Liability for misinformation to health care providers under final COBR

[Guest Abby]

Has anyone given any thought to what kind of liability a third-party administrator or a plan administrator may have pursuant to the final COBRA regulations if they fail to give a health care provider (physician, hospital, or pharm) a complete answer regarding a qualified beneficiary's right to coverage during an election period or a premium grace period? Who is on the hook to the h.c. provider - the individual, the plan, the TPA, etc.?

[Linda]

Is the data typically provided to a TPA sufficient and timely to allow the TPA to identify individuals in their COBRA election period or grace period for payment? I am under the impression that some TPS simply certify the coverage of e.g., a medical procedure but not the eligible status of an individual.

[KIP KRAUS]

Abby:

It has always been my understanding that COBRA compliance is the responsibility of the Employer. The employer may have a third party administer COBRA, but the ultimate responsibility remains with the employer.

An insurer or claims administrator, in my opinion has no responsibility to inform anyone that a person is entitled to COBRA. Most employers cancel a persons coverage until that persaon elects COBRA. If a TPA or insurer does not receive an application for COBRA coverage, there is no responsibility to pay claims during an election period. If claims are incured during the election period and COBRA is elected and coverage is reinstated retroactively the claims incured during the election period are eligible for adjudication and payment. The insurer or claims administrator should not be telling a health care provider whether or not a person is eligible for COBRA. If a provider wants information as to a persons eligibility for COBRA I would suggest contacting the employer.

Hope this helps.

[Linda]

Kip

It sounds like you would like the new responsibilites under IRS Reg. 54.4980B-6 Q&A-3 and 54.4980B-8 Q&A-5 to be handled by the employer, not the TPA or insurer. If the employer and TPA or insurer agree to that allocation of responsibilities, do you think the TPA or insurer must make some disclosure in the course of a precert call to direct the provider to the employer as to COBRA status?

[Brigid Anderson]

Even before there was an affirmative requirement to tell providers about a QB's COBRA status, there were cases by providers who had been misled by employers and TPAs. The results have been mixed (compare Nat'l Expert Care Consultants v. United Air Lines, 13 EBC 1670 (SDNY 1991), where the court held that ERISA did not preempt a claim by a prvoider against an employer that certified incomplete coverage information, with Lincoln Gen Hosp. v. Blue Cross/Blue Shield of Nebraska, 963 F.3d 1136, 15 EBC 1361 (8th Cir. 1992), where the court was less receptive, finding that the TPA's duty not to mislead ran only to participant and beneficiaries not service providers). I expect that many judges will be impressed by the inclusion of this new affirmative duty. Even though it seems designed to protect QBs rather than service providers, the existence of the requirement might give misled providers a leg up. It raises some interesting preemption issues too. Now that the disclosure requirement is part of IRS regulations, it might tip the scale in favor of finding such claims preempted by federal law? But that leaves the misled provider between a rock and a hard palce since ERISA allows only participants and beneficiaries to sue to enforce its requirements. I think the resolution of this one is wide open for the courts.

I agree and disagree with Kip's comments. COBRA does not impose any requirement on TPAs to make these kinds of disclosures. The "plan administrator" is the responsible party and is usually the employer as plan sponsor (although a TPA could be designated as plan administator in the governing documents). However, a TPA could assume the responsibility, by contract with the plan administrator, to make these disclosures. While this will not relieve the plan administrator of ultimate liability in the event the TPA screws up, it should give the plan administrator a claim for reimbursement under the contract against the TPA.

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