No, her employer does not have to pay her for the two weeks. No law in any state requires an employer to pay for unworked notice time, no matter whose decision it was that the time be unworked. Many employers do so anyway but it is not required by law.
Indiana has no statute requiring that vacation time be paid on termination; however there is case law which suggests that such time should be considered wages and paid. On the other hand, IF there is a policy that time will only be paid out under certain conditions, she must meet those conditions in order to be paid. She can contact the IN DOL for further information.
They are not legally obligated to pay for her insurance after her last day of work. The insurance policy contract will indicate what rights to have her insurance paid exist. If the insurance ends on the last day of work (which is the case at least 50% of the time if not more) then there is nothing illegal, or even unfair, about requiring her to pay for the balance of the month in order to retain the insurance.