Can an Employer Cancel Health Insurance During Medical Leave?

An employer may be able to end health insurance during medical leave in some situations, but the reason for the leave, the employee’s eligibility, and the plan’s rules matter. The federal Family and Medical Leave Act (FMLA) generally requires covered employers to maintain group health coverage during qualifying FMLA leave on the same terms as if the employee were working. Other types of leave may have different protections. Understanding the rules can help an employee spot a coverage problem, avoid missed premium payments, and act quickly if insurance is canceled.

When an Employer Must Maintain Health Insurance

For an employee taking qualifying FMLA leave, the employer generally must continue group health benefits under the same conditions that would apply if the employee had not taken leave. That means the employee usually keeps the same coverage and pays the same share of the premium. The employer generally continues paying its share, subject to the plan’s usual terms and any permitted changes that apply to employees on leave.

FMLA coverage applies to eligible employees of covered employers. In general, private employers are covered if they had at least 50 employees for at least 20 workweeks in the current or preceding calendar year. Public agencies and public and private elementary and secondary schools are covered regardless of employee count. An employee usually must have worked for the employer for at least 12 months, worked at least 1,250 hours during the 12 months before leave, and work at a location where the employer has at least 50 employees within 75 miles.

Eligible employees may take up to 12 workweeks of unpaid, job-protected FMLA leave in a 12-month period for certain family and medical reasons. These can include the employee’s serious health condition, bonding with a new child, or caring for a spouse, child, or parent with a serious health condition. Certain military family circumstances also qualify. The rules differ for military caregiver leave, which can provide up to 26 workweeks in a single 12-month period.

FMLA leave can be unpaid, paid, or a combination. An employer may require or an employee may choose to use accrued paid leave at the same time as FMLA leave, subject to applicable rules. Using paid leave does not, by itself, remove the FMLA protection for continued group health coverage.

What “Same Terms” Means During FMLA Leave

Maintaining coverage does not mean the employee is exempt from the employee share of the premium. If the employee normally pays part of the monthly cost, that contribution generally remains due during leave. The employer may not generally charge the employee more for continued coverage merely because the leave is FMLA leave.

When premiums are normally withheld from a paycheck, an unpaid leave can interrupt those deductions. The employer and employee should arrange another payment method, such as direct payment, a monthly invoice, or another method allowed by the plan and FMLA rules. Employees should ask for the amount due, the due date, and how to submit payment in writing before their pay stops.

An employer may change benefit terms for employees on leave if the change also applies to employees who are not on FMLA leave. For example, an employer-wide change to a health plan may affect an employee on leave under the same rules that apply to active employees. The FMLA does not generally freeze the plan’s benefits or costs for one person.

When Coverage Can End During FMLA Leave

Health coverage can lapse if the employee does not pay the required premium share after the employer follows the applicable notice and grace-period rules. Under the FMLA regulations, an employer generally must give the employee at least a 30-day grace period to make a payment. If the payment remains overdue, the employer must provide written notice at least 15 days before coverage is to end, stating that coverage will end on a specified date unless payment is received.

An employer may also choose to pay the employee’s share during leave to prevent a lapse. If it does, the employer may, in certain circumstances, recover the employee’s unpaid share when the employee returns. The employer generally cannot recover those payments if the employee does not return because a serious health condition continues or circumstances beyond the employee’s control prevent the return, subject to the regulations.

FMLA protection is limited to the period of qualifying leave available to the employee. Once FMLA leave is exhausted, the FMLA’s requirement to maintain coverage may no longer apply, although another law, the employer’s policy, a collective bargaining agreement, or the plan itself may provide additional rights. Employers should not treat an employee’s qualifying FMLA leave as a reason to cancel coverage early.

Medical Leave That Is Not FMLA Leave

Not every medical leave qualifies for FMLA protection. An employee may not meet the eligibility requirements, the employer may not be covered, or the leave may exceed the available FMLA entitlement. A company may also offer personal, short-term disability, or other medical leave under its own policies. Whether health insurance continues during that leave depends on the plan documents, employer policy, applicable state law, and any other relevant protections.

Short-term or long-term disability benefits are not the same as health insurance. Disability insurance may replace part of a person’s income while they cannot work, but it does not automatically require the employer to continue medical coverage. Employees should check the written leave policy and benefit plan rather than assuming that receiving disability payments guarantees continued health insurance.

State and local laws may provide leave or insurance protections beyond federal FMLA requirements. Some states have paid family or medical leave programs, and state continuation laws may apply to certain employer plans. Coverage can depend on the type of plan, the employee’s location, and the reason coverage would otherwise end. The U.S. Department of Labor’s state-by-state resources and the state insurance department can help identify applicable rules.

