How Lack of Clear Policy Impacts COBRA Compliance for Employers

Why Every Employer Needs Well Written Leave Policies:

COBRA Compliance for Employers & Leave Management Work in Conjunction with one another. 
Perhaps one of the more frequently asked questions we receive from Employers and Brokers at CobraHelp is, “What do we do with the benefits now that an employee is going on leave?”.  There is a common misconception that Companies should terminate benefits immediately and offer COBRA, or conversely, not offer COBRA at all, even when the employee does not return to work following leave.

Types of Leave
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There are many reasons for an employee’s potential leave such as medical leave, family medical leave, short term disability, caregiver leave, maternity/paternity leave, and more.  Further, there are state specific leave program requirements for certain states, while others are subject to solely Federal leave compliance requirements. Such requirements, such as the Family and Medical Leave Act (FMLA) impact certain employers who fall under the FLSA.  There is not a one size fits all answer to the aforementioned question because of the diversity in leave reasons and types, as well as the complexities of the compliance requirements surrounding employee leave. 

For the purposes of this article, Cobra Compliance for Employers, we’ll take a look at two types of entities:

• Companies who comply with FMLA:  Many employers fall into this category as it generally applies to Employers falling under the FLSA and who have 50 or more employees. FMLA works in conjunction with COBRA and so both compliance standards must be met when dealing with employees who are on leave under FMLA.
• Companies Exempt from FMLA: Generally, these are smaller businesses, and they may or may not be subject to state leave requirements depending on the state in which the Employer operates.

In either category, Employers should have a well-documented leave policy that outlines what will happen to employees’ benefits including when the employee may become eligible for COBRA continuation when leave is involved.

When COBRA Comes Into Play
For employers who do not have well-documented policy, the waters may be muddied when communicating leave matters to employees. This is because employers not subject to FMLA (family medical leave act) are often left with no official leave requirements, and are able to make their own company policies. The trouble comes in when no official policy was developed, and so employers fall into tricky situations where employees requiring leave may be left without consistent practices, and not every employee is receiving the same leave options. This can open employers up to extensive risk, and can also cause employers to lose track, which often results in further insult to injury – forgetting about the COBRA requirements that tie into leave situations.

For employers subject to COBRA, COBRA continuation coverage should be offered whenever a “Qualifying Event” occurs. This includes termination due to an employee not returning from leave, whether voluntary or involuntary. Employers should not offer COBRA to employees on leave unless their active health benefits ceased (as part of company policy) when the employee left for the leave. Most commonly, leave policies allow for employees to maintain active health benefits such as medical, dental, and vision coverage so long as the employee remains employed with the company or until approved leave time is exceeded. When it comes to COBRA Compliance for Employers, companies may determine to offer paid or unpaid leave, and often times benefits are part of that leave package, while other times employers require the employee to pay a portion of the monthly health plan premiums while an employee is on leave. NOTE: Employers need to determine if they must comply with FMLA standards, as these leave rules will play a major role in determining company leave policy.

Without a well-documented leave policy, an Employer may set unclear expectations for employees who need short term medical leave such as workers comp related injury leave. For example, in an instance when the employee is authorized to take a family medical leave of absence, but the amount of days/weeks is not clearly defined in company policy, an employee may not understand when he or she is expected to return to work or when benefit changes occur. There could be a misunderstanding here, resulting in the employer’s word against that of the employee. In this scenario, how is an employer to know when to offer COBRA if the qualifying event date is not clear? Further, how is the employer to avoid liability involved with potential termination of employment if an individual employee believes that he or she has been fired for illegitimate reasons?

Best Practice Measures:
Employers can avoid pitfalls and offer COBRA at the right time when Employee Leave is involved by choosing straight-forward, well documented company policies and adhering to recommended COBRA compliance. Companies should prepare their Human Resources staff and Employees by:

• Determining if their business falls under FMLA or if it is Exempt
• Check with their State to ensure any state-specific leave program requirements are being met.
• Work with expert legal counsel to create straight-forward, well-documented company policies for employee Leave and qualifying leave reasons.
• Become familiar with COBRA qualifying events and circumstances during an employee’s leave, that would cause COBRA (or state continuation) to be offered.
• Include COBRA information in the leave policies – such as outlining under what circumstances an employee on leave would become eligible for COBRA continuation coverage options.
• Ensure that all employees have received these polices and have access to them in case Employees have questions about leave and leave related requirements.
• Determine how the Company will keep track of leave related COBRA qualifying events so that no compliance requirement steps are overlooked.
• Keep insurance carriers apprised of leave-related changes for individual employees so that benefits are not left active when they should be terminated and vice versa.
• Communicate the expectations with Employees and maintain good records of this communication. 

​Legal Disclaimer:
​The information in this website is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from CobraHelp. or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.