New Year, New Considerations for Leaves of Absence

By: Kendall Jackson

For many, the start of a new year offers a breath of fresh air, particularly for those who were working tirelessly to complete important end-of-year administrative tasks. From making changes to benefits and implementing plan document updates to ensuring the seamless enrollment of new participants, the last quarter of the year can be quite hectic. While there may be some relief brought by the new year, we must not forget that the first of January is often a day on which many new laws take effect.

Particularly relevant for this industry are the new leave of absence provisions that took effect in several states just over a week ago. For example, as of January 1, 2026, in Delaware, eligible employees have rights to leave under the Healthy Delaware Families Act, and in Minnesota, eligible employees are entitled to paid medical leave or paid family leave during which health coverage must continue. These are just two of several new state leaves of absence provisions that went into effect at the start of the year.

Despite commonly being labeled as purely an employer obligation, adhering to new state leave of absence requirements is also a consideration for self-funded health plans, particularly when coverage is being continued while an employee is on leave. It’s quite common for employers to outline leaves of absence in the employee handbook. Yet for the leaves that warrant the continuation of health coverage, we often see employers forget to include language within the plan document that accounts for this continuation. Including this language is important for a variety of reasons, such as ensuring consistency between documents, providing complete and comprehensive information to plan participants, and avoiding jeopardizing stop-loss reimbursement.

The stop-loss component is perhaps one of the most significant concerns, since it has the potential for more substantial consequences from a cost perspective. All plan documents contain eligibility criteria, and while that criteria will vary from plan to plan, typically plan documents contain “actively-at-work” requirements, which necessitate that employees perform their regular duties of employment to be eligible for plan coverage. In instances where an employee is unable to perform their regular employment duties by virtue of being on an approved leave of absence, plan language is necessary to support the continuation of the employee’s health coverage. Where the plan document lacks language to support the continuation, we often see stop-loss carriers refusing to provide reimbursement for the employee’s claims. The denial is based on the fact that the employee is no longer eligible for coverage under the terms of the plan since the employee does not meet the eligibility criteria—they are not “actively at work” and there is no language to justify the continuation of the employee’s coverage. This leaves the plan in a very precarious position. If the employee on leave is incurring high-dollar claims, the plan is left responsible for the charges without any potential for stop-loss reimbursement. Unfortunately, we’ve seen this exact scenario play out many times, and in instances where the claims are exceptionally high, it can jeopardize the plan as a whole.

The availability of stop-loss reimbursement is a vital component of self-funding, as it functions as a safety net for employers when there are significant, catastrophic claims. Since stop-loss carriers generally only consider the language in the plan document and won’t consider language from outside policies such as an employee handbook, including leaves of absence provisions that continue coverage in the plan document is essential for ensuring that an employee’s continuation of coverage is properly supported with plan language. In this regard, gaps between these two documents can pose detrimental outcomes, so aligning the plan document and employee handbook is certainly best practice.