Facts - pregnant employee for small company in CA (maybe 10 employees so - not covered by FMLA). Company wants to take away health insurance benefits while employee goes on leave.

From what I do know and my gut tells me that they can not do this if the employee takes the 10 weeks or so disability. If any employee is on disability, I do not think you can terminate their health benefits.

I also assume that if employee takes more than disability (takes PFL) that since employer does not have to hold job, they certainly do not have to keep her health benefits.

Is this correct?

What if they continue her benefits and she quits. Can they then demand reimbursement???

Unfortunately, your employer is not obligated to continue your heath benefits unless you are covered under FMLA. You should be eligible for Cal Cobra, which would allow you to continue your benefits at your expense.

The employer does not have to pay for benefits or hold the job open under PFL.