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Health plan admin - COBRA

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Sound Process and Good Recordkeeping Demonstrate Compliance with COBRA Notice Requirements
"This decision serves as a reminder of the benefit to employers of having established procedures in place for providing notices required under COBRA and similar laws.... [E]mployers should review their agreements with third-party administrators, make sure they include performance guarantees regarding COBRA notice procedures, and keep records (or make sure the administrator keeps records) demonstrating those procedures are followed." [DeBene v. BayCare Health System Inc. No. 16-12679 (11th Cir. May 31, 2017)] (Verrill Dana LLP)
COBRA and Severance Agreements: A Gift or a Curse?
"If the individual is left enrolled as an active employee, fully-insured employers may risk violating the medical plan eligibility requirements in their insurance contract. Similarly, self-funded employers may violate the coverage provisions of their stop-loss agreement. Consequently, failure to offer COBRA can expose an employer to significant financial liability for claims not paid by an insurance carrier or stop-loss insurer.... If the severance agreement includes an employer contribution toward the cost of COBRA coverage, minimize tax consequences by paying the COBRA premium directly to the plan instead of reimbursing the former employee." (Hill, Chesson & Woody)
Loss of COBRA Subsidies: A Marketplace Conundrum
" currently provides in a couple of different spots that loss of an employer-provided COBRA subsidy does entitle an individual to a [special enrollment period (SEP)].... [No] change has occurred to the underlying regulations, nor has there been any formal communication from any of the agencies that are responsible for administering the ACA acknowledging or explaining this change.... [R]epresentatives at [HHS] ... indicated confusion over the change on the website and stated that their enrollment system is still not set up to provide a SEP to an individual in such circumstances." (Jackson Lewis P.C.)
Employer Faces Class-Action Lawsuit Because of Vague Language in COBRA Notice
"Roberto argued that [1] Cushman & Wakefield failed to include in the notice the specific date coverage will end, and [2] Roberto cannot determine whether this monthly coverage would end at the beginning or the end of the 18th month and whether it would end on the day that was exactly 18 months in the future. The notice stated that coverage may generally last for up to 18 months, and Cushman & Wakefield contended that the notice need not specify the day on which coverage ends. The court noted that Roberto stated a plausible claim because the regulation's inclusion of the phrase 'termination date' suggests that the employer must identify the day on which coverage ends." [Valdivieso v. Cushman & Wakefield, Inc., No. 17-118 (M.D. Fla. May 18, 2017)] (HR Daily Advisor)
Theft Was Gross Misconduct, But Inconsistencies May Make COBRA Ineligibility Less Clear
"An employer argued that COBRA coverage was not provided due to a qualified beneficiary's gross misconduct. However, the former employee countered that the real reason behind his termination and the COBRA coverage denial was the high cost of his medical expenses.... [T]he court denied a request to rule in the former employee's favor on a COBRA notice claim.... Given that the gross misconduct determination is based on the facts and circumstances, plan administrators considering whether to deny COBRA coverage should follow certain steps before making a final determination." (HR Daily Advisor)
Recordkeeping Evidence Leads Eleventh Circuit to Conclude That Former Employer Met COBRA Obligations
"Evidence of routine processes by BayCare and Benefits Concepts regarding the preparation and mailing of COBRA elections notices, and of how those processes were followed, along with a copy of DeBene's COBRA letter containing his premium amount and enrollment form were highlighted by the court as reasons for its decision. A report from Benefits Concepts showing when the letter was sent and successful election of coverage by other employees who received notices mailed the same day led the court to conclude that BayCare met its obligations under COBRA." [DeBene v. Baycare Health System, Inc., No. 16-12679 (11th Cir. May 31, 2017; unpub.)] (Wolters Kluwer Law & Business)
Undisputed Evidence of COBRA Notice Procedures Defeats Claim of Non-Receipt
"The employer (in its role as health plan administrator) maintained that an election notice was timely sent, producing evidence that the employee was coded into the employer's database as 'COBRA-eligible,' that this information was transferred to the employer's [TPA], and that a notice was generated and printed within the required time period. In addition, the employer provided evidence of the TPA's mailing procedures, a copy of the employee's notice, and a report from the TPA showing the date on which the notice was mailed. Finally, the employer demonstrated that other recipients of notices mailed on the same day were able to successfully elect coverage and had not reported missing notices." [DeBene v. Baycare Health System, Inc., No. 16-12679 (11th Cir. May 31, 2017)] (Thomson Reuters / EBIA)
