Health insurance during a maternity leave of absence is an important and complicated topic. The Family Medical Leave Act (FMLA) does offer health insurance continuation – if you qualify, and while they last.
A woman taking maternity leave of absence provides an excellent set of examples to illustrate the options. She may take an unpaid leave of absence for her own disability when she experiences complications of pregnancy before delivery. She then extends her leave to care for her new family member.
The biggest variable is whether you are eligible for Family Medical Leave Act (FMLA) rights and whether you stay out of work beyond 12 week – after your rights expire.
Health Insurance for FMLA Eligible Employees
Health insurance for Family Medical Leave Act eligible employees costs more during maternity leave. The law stipulates that employers cannot terminate an employee’s group health insurance during FMLA. In addition, it must maintain the coverage on the same basis as if the employee continued to work.
However, many new parents find that three forces combine to make it more difficult to afford the coverage.
- FMLA provides an unpaid leave of absence
- After-tax payments raise the actual premium costs
- Changes in coverage increase premiums after birth
Requesting a personal loan can help parents fund the ongoing after-tax premiums while taking an unpaid leave of absence. Many growing families find it difficult to handle a sudden increase in actual premium costs when down at least one income.
Under FMLA, parents take an unpaid maternity leave of absence. Most employers do not volunteer to continue paying employees while absent from work. Only five states offer temporary disability programs. Even fewer provide paid family leave benefits.
- New Jersey
- New York in 2019
- Rhode Island
Families in the 45 other states often lose two incomes for up to 12 weeks.
- Fathers on unpaid paternity leave
- Mothers on unpaid maternity leave
After-Tax Premium Payments
While working, most employees make cost-sharing premium payments using pre-tax payroll deductions. Pre-tax deductions reduce the earnings subject to three forms of taxation.
- Federal income tax
- State income tax
- FICA payroll taxes (7.65%)
While out on an unpaid maternity leave of absence, FMLA requires that you continue paying the health insurance premiums. Since you are not working and earning an income, there is no mechanism to pay the premiums through payroll deduction.
You pay the premium using after-tax money and lose the benefit of the tax savings. This is the first hidden cost many people miss.
Extra Cost of Newborn
There is a possible second hidden cost of FMLA health insurance continuation during maternity leave. A new baby arrived in the family! The plan automatically covers your newborn during the first 30 days after birth.
Parents may need to change their plan level to make sure the new arrival has adequate coverage after the first 30 days. Families with individual or employee/spouse plans need an upgrade.
- Individual to parent/child plan
- Employee/spouse to family plan
These upgrades cost more money!
FMLA requires that all employers continue paying the same portion of the group health insurance premiums for the affected employee. Each employer holds to a different formula for the employee, the spouse, and any children.
- Individual – highest %
- Spouse – lower %
- Children – lowest %
Health Insurance for Non-FMLA Eligible Employees
Next, we cover health insurance options during a maternity leave of absence for non-Family Medical Leave Act eligible employees. The majority of workers in the United States fall into this category. You will not enjoy continuation rights if you are not eligible.
You may fall into this category for two reasons.
First, if you work for a non-FMLA covered employer or you fail the hours-worked criteria, you can lose your health insurance coverage immediately. You may also lose your job.
- Covered employers
- Employ 50 or more employees for at least 20 workweeks
- One or more worksites within 75 miles
- Eligible employees
- Worked for that employer for at least 12 months
- Worked for at least 1,250 hours over the 12 months
- Works at a location with 50 or more employees within 75 miles
Second, if your maternity leave extends beyond the 12-week FMLA limit, you lose the health insurance protections under the law. You could lose your coverage at this point and may need to explore the alternatives.
- Pregnancy disability causes lost work before delivery
- Recovery from C-section birth takes 8 weeks
- An infant born sick or prematurely needs extended care at home
Request an online health insurance quote. Obamacare plans are the first option to explore for non-FMLA eligible employees taking maternity leave. You can purchase these plans on the individual marketplace.
During an unpaid leave of absence, you may be able to save money on your health benefits by buying an individual plan through your state marketplace. You may qualify for income-based subsidies now that your earnings are lower than before. You can enroll during a special enrollment period if you meet the qualifying life event criteria.
- A decrease in work hours that leads to the loss of your health benefits
- Being laid off
- Quitting or losing your job
- COBRA coverage ending
Having the option to continue coverage through COBRA does not disqualify you from subsidies. You must act within 60 days of losing your group plan.
Medicaid plans are a popular health insurance option for maternity leave for non-FMLA eligible women when mom must stop working due to complications. Each state allows pregnant women to enroll anytime during the year. In addition, each state expands income-based eligibility for expectant women.
Medicaid covers women for all care related to the pregnancy, delivery and any complications that may occur while expectant and up to 60 days postpartum.
You can continue on Medicaid during and after your maternity leave if you meet the income guidelines. Keep in mind that these guidelines vary by state, and by the number of family members in your household.
COBRA plans are a second health insurance option for non-FMLA families during the unpaid maternity leave of absence. Not every household qualifies for income-based subsidies.
Keep in mind that COBRA premiums cost much more than you expect. You lose the employer premium contribution, and you make payments using after-tax dollars rather than before-tax payroll deductions.
The COBRA qualifying life event criteria are slightly different.
- Death of the employee
- Termination or reduction in hours
- Employee becomes entitled to Medicare
- Divorce or legal separations of employee and spouse
- Child’s loss of dependent status
- US Dept of Labor – FMLA
- US Dept of Labor – COBRA
- Individual Marketplace Events
- HIPAA Special Enrollment