Final regulations state that a third party (such as a parent, friend, hospital or new employer) may pay COBRA premiums for a Qualified Beneficiary. Employers should accept payments but a problem may arise when/if the third party does not make proper or timely payments. The case of Lloyd v.Harrington Benefit Services, Inc., 2006 WL 571862 (N.D. Miss., March 8, 2006) addresses this issue and how it can spiral out-of-control.
Clifton Lloyd resigned from North American Pipe (who was self-insured with a Third Party Administrator, Harrington Benefit Services) on May 28, 2003 and started a position with Cubicon shortly thereafter. Per COBRA requirements, North American Pipe notified Harrington Benefit Services of the termination and a qualifying event notice was prepared and sent in a timely fashion. (Employers have 30 days to notify the Plan Administrator of a COBRA qualifying event and the Plan Administrator has 14 days to prepare and send the qualifying event notice.)
Lloyd made an oral agreement with the new employer, Cubicon whereby they would pay for Lloyd’s COBRA premiums until he became effective on their group health plan sixty days later. After receiving the COBRA election form from Harrington Benefit Services, Lloyd completed the application and submitted it to his supervisor at Cubicon. The supervisor was to submit it to Cubicon’s Accounts Payable Department and send it directly to North American Pipe.
Unfortunately for the Lloyds, the election form and payment never made it to North American Pipe. Lloyd was under the assumption he had continuation coverage until he received a letter on August 23, 2003 from Harrington Benefit Services stating his time had elapsed to elect COBRA continuation coverage. Although the letter was sent stating benefits had been lost back to the date of termination, the TPA mistakenly paid $15,000 in medical claims for Lloyd’s spouse.
In March 2004, Lloyd was re-hired by North American Pipe who submitted Lloyd’s health plan enrollment forms which led to Harrington Benefit Services uncovering the error in the $15,000 claim being paid. Harrington went back to the Lloyd’s medical providers (doctors and hospitals) and asked for reimbursement. The providers then demanded payment from the Lloyds for their unpaid services.
With this, the Lloyds sued Harrington Benefit Services for paying the claim and then withdrawing its payment to providers without cause or justification. They sought reimbursement for the claims, attorney’s fees and costs. The Mississippi court found the Lloyds did not have claim to benefits because it was ultimately their responsibility to submit the COBRA election form to North American Pipe and to make sure premiums were paid in a timely fashion. The court found that neither North American Pipe nor Harrington Benefit Services were responsible for the paperwork and payment error.
It is our opinion that if a third party is paying premiums for a qualified beneficiary; caution should be taken by the Administrator. If a payment is not received, the Administrator may want to notify the qualified beneficiary of the delinquent payment. This is NOT required by law but it may eliminate a similar issue as demonstrated by this case.
Clifton Lloyd resigned from North American Pipe (who was self-insured with a Third Party Administrator, Harrington Benefit Services) on May 28, 2003 and started a position with Cubicon shortly thereafter. Per COBRA requirements, North American Pipe notified Harrington Benefit Services of the termination and a qualifying event notice was prepared and sent in a timely fashion. (Employers have 30 days to notify the Plan Administrator of a COBRA qualifying event and the Plan Administrator has 14 days to prepare and send the qualifying event notice.)
Lloyd made an oral agreement with the new employer, Cubicon whereby they would pay for Lloyd’s COBRA premiums until he became effective on their group health plan sixty days later. After receiving the COBRA election form from Harrington Benefit Services, Lloyd completed the application and submitted it to his supervisor at Cubicon. The supervisor was to submit it to Cubicon’s Accounts Payable Department and send it directly to North American Pipe.
Unfortunately for the Lloyds, the election form and payment never made it to North American Pipe. Lloyd was under the assumption he had continuation coverage until he received a letter on August 23, 2003 from Harrington Benefit Services stating his time had elapsed to elect COBRA continuation coverage. Although the letter was sent stating benefits had been lost back to the date of termination, the TPA mistakenly paid $15,000 in medical claims for Lloyd’s spouse.
In March 2004, Lloyd was re-hired by North American Pipe who submitted Lloyd’s health plan enrollment forms which led to Harrington Benefit Services uncovering the error in the $15,000 claim being paid. Harrington went back to the Lloyd’s medical providers (doctors and hospitals) and asked for reimbursement. The providers then demanded payment from the Lloyds for their unpaid services.
With this, the Lloyds sued Harrington Benefit Services for paying the claim and then withdrawing its payment to providers without cause or justification. They sought reimbursement for the claims, attorney’s fees and costs. The Mississippi court found the Lloyds did not have claim to benefits because it was ultimately their responsibility to submit the COBRA election form to North American Pipe and to make sure premiums were paid in a timely fashion. The court found that neither North American Pipe nor Harrington Benefit Services were responsible for the paperwork and payment error.
It is our opinion that if a third party is paying premiums for a qualified beneficiary; caution should be taken by the Administrator. If a payment is not received, the Administrator may want to notify the qualified beneficiary of the delinquent payment. This is NOT required by law but it may eliminate a similar issue as demonstrated by this case.
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