Is an employee out on workers’ comp entitled to health insurance?

A: No, and in fact, you shouldn’t unless he qualifies for leave under the federal Family and Medical Leave Act (FMLA). There are only three reasons an employee should be on your insurance plan: (1) they meet the eligibility requirements to be an active participant under your insurance contract; (2) you’re required to offer coverage under an applicable law (i.e. FMLA); or (3) they have elected continuation coverage under COBRA (or equivalent state law) or USERRA (military leave). Workers’ compensation law does not require you to continue insurance coverage for an employee who isn’t otherwise meeting your plan’s eligibility requirements.

Here’s an example: Your insurance contract says that an employee must work at least 32 hours per week in order to be eligible for coverage. An employee is injured on the job and goes out on unpaid leave. Since he’s no longer working 32 hours per week, he no longer meets the eligibility requirements of your insurance contract. If he’s eligible for FMLA, then you must continue his health insurance benefits as if he were actively working. If the employee is required to pay a portion of the premium in order to continue insurance while out on FMLA leave, be sure to notify him of that requirement and arrange for payment. Once the employee has exhausted his FMLA leave entitlement (or if he was never entitled to FMLA to begin with), there is no longer any applicable law that requires you to continue insurance coverage. So if the employee still isn’t working at least 32 hours per week, he is not eligible to stay on your insurance plan as an active employee. At this point, the employee would have the right to voluntarily continue health insurance coverage through COBRA by self-paying. You must ensure the employee and any enrolled dependents receive a COBRA notice. Even if you plan to pay the COBRA premium for the employee, you should always require a completed, signed COBRA election form.

Note that under many insurance contracts, if the employee is on some form of paid leave - e.g., sick leave, PTO or vacation - he or she will be treated as if actively working. Check your plan to see how paid versus unpaid leaves are handled.
 
What is the risk of carrying an ineligible employee on your insurance? It is potentially huge. First, your insurance carrier could deny the claims for an employee who was improperly on your insurance plan and then you become liable for those claims. Second, if you fail to give an employee the proper COBRA notices when they were entitled to them, the potential penalty is up to $110 per day. This is not a mistake most employers can afford to make.

For more information about workers’ comp issues and the overlap of FMLA or ADA, check out our Legal Guide, “FMLA: Medical Continuation Coverage and COBRA Overlap” or learn more about our workers’ comp retro program where you can get ongoing help with these issues.