If employee medical insurance is cancelled by an insurance company due to non-payment by the employer, is the employer responsible for costs?

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If employee medical insurance is cancelled by an insurance company due to non-payment by the employer, is the employer responsible for costs?

Company pays 80% of medical, RX, dental, vision and life insurance. The premiums were not paid and twice the insurance company cancelled coverage. Rx purchased were paid in full by employee. Later the insurance was reinstated but finally cancelled without reinstatement. I am wantto know if I can be reimbursed by my employer for the expenses the insurance would have covered. Also, is the employer supposed to increase the wages of employees who had the insurance when that benefit was no longer being received?

Asked on August 5, 2011 California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

1) During a plan year, if the company fails to pay premiums, either intentionally (chose to not pay; e.g. short on cash) or negligently (e.g. carelessly) and the policy is canceled, the company would be resonsible for any and all medical costs incurred by employees or their families during the cancellation, over and above what the employees would have paid anyway. For example, say you have a $50 emergency room copay and you son was hurt playing ball, so you brought him to the emergency room and incurred a $1,000 bill; the company would be responsible for $950 (you have to pick up the $50 you'd pay anyway).

2) Whan a plan year is up, the company may choose to stop offering health care as a benefit--subject only to any employment contracts or union agreement requring it to offer health insurance.

3) If a company legally chooses (see 2), above) to stop proving health coverage, it does NOT have to gross up the salary of any employees who lost their insurance--companies can decide how much in total, including benefits, to pay.

4) I a company improperly caused health care to lapse (see 1), above), the company's obligation is not to gross up salaries, but to restore coverage and, as stated, pick up medical costs employees incurred owing to its lapse.


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