The Two-Headed COBRA
Sometimes even employers can feel the bite of the two-headed COBRA. Watch today's video to find out how.
When an employee is fired can he keep his health insurance? Generally, if the employee is not fired for gross misconduct and if the employer has 20 or more full-time employees (part-timers may count as part of an employee for that count), then a COBRA notice must be sent to the employee regarding his right to continue coverage. Of course, the employee has to pay for that coverage at 102% of the actual cost, but at least coverage can be maintained. If this notice is not timely sent to the employee’s last known address, then a penalty can be awarded by a federal district court judge of up to $110 per day.
The employer also has to provide notice if the employer discontinues the plan prior to the end of the maximum period of continuation coverage. Obviously that termination could have a significant impact on someone who is, for example, undergoing cancer treatment. Typically, the maximum coverage period is 18 months.
In Hager v. DBG Partners, Inc., No. 17-11147, __F.3d__, 2018 WL 4258968 (5th Cir. Sept. 6, 2018), the plan was terminated before the 18 months had passed. The employer failed to notify the former employee. The employee was undergoing treatment for colon cancer and for several months did not know his coverage had been canceled. The question presented? What was the remedy, if any, due the former employee? The plaintiff sought payment of the medical bills that the insurance would have covered. As you can imagine, treating colon cancer is expensive. Because the plan no longer existed, there was no claim for benefits under the plan. The court felt that restitution was not a proper remedy because the plaintiff was seeking money damages. Therefore, that claim was foreclosed.
However, the plaintiff did have a claim for the statutory penalties. ERISA allows the assessment of a daily penalty. The court held that the penalty could be the amount of the medical expenses. The court did not say what would happen if the medical expenses exceeded the amount of the maximum daily penalty. (I suspect that the total of this daily maximum penalty would serve as the upper limit.) Finally, the court noted that attorney’s fees could be awarded as well.
This employer felt the bite of the two-headed COBRA. The employer dodged the first head by giving notice when the employee’s employment was terminated. However, it was bitten by the second head when it failed to give notice of termination of the plan.
We routinely charm the dreaded COBRA for the benefit of our clients. We handle ERISA claims such as those arising under COBRA as medical benefit and disability claims. Put our experience to work for your client! See ERISAcase.com for more.