How the ADA May Apply

The Americans with Disabilities Act (ADA) may require a covered employer to consider unpaid leave as a reasonable accommodation for an employee with a disability, unless the accommodation would cause undue hardship. The ADA does not automatically provide a set amount of leave or guarantee continued health insurance in every case.

Health coverage during ADA-related leave generally depends on the employer’s benefit plan and how it treats comparable leaves. An employer may need to apply its policies consistently and consider whether a change to a leave policy is a reasonable accommodation. An employer should not make an adverse decision simply because an employee has a disability, but the precise insurance obligation can depend on the facts and governing law. The U.S. Equal Employment Opportunity Commission (EEOC) provides guidance on leave as a reasonable accommodation.

What Happens When Employer Coverage Ends

If employer-sponsored coverage ends because of a qualifying event, the employee and covered family members may have a right to continue the group plan under the federal Consolidated Omnibus Budget Reconciliation Act (COBRA). A reduction in work hours that causes a loss of coverage can qualify, even if the employee remains employed. COBRA generally applies to private-sector and state or local government group health plans maintained by employers with at least 20 employees, with exceptions and special rules.

COBRA continuation commonly lasts up to 18 months after a qualifying reduction in hours or termination of employment. The former employee generally pays the full premium, including the amount the employer previously contributed, plus an administrative fee of up to 2%. The plan administrator must provide election information, and the employee typically has 60 days to elect COBRA from the later of the date coverage would otherwise end or the date the election notice is provided. The exact deadlines and eligibility rules should be confirmed in the notice.

COBRA is not the only possible option. A person losing employer coverage may be eligible to enroll in a Marketplace plan through HealthCare.gov or a state exchange during a Special Enrollment Period, generally within 60 days before or after the loss of qualifying coverage. Medicaid or a child’s coverage through the Children’s Health Insurance Program (CHIP) may also be available, depending on income and state rules. A spouse’s employer plan may offer a special enrollment opportunity after a loss of other coverage.

Employees should compare premiums, deductibles, provider networks, and prescription coverage before choosing. COBRA can preserve the same plan and provider network, while Marketplace coverage may cost less after premium tax credits, depending on household circumstances. Coverage choices and enrollment deadlines are separate from the question of whether the employer acted lawfully in ending the original plan.

What to Do If an Employer Cancels Coverage

If coverage appears to have ended during medical leave, the employee should first confirm whether the policy was actually canceled, whether a premium payment was missed, or whether the employer’s plan changed for everyone. A termination notice, benefits portal, insurer, or plan administrator can clarify the effective date and stated reason. Employees should avoid relying only on a verbal explanation.

1. Ask for the explanation in writing. Request the coverage end date, reason, premium balance, payment history, and any notices sent.
2. Check leave status. Confirm whether the leave was designated as FMLA leave, how much FMLA time remains, and whether the employer received the required medical certification.
3. Review plan documents. Look at the Summary Plan Description, enrollment materials, premium-payment policy, and any notices about changes to the plan.
4. Address missed payments promptly. Ask whether coverage can be reinstated by paying the amount due, and keep receipts, emails, and delivery confirmations.
5. Protect alternative coverage deadlines. Review COBRA, Marketplace, spouse-plan, Medicaid, or CHIP options without waiting for a dispute to be resolved.

For a possible FMLA violation, an employee can contact the U.S. Department of Labor’s Wage and Hour Division. Questions about disability discrimination or accommodation may be directed to the EEOC. Benefits disputes involving many private-sector employer plans may fall under the Employee Retirement Income Security Act (ERISA), administered in part by the Department of Labor’s Employee Benefits Security Administration (EBSA). A state insurance department may help with state-regulated insurance or continuation rights.

Quick Comparison of Leave and Coverage Rules

Key Takeaway

An employer generally cannot cancel group health coverage simply because an eligible employee is taking qualifying FMLA leave, as long as required employee premiums are paid and the plan remains in effect. Outside FMLA, the answer depends on the reason for leave, employer and plan rules, disability protections, and state law. A written explanation, prompt review of premium notices, and attention to alternative-coverage deadlines can help prevent a temporary leave from becoming a lasting gap in health insurance.

Authoritative Resources

• U.S. Department of Labor: FMLA overview and employee protections
• Electronic Code of Federal Regulations: FMLA health-benefit payments and coverage
• U.S. Department of Labor: Health coverage after job loss or reduced hours
• EEOC: Employer-provided leave and the ADA
• HealthCare.gov: Options after losing job-based coverage

Note: This article provides general information, not legal or benefits advice. Individual rights depend on the facts, plan documents, and laws that apply.