The U.S. Department of Health and Human Services recently announced the availability of a special enrollment period, beginning May 2, 2014 and extending through July 1, 2014 (the “COBRA SEP”), during which individuals who currently have employer-sponsored COBRA continuation coverage may drop it and enroll in coverage from a Federally-facilitated health insurance marketplace under the Affordable Care Act. According to HHS, this special enrollment period is being provided in response to HHS’ concerns that COBRA-eligible individuals may not have received sufficient information, through COBRA notices or otherwise, explaining the options and limited enrollment timeframes they have for obtaining coverage through the federal marketplaces. Notably, the COBRA SEP applies only to a federal marketplace (although HHS has encouraged the state-based marketplaces to adopt similar special enrollment periods). As related to this issue, the U.S. Department of Labor issued new model COBRA notices that include more detailed information about enrollment rights in the… Continue Reading
On May 2, 2014, the U.S. Department of Labor (the “DOL”) issued proposed regulations amending the notice requirements for the group health plan continuation coverage provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). Simultaneously, the DOL released new model notices that sponsors of group health plans may use to comply with the COBRA notice requirements. Both the updated general notice and updated election notice explain that coverage is now available in the Health Insurance Marketplace (the “Marketplace”), and the new election notice includes information about special enrollment rights in the Marketplace. Until final rulemaking is completed, use of the model notices on the DOL’s website will constitute good faith compliance with the notice content requirements of COBRA. A copy of the proposed regulations is available here. The model notices are available here.
Visteon Corp., the plan administrator of its group health plans, was recently ordered to pay $1.85 million in statutory penalties, plus attorneys’ fees, as a result of a class action lawsuit charging Visteon with violating applicable COBRA law when Visteon failed to send timely COBRA election notices to certain former employees and their family members. The federal district court for the Southern District of Indiana ruled that Visteon failed to (a) provide oversight to third-party administrators responsible for COBRA administration, (b) audit whether individuals entitled to COBRA notices were being sent them on a timely basis, and (c) adopt policies for addressing inquiries regarding COBRA, thus causing harm to the plaintiffs. As the plan administrator, Visteon was held responsible for the acts and omissions of its third-party COBRA service providers. Pierce v. Visteon Corp., No. 1:05-cv-01325-LJM-DKL (S.D. Ind. June 25, 2013). The opinion can be found here.
Eighth Circuit Holds Employer Not Liable for Civil Penalties for Failing to Timely Deliver COBRA Notices
A terminated employee sued his prior employer for failing to provide him with notice of his right to COBRA continuation coverage after his termination of employment. The COBRA law permits a court to hold a plan administrator personally liable to a plan participant in an amount of up to $110 per day of noncompliance with COBRA’s notification requirements. Here, it was undisputed that the employer failed to provide the employee with the required COBRA notices at the employee’s initial enrollment and after his termination; however, due to a clerical error, the employer continued to provide the employee with health insurance coverage for nearly two years after the employee’s termination. Upon discovering the error, the employer retroactively canceled the employee’s coverage, and the insurer sought to “claw back” the amount of benefits it had paid for the employee. After the employee filed suit, the employer reversed course and retroactively reinstated the… Continue Reading
A former employee who did not receive a COBRA election notice for her dental insurance after she terminated employment was awarded a statutory penalty, attorneys’ fees and costs in her subsequent lawsuit. After the former employee called the vice president responsible for human resources regarding her missing COBRA election notice, the benefits coordinator was instructed to mail the COBRA notice. The benefits coordinator, who had been in the position for a few weeks, maintained that she then mailed the COBRA notice but did not have a clear memory of doing so and there was no evidence that the notice was ever mailed. The employer’s benefits manager and vice president who supervised the benefits coordinator did not follow up to ensure that the notice was sent. The former employee maintained she never received the notice. The court found that it could not credibly conclude that the failure to send the COBRA… Continue Reading
Sixth Circuit Holds Stop-Loss Insurer Not Liable for Medical Expenses Incurred During Short-Term Disability Leave
Following a period of FMLA leave, an employee was placed by her employer on an approved short-term disability leave of absence (LOA), and she continued to be covered under her employer’s group health plan for an additional six months. When her 6-month LOA expired, the employee was terminated and offered COBRA coverage. In the lawsuit between the employer and its stop-loss carrier over medical expenses incurred by the employee during her LOA, the U.S. Court of Appeals for the Sixth Circuit affirmed the federal district court’s decision. The Sixth Circuit ruled that under the plain language of the plan, the employee was ineligible for coverage after her FMLA leave ended except through COBRA continuation coverage, which she was not offered until her LOA expired. As a result, the stop-loss carrier was not liable for claims incurred during the LOA. This problem could have been avoided if the plan and its… Continue Reading
The U.S. Court of Appeals for the Seventh Circuit affirmed a district court’s denial of statutory penalties for an employer’s failure to provide timely COBRA election notices. During an annual internal audit, the employer discovered that it failed to provide COBRA election notices to two employees. To correct this failure, the employer sent the notices to each employee along with an offer to retroactively elect COBRA. The employees did not take the offer and instead sued for statutory penalties. In affirming the district court’s denial of statutory penalties, the Seventh Circuit found that there was no evidence of bad faith or gross negligence on the part of the employer. In addition, the court rejected the employees’ argument that the employer was, as a matter of law, required to have an oversight system in place to ensure that COBRA notices reach all qualified beneficiaries on time. Although this decision was ultimately… Continue Reading