How are workers' compensation benefits coordinated with other benefits?

When an employee is injured at work, workers' compensation benefits in most cases will apply. But what about health insurance coverage for that injured employee, especially if the employee is out on disability? Are you required to continue group health coverage; if so, for how long? What impact does the ADA have on your obligations? And what about the Family and Medical Leave Act-does it apply? How does COBRA fit? What steps can an employer take to sort out this mess?

□ Understand your group health plan's description of eligibility

Eligible persons. Coverage eligibility under group health plans is strictly governed by the definition of eligible persons in the summary plan description. COBRA begins when coverage eligibility ends under your group health plan. There may be some events listed in COBRA that do not cause a loss of eligibility under your plan. It is not true that, just because reduction in hours is listed as a qualifying event in COBRA, a leave of absence will be a COBRA qualifying event for every group health plan. Also, just because a divorce and legal separation are qualifying events under COBRA does not mean that your plan recognized either of these as reasons to terminate health plan coverage for spouses or former spouses. You have to look at each summary plan description to determine when eligibility ends. Some plans cover employees to the point of termination regardless of reduction in hours.

Plan design. COBRA was intended to continue health coverage to individuals who should no longer have been eligible under the plan. Your plan design still governs who is eligible. If employees on leaves of absence did not lose coverage before COBRA became law, then they will not be offered COBRA now unless the definition of eligible employee is changed in the summary plan description and plan document. COBRA picks up when your plan coverage ends; the eligibility definitions under your plan are critical.

Definitions of eligible employee. There are two possible definitions of the term eligible employee for most benefit plans.

The first definition is very sweeping and provides coverage until the termination of employment. It reads: a full-time employee [regularly/routinely] scheduled to work [40/30] hours per week. If you have this definition in your group health plan, then you are obligated by that plan to offer coverage as you would to any active, eligible employee until the point of termination. Of course, you can amend the plan and change the definition of eligible employee. This first definition is the reason why there are employees on workers' compensation leave who remain on active group health coverage for years after the original leave began.

The second definition of eligible employee triggers COBRA during a leave of absence. It reads: a full-time, ACTIVE employee working a minimum of [40/30] hours per week and the first [90] days of an approved leave of absence. If you have this definition in a group health plan, then eligibility for coverage is lost after a certain period of approved leave is exhausted and the employee remains inactive. COBRA can then be triggered because the employee has lost eligibility based on a reduction in hours. This definition must reflect the interaction with the Family and Medical Leave Act, however, since the COBRA qualifying event does not occur until the employee fails to return from the FMLA leave.

□ Understand the impact of the FMLA, Family and Medical Leave Act

The Family and Medical Leave Act has many implications for employers trying to coordinate with workers' compensation. An employee who is injured or has an accident at the workplace should look to the employer's workers' compensation policy for income and reimbursement of medical costs while injured. However, the employee will be absent from work or work reduced hours. The fact that the employee's illness or disability results from a workplace occurrence does not preclude the employee from applying for leave under the FMLA.

FMLA leave for workers' compensation injuries. The FMLA requires employers to offer group health coverage to employees on FMLA leave on the same terms and conditions as for active employees.

To avoid lawsuits involving claims for employment and employment benefits, employers should document that FMLA leave was offered to employees as an alternative to termination, when appropriate. Often, employees are fired because of absence from work or they may resign because of overwhelming family obligations.

Establish and enforce a maximum leave of absence. Employers can set a maximum leave of absence that is enforced consistently across the board for all employees. The maximum applies to employees whether the leave is based on pregnancy, disability, workers' compensation, or military service. Employers may consider six, nine, or 12 months as a maximum leave period.

This is particularly helpful when employers define eligible employee under their group health plans as a full-time employee [regularly/routinely] scheduled to work [40/30] hours per week and the employer waits until the point of termination to cancel coverage. Under this definition, a maximum limit on the leave of absence will limit the employer's liability. A maximum leave of absence that is uniformly applied to all employees (workers' compensation and non-workers' compensation) can be successfully defended against retaliation claims.

Should every qualifying absence be FMLA leave? Some experts advise employers to count every absence-be it one hour, one day, one week, or one month-as FMLA leave if it qualifies. This has a dramatic impact on how much FMLA time remains to be taken in a solid block. Thus, employers should revise their sick day, personal day, short-term disability, and medical leave policies to provide that these policies run concurrently with the FMLA. This does not happen automatically, but may be a matter of corporate culture. Remember, it is a prohibited act under the law to count FMLA absences against a no-fault attendance policy or to deny attendance bonuses based on FMLA absences.

Coordination of FMLA and workers' compensation benefits is further discussed at ¶45,480 .

□ Understand the impact of the ADA, Americans with Disabilities Act

Are all workers injured on the job protected by the ADA? No. The person still must meet the ADA's definitions of an individual with a disability and qualified individual with a disability.

