Effective January 1, 2012, California employers are required to continue to maintain and pay their share of premium costs for group health coverage for female employees on pregnancy disability leave -- for up to four months. In certain circumstances, this could significantly increase the period of time the employer pays for the continued coverage. On its face, the law applies to self-funded plans as well as insured plans.

On October 6, 2011, California enacted a new law (SB 299) requiring employers to continue to provide and pay their share of the premiums for continued group health care coverage for employees on pregnancy disability leave. Under existing California law, employers are required to grant up to four months of medical leave due to pregnancy disability. Previously, an employer was required to continue to provide and pay for continued group health insurance only if (i) it did so for employees on other types of disability leave, or (ii) it was required to do so under the Family Medical Leave Act (FMLA) or the California Family Rights Act (CFRA). Similar to FMLA an employer may seek to recover the amounts it paid for such continued group health care coverage if the employee fails to return to work at the end of her pregnancy disability leave (unless she fails to return for medical reasons or circumstances beyond her control).

This new requirement could significantly increase employers’ liability for paid health care benefits:

  • Extending FMLA period of coverage: Even for employers accustomed to providing and paying for coverage during FMLA leave, this law extends the period of coverage from 12 weeks to four months;
  • It applies to leave that doesn’t qualify for FMLA: Pregnancy disability leave is available in situations where FMLA leave is not (there’s no requirement that the employee have been employed for 1 year and completed minimum hours);
  • It applies to small employers: It applies to employers with five or more employees (FMLA applies to employers with 50 or more employees);
  • An employee could get 7 months of coverage in a 12 month period: If the employee is not eligible for FMLA leave when the pregnancy disability leave commences, and later becomes eligible for FMLA leave, the continued benefits under the FMLA appear to be in addition to the continued benefits prior to the FMLA leave; and

Since the new law is written to require continued coverage under all group health plans, self-insured as well as insured, expect an ERISA preemption challenge to the enforcement of this new law against employers with self-insured plans.