Don’t delay COBRA election notices

A recent court case shows why it’s so important to promptly send a COBRA notice to a qualified beneficiary after he or she experiences a COBRA qualifying event. (COBRA is the federal law that gives health plan participants the right to continue their health coverage for a limited time on a self-pay basis after they lose coverage due to certain “qualifying events.”) In this case, an employee who participated in her employer’s group health plan was terminated, but the employer didn’t send a COBRA notice and mistakenly continued her coverage at no charge for five months following her termination. When the employer discovered its mistake, it retroactively canceled her coverage, but later reversed itself and reinstated the coverage at no cost to the employee. When the employee sued over the employer’s mistake, the court awarded her nearly $3,000 in damages just because the employer didn’t provide her a COBRA election notice when it should have, despite the fact that she actually received five free months of coverage that she wasn’t entitled to (Fama v. Design Assistance Corp., D NJ, April 2012).
 
Tips: An employer who fails to send a COBRA election notice within 44 days after a COBRA qualifying event can be liable for penalties of up to $110 per day that the notice is late. In this case, the court awarded a penalty of $10 for each of the 293 days that the notice was late. The court likely went easy on this employer because the employee wasn’t ultimately financially harmed by the employer’s mistake. For more information see Vigilant’s Legal Guide, “COBRA Qualifying Events and Notice Schedule” (1658).