Many private employers have complex federal responsibilities to provide specific notices to qualifying employees leaving employment or experiencing certain other major life events. Known as COBRA continuation notices or COBRA election notices, they inform employees who are qualifying beneficiaries of employer-provided group health plans, and are also facing “qualifying events” – usually voluntary or involuntary job termination – of their right to continue coverage temporarily.
COBRA continuation coverage
Most private employers with at least 20 employees must comply with the federal Employee Retirement Income Security Act (ERISA) that establishes standards and requirements for covered employers in their delivery of most kinds of employee benefit plans, including health plans.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is an important part of ERISA that requires plan administrators to offer continued coverage to qualified employees as well as to certain former employees, retirees, spouses and former spouses, and dependent children. The right to continuation coverage is triggered by a qualifying event like job loss or reduction in hours, employee death, employee divorce or legal separation, Medicare qualification and some other similar life events.
Continuation coverage is to bridge the gap between a major life event and the future time when the person gets back on their feet and can access other health insurance coverage, when that transitional support is no longer needed.
Most employers bill covered individuals for continuation coverage under their plans, which is allowed within limits.
An important piece of this scheme is the employer notice requirement. COBRA and ERISA are complicated and so are the continuation coverage provisions, which is why the law requires elaborate notices to qualifying employees and beneficiaries to explain their rights and options, applicable deadlines, up-to-date contact information if they want to continue and other issues.
Without adequate notice, most people would not be aware of their options under COBRA to continue coverage and may face prohibitively expensive coverage through other plans, potentially ending up without health insurance for a time.
The U.S. Department of Labor (DOL) has a model general notice and a model election notice on its website. While some personalization will be needed, the DOL generally will recognize the use of their model forms as adequate. An employer may also write its own notices, but they (through their plan administrator that can be a third party) must comply with myriad content requirements. Any COBRA notice must be written in language that an “average plan participant” could understand.
Failure to comply can result in employee lawsuits (often class action) and/or potentially steep DOL and IRS monetary penalties. For example, on Dec. 15, a former employee filed a class action lawsuit in a Florida federal court against McDonald’s, her former employer. In Johnson v. McDonald’s Corporation, she alleges that McDonald’s sent piecemeal, deficient, confusing and misleading notices that caused her to lose health coverage and incur medical costs.
Plaintiff Johnson is requesting on behalf of the class (if approved) equitable relief, an order to stop McDonald’s from using its allegedly deficient notices, statutory penalties of $110 per day per class member with a defective notice, and other remedies.
A Kentucky employer should consult legal counsel to review proposed COBRA continuation notices for compliance as well as for guidance should they face allegations of insufficiency. On the other hand, an employee with questions about the adequacy of a notice or who did not understand or did not receive a notice and suffered harm such as a loss of health insurance should seek the advice of an employment lawyer to understand potential legal remedies.