Certainly every workers' compensation injury will not constitute a disability under the Americans with Disabilities Act; it must be determined in each case whether there is a substantial impairment of a major life activity. Of course, when the on-the-job injury does constitute a disability under the ADA, the employer must reasonably accommodate the individual. Traditional light duty assignments may not satisfy the employer's obligations under the ADA. Employers should always seek specific advice whenever workers' compensation and the ADA interact.

Is it workers' compensation or a disability? The ADA's three definitions of disability are:

• having a mental or physical impairment that substantially limits a major life function

• having a record of substantially limiting impairment

• being regarded as having a substantially limiting impairment.

Having a broken leg, even if it occurred on the job, is not a substantially limiting impairment since it will heal in almost all cases. An injured back may be a different story. Having previously filed a workers' compensation claim gives the individual a record of disability.

You can no longer, as a matter of course, terminate an employee who is unable, due to injuries that resulted in workers' compensation or otherwise, to perform the particular job the employee was hired to do. The ADA requires reasonable accommodation, which may include placing an employee in a light-duty or alternate job assignment.

How does a maximum leave period work under ADA? Under the ADA, termination of employment under maximum leave of absence policies is no longer automatic. In the past, employers have often enforced a maximum leave policy by sending a notice at the end of the leave saying, You're terminated. Following enactment of the ADA, an employer must now send a notice by certified mail 30 days before the leave ends that requires the employee to notify it immediately of the employee's ability to return to work and, if the employee is disabled, of the employee's need for reasonable accommodation.

This places the burden on the employee to initiate the reasonable accommodation process and provides proof of the employer's willingness to accommodate. This is a major change in the way many employers enforce their maximum leave of absence and is required by the ADA.

Extending the leave of absence. It may be necessary as a reasonable accommodation not to terminate an employee and to extend the leave of absence months beyond the maximum. An extension of a leave of absence is one of the listed examples of reasonable accommodation in the EEOC's guidelines. If the employer retains the first definition of eligible employee, active coverage extends until the employee is terminated. By the time COBRA is triggered, the employee may have been inactive for over a year, and the employer's liability under the group health plan has increased.

Under the second definition of eligible employee, however, the employer has limited the liability under the group health plan to a certain number of weeks/months of inactive status. Thus, reasonable accommodation of employment will have no impact whatsoever on group health coverage. COBRA is triggered based on the definition of eligible employee under the plan; this is nondiscriminatory and provides equal treatment for the disabled and nondisabled, pregnant and nonpregnant, workers' compensation and non-workers' compensation, military and nonmilitary. In other words, you are looking at inactive status and having an across-the-board limit on how much liability that you want to take on.

Can employers avoid increased workers' compensation liability and still comply with the ADA? Yes. One way would be to use information from medical inquiries and exams (taken after an offer of employment has been made) to screen out applicants with a history of fraudulent workers' compensation claims and to screen out individuals who would pose a direct threat to the health or safety of themselves or others.

What should an employer do when a worker is injured on the job? First, give the worker a medical examination to determine if he or she can perform the essential functions of the job held or desired, with or without reasonable accommodation. Next, scrutinize the employer's light-duty job policy and determine if it is a viable alternative.

Does the ADA require any type of rehabilitative programs? No.

Can an employer reject the application of a person who is known to have already filed and settled six other workers' compensation claims? Not outright. The issue is whether the employee can safely perform the essential functions of the job description.

Is a person who falsifies an answer to a lawful postoffer inquiry about his or her condition or workers' compensation history entitled to a job? Absolutely not.

Are second injury fund claims still valid under the ADA? Yes. And the ADA still allows employers to obtain information about preexisting injuries and to provide needed information to second injury funds, with certain limitations.

Can a person file both a workers' compensation claim and an ADA charge? Yes. Filing a workers' compensation claim does not prevent an injured worker from filing a discrimination charge under the ADA.

What happens if state or federal workers' compensation laws conflict with the ADA? It may be a defense to a charge of discrimination under the ADA that a challenged action is required by another federal law or regulation, or that another federal law prohibits an action that otherwise would be required by the ADA. However, ADA requirements supersede any conflicting state workers' compensation laws.

□ Understand the impact of long-term disability plans

Consider the interaction with LTD policies. An employer also needs to consider its long-term disability plan (LTD). Often, LTD plans provide income protection even in the event of workers' compensation. Such plans simply offset the workers' compensation payments. This becomes significant if the LTD plan provides group health coverage or if the employee is considered an eligible employee under the group health plan. Ordinarily, this is a separate plan from active group health and is not mentioned in the summary plan description for active employees.

The employee (and covered family members) may need to choose between COBRA rights under the active plan and coverage under the LTD plan, just as retirees (and covered family members) elect between COBRA and retiree health coverage where it is offered. Some employers provide health coverage to employees who are on LTD even after they become covered by Medicare. Such employers should be aware that Medicare is primary for employees on LTD. For some organizations, this change in the law effectively eliminated employer-provided health coverage for employees on LTD since benefits under the employer plan were identical to Medicare.