Employment Law Blog

News, trends and analysis in employment law and HR

Aug 29, 2011

COBRA mistakes cost employers big bucks

Employee BenefitsLeave Laws 

Three recent court decisions involving the Consolidated Omnibus Budget Reconciliation Act (COBRA) serve as a good reminder to employers that the dangers of noncompliance with COBRA are very real. Under COBRA, employees who lose health insurance coverage due to a qualifying event must be given the opportunity to continue their coverage for a limited time by self-paying.<!--?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /?-->

 

·         A district court ruled that an employer wrongly denied COBRA coverage to a former employee and his family when he was terminated after being convicted of sex crimes unrelated to his job. The employer claimed the employee was terminated for “gross misconduct” and therefore was not entitled to COBRA. The court disagreed, finding that there was no connection between this employee’s criminal convictions and his job, so the gross misconduct exception to COBRA did not apply (Shrimpton v. Quest Diagnostics, Inc., ND Ohio, July 2011). Vigilant generally recommends against denying COBRA rights on the basis of gross misconduct. For more information, see our Legal Guide, “COBRA Continuation Coverage: Termination for Gross Misconduct Exception” (1237).

 

·         Another district court refused to throw out a former employee’s claim for $220 per day in penalties under COBRA for the employer’s failure to provide both the COBRA general notice (which must be given within 90 days of the employee’s enrollment in the health plan) and a COBRA election notice (Rodriguez v. Oriental Financial Group, Inc., D Puerto Rico, July 2011). For more information on required COBRA notices, see Vigilant’s Legal Guide, “COBRA Qualifying Events and Notice Schedule” (1658).

 

·         An employer will pay more than $250,000 in uninsured medical bills for an employee who wasn’t given a COBRA election notice when she was unable to return to work following the expiration of her leave under the federal Family and Medical Leave Act (FMLA). Instead of issuing a COBRA notice when she was unable to return to work, the employer put the employee on short-term disability (STD) and continued paying her medical premiums out of her STD payments. When the employer submitted a claim to its stop loss carrier for the employee’s large claims, the carrier refused to pay on the grounds that the employee should have been offered COBRA. The court agreed that the employee should have been offered COBRA when her FMLA leave expired and, due to the employer’s error, the stop loss carrier didn’t have to pay the claims (Clarcor, Inc. v. Madison National Life Insurance Co., MD Tenn, July 2011).

 

If you’re unsure how to handle a situation involving COBRA, call Vigilant!
 

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