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October 2016


Case of Improper Mailing Address

In a recent court case where an employer/plan administrator improperly addressed a COBRA notice, the 2nd U.S. Circuit Court of Appeals actually affirmed that this did not invalidate the notice. The case was Vangas v. Montefiore Medical Center, 2016 WL 2909354 (2nd Cir., May 19, 2016) and the facts are as follows:

On March 25, 2010 Mirelle Vangas was working for Montfiore Medical Center (MMC) when she became ill due to cancer. She immediately took a leave of absence under the Family and Medical Leave Act (FMLA). Once her FMLA leave time was drained, she was still unable to return to work; therefore, MMC terminated her employment on August 30, 2010. Subsequently, Vangas never elected COBRA.

MMC stated that they used an outside vendor, WageWorks, to help administer its COBRA procedures. According to the benefits director there were established procedures that were followed; upon termination of an employee MMC would send WageWorks an electronic file. Normally, WageWorks would mail a letter to the employee within three to five business days from receipt of their file. The letter would outline the cost of COBRA as well as the election time period. If the employee had not elected COBRA by the election deadline, WageWorks would send another letter to the employee informing them that their eligibility for coverage was no longer available.

Vangas claimed to have never received a COBRA election notice. Henceforth, she and her husband filed a lawsuit against MMC seeking the cost of their medical expenses and statutory damages of $110 per day beginning from the date MMC was supposed to send the COBRA notice. They also sued for attorneys’ fees and costs.

The case hinged upon the fact that MMC had mailed the letters to an abbreviated version of Vangas’ address. Her address was actually 16 Wood Avenue, Cornwall-on-Hudson, New York 12520. The address on the letter to Vargas abbreviated the town to, “Cornwallonhuds.” The rest of the address was correct, including the zip code. The benefits director testified that this was caused by a character limit in the “town” field of their electronic system. While Vangas testified that she had not received the COBRA election notice, the court found that she had in fact received approximately 18 other pieces of mail with the same abbreviation of her town – even some with a missing zip code. Furthermore, the benefits director explained to the court that she had actually observed in the electronic system that Vargas’ file was sent electronically to WageWorks on Sept, 24, 2010 and the COBRA notice was mailed to Vargas on Sept, 27th, 2010 in accordance with their standard COBRA procedures.

Ultimately, both the lower court and the 2nd U.S. Circuit Court of Appeals found that, “the incorrectly abbreviated town name on the COBRA notice does not render the notice invalid.” They found Vargas’ argument was weak because she had received other incorrectly addressed mail. Additionally the courts noted that MMC did offer compelling evidence of following its standard COBRA notice procedures, therefore it was determined that MMC had made a proper attempt to mail the notices to the Vanga’s last known address with a reasonable intent to reach them.

In this author’s opinion, this case illustrates the importance of setting up a proper COBRA notice program with standard policies that are consistently followed. Remember, per COBRA notice requirements, an employer or plan administrator is not required to show proof that the qualified beneficiary actually received the notice; but rather that a good faith effort was made to provide the notice. When involved in a COBRA notice violation case, those employers and plan administrators that can show their standard mailing procedures and documentation to back them up will fare much better in the court’s eyes.

Errors and Misunderstandings with COBRA Compliance

When analyzing the grounds for complaints involved in the hundreds of COBRA cases reported, a vast majority involve very basic errors. All too often these cases illustrate that employers and plan administrators often lack the understanding of basic COBRA compliance. These misunderstandings and errors not only open up exposure to possible litigation which involves costly legal fees and penalties; but, employers and plan administrators often find themselves responsible for thousands of dollars in excise taxes for these COBRA compliance issues as well. On top of keeping up with COBRA compliance requirements, employers and administrators also need to be cognizant of other laws affecting their group health insurance plans namely health care reform, HIPAA and the Mental Health Parity Act. Furthermore, regulations need to be properly deciphered and translated from the pertinent state governments, as well as other agencies such as the IRS and Labor, Health and Humans Services.

Because litigation and the aggravation caused by compliance issues can be costly even if you win the case, it is a wise move to take time to look at your COBRA notification process and check for basic documentation clarity. To begin with, have you updated your COBRA notices with the most recent guidance from the U.S. Department of Labor regulations? Does your notice include both the rights and responsibilities of the qualified beneficiaries? Your notice should clearly outline the election date deadlines as well as the premium payment due dates. The consequences of tardiness in both electing coverage and paying premiums should be clearly spelled out in the notice. Addressing possible multiple qualifying events should also be part of the notice along with an explanation of how the qualified beneficiary should inform the plan administrator of these events should also be included.

Remember to read your group health plan document as well as your official Summary Plan Description and check to make sure the legally required language is up-to-date. Furthermore, it is your ERISA fiduciary responsibility to administer the plan according to its terms. Make sure that your administration is consistent with the actual written plan terms. Using the excuse that you were administering the plan on what you were verbally told, rather than what was written in the Summary Plan Description simply won’t hold up in court.

Once an employee is terminated, a common mistake is often made at the time of the exit interview where employers are frequently overly glib in giving out misinformation to the terminated employing by promising far too much in terms of COBRA coverage. Another possible instance where verbal misinformation can easily be conveyed is the timeframe during the election period. Specific special messages are required in terms of how claims are handled when health care providers or health care institutions are calling to confirm coverage and yet the qualified beneficiary has not elected and/or paid for COBRA coverage.

Check to make sure qualified beneficiaries are afforded their open enrollment rights and given the proper notification. If you change or add a group health plan ensure you are also notifying COBRA qualified beneficiaries and remember not to forget those that are in the middle of their election periods where these potential qualified beneficiaries can often slip through the cracks.

In summary, it is often the simple mistakes that get most employers and plan administrators into trouble when it comes to COBRA compliance. Taking the time to go over your documents and notification process - as well as reminding well-intentioned employees of the dangers of making verbal promises that cannot be met - will save countless hours and costly fees by avoiding future litigation.


In this Issue:

Case of Improper Mailing Address

Errors and Misunderstandings with COBRA Compliance

See Also:

COBRA Solutions
Cafeteria Plan Manager
Employee Database 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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