COBRA mistakes

[lexi]

Hi everyone:

I have two related questions about an ER that acquired a company and found out that:

1) former employees, some of whom have not been on the payroll for years, were never taken off the acquired company's health plan, and, consequently, are continuing to be covered as "self-pay" insureds under the Company's health care plan despite no longer being an "employee;" and

2) The acquired and acquiring corporations do not have any retiree health care plans. There are a couple of retired EE who have Medigap w/ the insurance provider, which is a remnant of when they were still active EE of the acquired corporation. The EE no longer work with either corporation.

Do any of these two groups of people (terminated and retired EE) need COBRA coverage where the qualifying event, and the COBRA coverage period they would have been entitled to had they elected COBRA coverage, have expired, assuming they had they been given proper notice upon the qualifying event?

What do you all think? thanks in advance for any help you might be able to provide.

Lexi.

[Guest Ira Hayes]

If they're paying the same as active employees, no qualifying event has occurred!

[leevena]

I do not pretend to be an expert on COBRA, but I do not believe that the ex-employees in the first scenario are eligible for COBRA. I say this because the DOL defines a qualifying event as "Voluntary or involuntary termination of employment for reasons other than gross misconduct". The key is termination of employement. It would seem to me that the current carrier (and maybe past carriers) believed these employees to be active. Most group plans require participants to be active employees, other than retirees.

So if these employees were terminated but kept on the plan as active employees, it appears that fraud was committed and that they are not eligible for COBRA.

That being said, since the carrier does not know about this, they could probably submit their request for COBRA and receive it. Also, if they were on some type of approved extension (such as terminated employees with coverage extended) they may be ok.

Don't envy you on this, and I hope I am wrong.

[Mary C]

Employers may continue coverage for however long as they wish after a termination of employment, i.e., as part of severance, as this employer has done, or under state continuation laws. It is called under COBRA regulations "Alternative Coverage". COBRA regs set forth criteria that can be applied to alternative coverage to determine if it can be run concurrent with COBRA or consectutive to COBRA.

In any event, I agree that giving them a COBRA notice now using the current date or the date of the sale as the date you cancel ACTIVE coverage and allowing them to elect 18 months of COBRA may be your best course of action.