When COBRA and Leaves Collide
A partner of mine recently came to me with this question: if any employee is out on leave, when does the employer send the COBRA notice? "Good question" I said, "what type of leave and what does the company's leave policy provide?" Well, it got me to thinking (and researching) COBRA and leaves and when the "qualifying event" is triggered.
I came across an article about a case called Jennings v. Crane, out of the Western District of Kentucky where an employee was terminated while out on leave. The company wanted the COBRA to qualifying event to be when the leave started. The employee said it started when he was fired. In the end, the Court sided with the employee, but did so after looking at the company leave policy and what the health plan said about leaves of absence. In other word, what did the plan sponsor tell the participants about COBRA and leaves of absence.
The DOL is very specific about what happens while an employee is out on FMLA leave. An FMLA leave is not a qualifying event, but a qualifying event may occur when the employee notifies the employer of the intent not to return to work. The DOL is much less specific about COBRA when someone is out on some other type of leave. The employer has to define how leave will apply.
Hypothetically, think of an employee who goes out on a leave for 6 weeks. At the end of 6 weeks, the employee does not return to work and the employer has no idea if he will ever return. Is that a qualifying event under COBRA? Is the employee treated as losing coverage in the day he does not return to work? Can he extend the leave indefinitely and never trigger COBRA? All are possible if the employer is not paying attention and does not take the time to the following:
1. When you design your group health plan, decide how a leave of absence will be treated and when the leave will trigger COBRA continuation. A plan sponsor can clearly define when the loss of coverage will occur under various leave situations.
2. Establish a written leave policy that incorporates the health plan leave provisions. How many weeks of leave can an employee have? What is the process for requesting leave? When will the leave end and the employee be treated as terminated? When will the leave result in loss of coverage? Many times smaller employers do not establish a leave policy and then are frustrated about employees who go out on absences and leave these administrative questions up in the air.
3. Administer your leave policy consistently. If you require doctors' notes, get them. If you require return to work certifications, then make sure you have them in a timely manner. If going out on leave triggers COBRA, then make sure the notice goes out as soon as the leave starts. Do it the same way for every employee, every time.
Regardless of the size of your workforce, you need to be aware of the possibility of employees being out indefinitely, and if they are on your company health plan, indefinite leave could mean you continue to pay for coverage without any clear determination of when the COBRA qualifying event occurs. Plus, establishing a leave policy will make it easier to manage your workforce because you can define how and when leave can be taken which avoid confusion when leaves occur.
