I have seen that type of payment from employers in NYS. Employees are required to pay into the FMLA, and when they use the FMLA  program they are issued a 1099-Misc, the plan covers about 65% of takehome pay but no FICA/Medicare withheld from third party, so employee is almost whole on take home pay.

I have been filing just as reported on other income.

Edit. Insurance company issued the 1099-Misc.