COBRA Premiums

[Guest elatchana]

In this situation, the employee is timely paying his COBRA premiums to the employer. However, the employer is not promptly forwarding the premiums to the insurer. The employer's arrangement with the insurer is to cancel coverage if premiums are not paid when due, but coverage will be retroactively reinstated if premiums are then paid within the following 30 day grace period.

Even though the employee is timely paying the premiums, his coverage is being canceled each month because the employer is holding the check. This causes much inconvenience for the employee who has to pay for doctor visits/procedures out of pocket and then must seek reimbursement once coverage is reintstated. Can an employer be liable for this? Any other remedies?

Thank you.

[Guest b2kates]

can Cobra beneficiary directly pay insurer?

[jmor99]

Maybe the employee, one time, could pay 2 premiums (to get ahead one month). That would at least indicate whether the employer was intentionally trying to create problems at which point there might be some legal recourse.

[Guest AMP]

If the health plan is subject to ERISA, I suggest that the employee contact the Employee Benefits Security Administration of the U.S. Dept. of Labor. Under DOL Reg 2510.3-102(a), the employee's COBRA premium payment becomes a plan asset on the earliest date on which the employer can reasonably segregate the COBRA premium payment from the employer's general assets. As soon as the COBRA premium payment becomes a plan asset, ERISA prohibits the employer from continuing to commingle that payment with the employer's general assets.

The 90-day period in DOL Reg. 2510.3-102( c) is a MAXIMUM period; it is NOT a safe harbor. In general, as soon as the COBRA premium payment check clears, the employer can reasonably separate that amount from its general assets and send it to the insurer. So if the employer is holding the COBRA premium payment any longer than necessary (even if it's less than the 90-day maximum period), the employer is engaging in a prohibited transaction and a breach of fiduciary duty.