Is it acceptable to keep extending medical leave to prolong insurance coverage, when one has no intent of returning? Two years ago I enrolled in a very high-ranked program in field X. Partway through the program, I developed severe health problems which affected my memory and cognitive function, and which made it difficult to learn the required material. In addition, I also found I was not that interested in the research itself (although the aforementioned memory/cognitive problems were far more damaging to my learning than the lack of interest).
Due to the combination of these two factors, I sought medical leave to deal with the health problems, which was granted in March. Around July/August, the problem was partially alleviated, and I have mostly been feeling better, and have decided to switch to another field of study Y. I talked with my adviser about my situation and explained the health problems, and he asked me if I was still planning on re-entering the program, and I told him that I felt that I might perform better working in field Y; we mutually agreed to terminate the leave, and I am currently applying to a second round of graduate schools.
This is where things get slightly more complicated. The health insurance I had under the medical leave was far better than my ordinary health insurance, and my mother has (since August) been trying to persuade me to extend my leave as long as legally possible, potentially up until Fall 2015 enrollment. According to doctors I talked to at the previous institution, it is not uncommon for students to take up to three years on medical leave, so this is AFAIK legally possible. In the interim time, she wants me to tell my adviser that I am still dealing with medical issues, and am not yet able to decide on re-entering the institute's program in field X, during which I can apply to other schools in field Y and enroll in one of them for Fall 2015. I have not yet told her that I have previously spoken with my adviser and agreed to end the leave.
My question is:

Under this set of circumstances, was I right in contacting my adviser and terminating leave, instead of extending it up until Fall 2015 enrollment at another institution?

Personally, my gut instinct towards my mother's proposal is that it is effectively financial blackmail, arguably dishonest, and would sour post-leave relations with my adviser. However, I am generally bad at gauging these sort of questions, and seek advice here as to what the correct course of action would have been. My mother has told me that the institute legally has to extend my medical leave as long as I am otherwise in good standing and still expressing desire to eventually re-enroll, and that by doing otherwise, I am potentially burning academic bridges behind me and making it more difficult for me to find a new graduate position. In any case, I hope that this question is sufficiently generalizable that it can help people who find themselves in similar circumstances regarding the handling of academic medical leave.
Edit
To clarify, I was not paid a stipend during leave, and the insurance premium was paid for by the institution.
Assuming that you are in the United States, the ethics of the situation are not clear-cut, because the health care system is such a mess.  It may not be clear to either you or your former advisor who is actually paying for the health care. For example, the school may have outsourced responsibility to a third-party insurance solution, or it might be covered by some unusual provision of the new health law, or the FMLA, or who knows what.  Honestly, I have no idea, and probably you can't find out without detailed interactions with HR, and even they might not be in compliance with laws and regulations and might not even know it.

It's also the case that, while there is a clear conservative ethical solution of "better safe than sorry," it's not actually clear that it is the right thing to do, given the amount of financial and/or medical problems that can be caused by a short period uncovered in the US.  A colleague of mine, for example, who was actually continually covered with a good plan, had problems getting critical medical care for a child because her plan was late in handling paperwork on a year-to-year transition.  On the flip side, I kept using some of my university's medical services for years after I had left, because I asked about it and was told that my alumni status meant it was still OK: it turned out that I wasn't supposed to, but nobody including me knew that.

So it's a pretty mess to sort through.  How should you deal with it?
Let's lay out some principles:


You really don't want to burn bridges.  This means that if you decide that it is important to try to stay on the same plan, then you should make sure that your advisor is OK with it.  Some professors I know would tell you to do it, and some would be uncomfortable.  What you don't want to do is have the professor be uncomfortable and only find out later.
Second, how critical is the difference between the plans?  Are you potentially facing many thousands of dollars in extra cost or being forced to go untreated for your medical conditions?  If the difference is relatively small, then let it go.  If the difference could destroy your health or life, then it's appropriate to try to use the options that are available.


None of this is ethically squeaky clean, unfortunately, and I wish that it were so.  Unfortunately, because health care coverage is so tightly linked to employment in the United States, we have a system that sometimes forces people to choose between problematic options.

In sum: if you can afford to drop down a grade in health care, that's the ethically best choice.  If you can't, make sure your professor is OK with you taking advantage of something that is permissible under the system but ethically questionable.