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,
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
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.