Q&A: California's New PDL Laws and Your Insurance Obligations

December 1, 2011  |  From HRCalifornia Extra

Under a new state law, California employers with five or more employees will be required to continue to maintain and pay for health coverage under a group health plan for an eligible female employee who takes Pregnancy Disability Leave (PDL) up to a maximum of four months in a 12-month period.

The benefits are at the same level and under the same conditions as if the employee had continued working during the leave period. The employee must continue to pay her share of the premium, unless the employer covers the entire premium. The new law, SB 299, takes effect on January 1, 2012.

Under current law, employers were only required to provide benefits for pregnancy leave to the same extent and for the same length of time as they would for other temporary disability leaves. If the employer was covered by the federal Family and Medical Leave Act (50 or more employees within a 75 mile radius of where the employee works), the employer had to provide continuing coverage for up to 12 weeks during a maternity leave covered by the FMLA.

However, if the employee was still disabled by her pregnancy during weeks 13-16, the employer was required to provide benefits only to the same extent that it would for other temporary disabilities.

Now, the employer will be required to provide continuing coverage regardless of how it treats other temporary disabilities. This new legislation was enacted along with companion legislation (SB 222/AB 210) that amends the Insurance Code to mandate that all individual health insurance policies must provide maternity coverage effective July 1, 2012.

The examples below demonstrate some of the significant consequences of the new legislation. For purpose of these examples, assume that these scenarios occur in 2012 after the new legislation is in place.

Q: Our company is small, only 13 employees. We have an employee going on PDL. Do we have to continue her health insurance benefits while she is on PDL?

A: Yes. All employers with five or more employees must continue health insurance coverage for up to four months of PDL. (The four months of PDL is not an automatic amount that the employee always receives. Instead, the four months is a maximum amount based on the time that the employee is actually disabled by pregnancy or childbirth.)

Q: Our company has over 50 employees and is a covered employer for purposes of FMLA and CFRA. We have an employee who was disabled for four months of PDL. She was not eligible for leave under FMLA/CFRA at the time she started her PDL, but became eligible at the end of her PDL leave. She returned from her PDL for a couple of weeks, but now has another serious health condition unrelated to her pregnancy and is eligible for FMLA/CFRA. Are we required to continue her health benefits coverage for her FMLA/CFRA leave when we just gave her four months of continued health insurance coverage for her PDL?

A: Yes. The employee is now eligible for FMLA and/or CFRA, both of which require that leave and related benefits start when the employee becomes eligible for FMLA/CFRA regardless of whether the employer provided leave to the employee prior to that time either voluntarily or under some other law, such as PDL. Potentially, if the eligible employee received four months of PDL and then became eligible for FMLA/CFRA only at the end of the PDL leave, the employee could receive continued health benefit coverage for up to a maximum of seven months; four months under PDL and 12 weeks under FMLA and/or CFRA.

Q: Our company has over 50 employees and is a covered employer for purposes of FMLA and CFRA. We have an employee who was disabled for four months of PDL. She did not return to work at the end of PDL, but instead is taking 12 weeks of baby bonding leave under CFRA. Are we entitled to recover our share of the insurance coverage premium that we paid during her PDL because she didn’t return to work?

A: No. The law specifically states that the employer cannot recover the premium amounts if the employee failed to return to work because she took additional leave afforded under the CFRA, such as baby bonding leave. However, the new law provides that an employer can, under certain circumstances, recover the amounts paid for the benefits if the employee fails to return to work.

For example, if the employee simply chose to accept another job at the end of her PDL leave, the employer might be able to recover the premium costs. Because the law is ambiguous as to what specific circumstances allow for cost recovery, employers are advised to consult with counsel prior to seeking cost reimbursement.​​​