Employer Can’t Get Back Medical Expenses for Employee not on FMLA Leave

According to EBIA, the employee in question had left full-time employment to go on FMLA leave. When she didn’t return from leave, she was not offered COBRA but was instead placed on short-term disability, with the employer continuing to treat the employee as covered under the plan for another six months. Following expiration of short-term disability, the employee was terminated from employment and offered COBRA.  

EBIA said the stop-loss carrier refused to reimburse the employer the medical expenses she incurred while on short-term disability, arguing that the employee’s move to short-term disability made her ineligible under the terms of the plan, which required eligible employees not on FMLA or COBRA to be regularly scheduled to work a minimum of 40 hours a week.  

The employer claimed this was only a condition for initial eligibility under the plan and that when the employee went on disability she had a change in status that, under another plan provision, allowed her to continue on the plan. However, the court agreed with the stop-loss carrier, ruling that, under the plain terms of the plan, the employee was not eligible after her FMLA leave ended except through COBRA and that the change-in-status provision relied on by the employer did not overrule the basic requirements for eligibility under the plan.