tennessee, have laws requiring longer coverage periods for certain types of leave, such as pregnancy disability or adoption-related leave²³. It’s important to comply with both federal and state regulations to avoid legal risks.
Consider ACA rules and measurement methods.
If your company is an Applicable Large Employer (ALE) under the Affordable Care Act (ACA), how you measure full-time status affects benefits continuation during leave. Under the monthly measurement method, eligibility can change monthly based on hours worked. But under the look-back measurement method, an employee’s full-time status is based on past hours worked during a measurement period, meaning coverage generally continues through the stability period even if the employee is on leave⁴⁵.
Follow your company policies and precedents.
If your plan documents and laws don’t provide a clear answer, your company’s internal policies and past practices will guide how long benefits continue during an LOA. Having a clear, written policy helps ensure consistent treatment of employees and reduces risk.
Manage premium payments during leave.
If benefits continue during leave, employees usually must keep paying their share of premiums. You should provide clear information about payment amounts, due dates, grace periods, and consequences of late payment. Common payment options include payroll deductions, direct payments, or prepayments through a cafeteria plan. If payments aren’t made on time, coverage may be terminated, but nonpayment is not a COBRA qualifying event⁶.
Conclusion
Deciding how long to continue benefits during an LOA involves reviewing your insurance contracts, federal and state laws, and your company’s policies. By understanding these factors, you can manage LOA benefits continuation effectively while minimizing financial and legal risks.
If you have questions about LOA benefits continuation or LOA and FMLA compliance, contact your Marsh McLennan Agency consultant for assistance.
Footnotes
1 Carrier contracts may limit coverage continuation during leave.
2 FMLA requires up to 12 weeks of health benefits continuation.
3 Some states require longer coverage for specific leave types.
4 ACA monthly measurement method bases eligibility on current hours.
5 ACA look-back method bases eligibility on past hours during measurement periods.
6 Nonpayment of premiums during leave can lead to coverage termination.
