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June 2017


COBRA Notice Sent on Time Includes Insufficient Content

According to COBRA law, termination of employment or a reduction in hours that thereby results in a loss of health care coverage, are both considered a “qualifying event.” Qualifying events then entitle a qualified beneficiary to “up to 18 months of coverage.” Keep in mind that just because a COBRA notice has been sent to a qualified beneficiary in good faith on a timely basis does meet mean that the employer or plan administrator has met all legal obligations. According to the Department of Labor’s Model Notice there are fifteen content requirements that need to be included in the election notice. A recent court case illustrates the importance of ensuring to cover all 15 specific items in your COBRA notices to avoid costly litigation and penalties. This pending case is Griffin v. Neptune Technology Group, 2015 WL 1635939 9m.D. Ala., April 13, 2015).

Upon termination of employment from Neptune Technologies, Joshua Griffin decided to sue his former employer for failure to send a COBRA notice. Neptune came to court prepared to show they had in good faith sent an election notice to Griffin’s last known address via first class mail. Their Benefits Coordinator attested she followed the routine process in Griffin’s cases, even submitting to the court a copy of the COBRA notice and metered envelope she had sent to Griffin on Jan 32, 2013. Additionally, Neptune provided documentation of their usual method of preparing and sending COBRA notices, including a declaration from another employee describing their standard mailing procedures.

The case is ongoing and thus far the Federal District Court in Alabama did not dispute that Neptune acted reasonably in sending the election notice to Griffin. Neptune was able to show that the notice was properly mailed - first class mail to the last known address. Neptune showed the court that they followed the proper legal requirements in how they sent the notice to Griffin. However, to Neptune’s surprise, the court denied their summary judgment motion stating that the content of the notice was insufficient - only five of the required items were included in their COBRA election notice to Griffin. At that time the DOL’s Model Notice only included fourteen specific requirements but has since been expanded to fifteen. The court noted that not only was this notice woefully incomplete, they pointed out that it directed Griffin to return the election form within 60 days of the notice and to “follow instructions on the next page to complete the enclosed election form.” However, in looking closely at their instructions, the court realized there was no such page attached! It was therefore determined that Neptune failed to provide sufficient content in its notice for Griffin to make a reasonably informed decision as to whether to elect COBRA coverage or not.

In this author’s opinion, let this case be a reminder to read the DOL’s model election notice that was last updated in May 2014 to ensure your election notices comply with all fifteen requirements – after all, content does matter! And don’t forget, the notice should be written in a manner that can be understood and completed properly by the average participant. Failure on the part of a plan administrator to meet COBRA’s requirements can be subject to statutory penalties of up to $110 per day.

Notices Require Specific Information

An employer who attempted to send verbiage from an employee handbook as a COBRA notice “failed miserably” to comply with COBRA law, according to a recent court ruling. It was determined that even if a notice is sent on a timely basis, if the notice does not include specific information per COBRA mandates, it can result in COBRA penalties as well as vulnerability in terms of claims liability. The case is De Leon-Serrano, et al. v. Northwestern Selecta, Inc., 2015 WL 1470571 (D. Puerto Rico, March 31, 2015).

Facts of the case: As a newly hired employee of Northwestern Selecta, Inc., Edgard De Leon-Serrano elected family coverage under their group health plan. Northwestern acted as both the plan sponsor as well as the plan administrator for this plan. De Leon-Serrano was provided with an employee handbook upon his employment which included a three sentence paragraph on COBRA.

“This benefit allows an employee who has terminated his/her services with the company to maintain the medical insurance he/she had with the same (if it’s the case), so long as he/she makes the total payments for the cost of the COBRA plan for a maximum period of 18 months, starting on the date of his/her termination or until the employee acquires another medical insurance, whichever is less. One of the principal benefits of the COBRA plan is to provide extension, during the time the employee makes the corresponding payments, to the price of a group plan and not to the price of a self-insured medical insurance. Those insured in the COBRA plan under treatment recognized by the COB RA law and who meet the 18 month coverage may qualify for a coverage extension.”

When De Leon-Serrano terminated his employment on Feb, 15, 2013, Northwestern allegedly sent him and his family a COBRA election notice approximately one week later. The De Leon-Serranos claimed both this notice, as well as the general notice of COBRA rights in the beginning of his employment, were neither timely nor sufficient.

Northwestern tried to claim that the COBRA statute and regulations are permissive; through the statute and regulations they argued that the word “shall” should be understood to mean “may.” Therefore, they contended that meant an alternate method of notification should be allowed. The court found this argument to be absurd – substituting the word “may” for “shall” would make it possible for an employer to decide whether or not to properly inform employees and their qualified beneficiaries of their continuing coverage rights. Needless to say, the court ruled in favor of the plaintiffs in this case and Northwestern was held liable for reimbursement of medical expenses, statutory penalties, attorney’s fees, etc.

In this authors opinion this case illustrates the importance of ensuring both the general notice and the election notice include specific information in order to be COBRA compliant. You must include the name of the plan and contact information in order for the individuals to seek help with any COBRA questions they may need answered. You must identify the type of qualifying event involved and name the qualified beneficiaries that are affected by this event. The date that their active coverage will terminate must be mentioned as well as a statement of their various rights in electing COBRA coverage. The procedures for electing COBRA coverage must be explained with specific dates with regards to the election time period and deadlines. The ramifications of failure to elect COBRA must be clearly spelled out. Finally, a description of the COBRA coverage should be included, along with details of the premium requirements, i.e. amounts and due dates. Make sure to periodically review your notices in order to verify all the pertinent information required has been included. As evidenced in this case, a simple notice without the proper verbiage will not suffice.


In this Issue:

COBRA Notice Sent on Time Includes Insufficient Content

Notices Require Specific Information

See Also:

COBRA Solutions
Cafeteria Plan Manager
QSE HRA Manager
COBRA Administration Manager
U.S. Department of Labor
COBRA and the Trade Act of 2002
COBRA and Medicare Entitlement

Technical Information
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