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

UPDATED: Aug 5, 2011

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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


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 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.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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