Case of Improper Mailing Address
In a recent court case where an employer/plan administrator improperly
addressed a COBRA notice, the 2nd U.S. Circuit Court of Appeals actually
affirmed that this did not invalidate the notice. The case was Vangas v.
Montefiore Medical Center, 2016 WL 2909354 (2nd Cir., May 19, 2016) and the
facts are as follows:
On March 25, 2010 Mirelle Vangas was working for Montfiore Medical Center
(MMC) when she became ill due to cancer. She immediately took a leave of absence
under the Family and Medical Leave Act (FMLA). Once her FMLA leave time was
drained, she was still unable to return to work; therefore, MMC terminated her
employment on August 30, 2010. Subsequently, Vangas never elected COBRA.
MMC stated that they used an outside vendor, WageWorks, to help administer
its COBRA procedures. According to the benefits director there were established
procedures that were followed; upon termination of an employee MMC would send
WageWorks an electronic file. Normally, WageWorks would mail a letter to the
employee within three to five business days from receipt of their file. The
letter would outline the cost of COBRA as well as the election time period. If
the employee had not elected COBRA by the election deadline, WageWorks would
send another letter to the employee informing them that their eligibility for
coverage was no longer available.
Vangas claimed to have never received a COBRA election notice. Henceforth,
she and her husband filed a lawsuit against MMC seeking the cost of their
medical expenses and statutory damages of $110 per day beginning from the date
MMC was supposed to send the COBRA notice. They also sued for attorneys’ fees
and costs.
The case hinged upon the fact that MMC had mailed the letters to an
abbreviated version of Vangas’ address. Her address was actually 16 Wood Avenue,
Cornwall-on-Hudson, New York 12520. The address on the letter to Vargas
abbreviated the town to, “Cornwallonhuds.” The rest of the address was correct,
including the zip code. The benefits director testified that this was caused by
a character limit in the “town” field of their electronic system. While Vangas
testified that she had not received the COBRA election notice, the court found
that she had in fact received approximately 18 other pieces of mail with the
same abbreviation of her town – even some with a missing zip code. Furthermore,
the benefits director explained to the court that she had actually observed in
the electronic system that Vargas’ file was sent electronically to WageWorks on
Sept, 24, 2010 and the COBRA notice was mailed to Vargas on Sept, 27th, 2010 in
accordance with their standard COBRA procedures.
Ultimately, both the lower court and the 2nd U.S. Circuit Court of Appeals
found that, “the incorrectly abbreviated town name on the COBRA notice does not
render the notice invalid.” They found Vargas’ argument was weak because she had
received other incorrectly addressed mail. Additionally the courts noted that
MMC did offer compelling evidence of following its standard COBRA notice
procedures, therefore it was determined that MMC had made a proper attempt to
mail the notices to the Vanga’s last known address with a reasonable intent to
reach them.
In this author’s opinion, this case illustrates the importance of setting up
a proper COBRA notice program with standard policies that are consistently
followed. Remember, per COBRA notice requirements, an employer or plan
administrator is not required to show proof that the qualified beneficiary
actually received the notice; but rather that a good faith effort was made to
provide the notice. When involved in a COBRA notice violation case, those
employers and plan administrators that can show their standard mailing
procedures and documentation to back them up will fare much better in the
court’s eyes.
Errors and Misunderstandings with COBRA Compliance
When analyzing the grounds for complaints involved in the hundreds of COBRA
cases reported, a vast majority involve very basic errors. All too often these
cases illustrate that employers and plan administrators often lack the
understanding of basic COBRA compliance. These misunderstandings and errors not
only open up exposure to possible litigation which involves costly legal fees
and penalties; but, employers and plan administrators often find themselves
responsible for thousands of dollars in excise taxes for these COBRA compliance
issues as well. On top of keeping up with COBRA compliance requirements,
employers and administrators also need to be cognizant of other laws affecting
their group health insurance plans namely health care reform, HIPAA and the
Mental Health Parity Act. Furthermore, regulations need to be properly
deciphered and translated from the pertinent state governments, as well as other
agencies such as the IRS and Labor, Health and Humans Services.
Because litigation and the aggravation caused by compliance issues can be
costly even if you win the case, it is a wise move to take time to look at your
COBRA notification process and check for basic documentation clarity. To begin
with, have you updated your COBRA notices with the most recent guidance from the
U.S. Department of Labor regulations? Does your notice include both the rights
and responsibilities of the qualified beneficiaries? Your notice should clearly
outline the election date deadlines as well as the premium payment due dates.
The consequences of tardiness in both electing coverage and paying premiums
should be clearly spelled out in the notice. Addressing possible multiple
qualifying events should also be part of the notice along with an explanation of
how the qualified beneficiary should inform the plan administrator of these
events should also be included.
Remember to read your group health plan document as well as your official
Summary Plan Description and check to make sure the legally required language is
up-to-date. Furthermore, it is your ERISA fiduciary responsibility to administer
the plan according to its terms. Make sure that your administration is
consistent with the actual written plan terms. Using the excuse that you were
administering the plan on what you were verbally told, rather than what was
written in the Summary Plan Description simply won’t hold up in court.
Once an employee is terminated, a common mistake is often made at the time of
the exit interview where employers are frequently overly glib in giving out
misinformation to the terminated employing by promising far too much in terms of
COBRA coverage. Another possible instance where verbal misinformation can easily
be conveyed is the timeframe during the election period. Specific special
messages are required in terms of how claims are handled when health care
providers or health care institutions are calling to confirm coverage and yet
the qualified beneficiary has not elected and/or paid for COBRA coverage.
Check to make sure qualified beneficiaries are afforded their open enrollment
rights and given the proper notification. If you change or add a group health
plan ensure you are also notifying COBRA qualified beneficiaries and remember
not to forget those that are in the middle of their election periods where these
potential qualified beneficiaries can often slip through the cracks.
In summary, it is often the simple mistakes that get most employers and plan
administrators into trouble when it comes to COBRA compliance. Taking the time
to go over your documents and notification process - as well as reminding
well-intentioned employees of the dangers of making verbal promises that cannot
be met - will save countless hours and costly fees by avoiding future
litigation.
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