Court Finds No Obligation to Provide COBRA Notice in Language Other Than English
"The 68-year-old employee -- who spoke Spanish as his native language -- objected that the notice was written in English ... The court dismissed [this] claim, explaining that, at 68 years old and with English as a second language, the employee was not an average plan participant within the meaning of the COBRA regulations.... In contrast, language assistance or translation services are required for certain other benefits-related documents." [Valdivieso v. Cushman & Wakefield, Inc., No. 17-118 (M.D. Fla. Mar. 16, 2017)] (Thomson Reuters / EBIA)
[Guidance Overview] COBRA and Second Qualifying Events
"If the initial qualifying event that triggers an individual's COBRA rights is terminating employment or reducing hours of employment, subsequent qualifying events may result in an extension of the maximum COBRA coverage period for certain qualified beneficiaries.... Note that a covered employee is not a qualified beneficiary with respect to any 36-month qualifying event. Therefore, the expanded period that applies in connection with a second qualifying event will not apply to a covered employee but only to the spouse or a dependent child of a covered employee." (Willis Towers Watson)
Duration of COBRA Election Period When Beneficiary Is Incapacitated
"[C]ase law shows that when a qualified beneficiary is incapacitated... 'equitable tolling' ... allows COBRA timeframes to be 'tolled,' or held in abeyance, until a legal representative is appointed to act for the qualified beneficiary. Generally, this doctrine can apply to both the election and premium payment periods." (HRDailyAdvisor)
Including COBRA Coverage in a Severance Package May Be Too Much of a Good Thing
"[A]lthough losing a job IS a qualifying event, losing a COBRA subsidy from your former employer IS NOT. Therefore, by paying the individual's COBRA for a month or two the employer may actually be hurting the terminated employee, as the following month when the COBRA subsidy from the severance is no longer being paid he/she will no longer be able to purchase coverage through the exchange." (Frenkel Benefits)
Over 30 Years Later, COBRA Still Has Fangs
"Some plan administrators and fiduciaries may presume that COBRA notices and other documents are compliant because a reputable source provided them or the documents have not caused any issues for years. However, the threat of class action litigation over misleading and inaccurate plan documents and communications serves as a reminder -- it is important to review routine plan documents." (Michael Best & Friedrich LLP)
Why COBRA Might Be Making a Comeback
"[W]e're facing a landscape where the complexity of COBRA remains a part of every employer's benefits program while the ACA gets a makeover from the Republican White House.... Most likely, it just means that the majority of employers will continue to outsource COBRA administration. It also could mean eligible employees go back to just having COBRA as their only choice for 'transitional' coverage. But even if the option remains to enroll in Obamacare plans, COBRA could still win as the most attractive option for employees who qualify." (Benefitfocus)
Employers Should Beware of the COBRA Bite
"[R]ecent lawsuits for COBRA administrative failures have resulted in court-approved settlements of up to $1 million. Periodic self-audits and consistent documentation efforts will help your company avoid costly COBRA mistakes. The foundation for successful COBRA administration lies in the proper distribution of the Initial COBRA notice, or 'General Notice', which informs health plan participants of their COBRA rights and responsibilities." (Marsh Consulting Group)
The American Health Care Act: Key Takeaways for Employers and Plan Sponsors
"Individuals enrolled in group health plans would not eligible for the tax credit, unless they are enrolled in COBRA coverage that is not subsidized by the employer. Importantly, in order to receive the credit, the coverage (whether individual market or COBRA) cannot cover services related to abortion (subject to certain exceptions). This arrangement would likely create administrative headaches for plan sponsors and COBRA administrators. The new tax credit scheme appears to require monthly reporting by eligible coverage providers, so COBRA administrators would have to develop procedures to comply with this requirement." (Proskauer's ERISA Practice Center)
How COBRA Intersects with Medicare and Retiree Health Plans
"If an employer offers retiree health coverage that is a non-COBRA alternative to COBRA coverage for eligible retirees, then the retirees are still considered 'covered employees' for COBRA purposes." (HR Daily Advisor)
Avoiding COBRA's Bite: Measures to Counter COBRA Class Actions
"Wal-Mart is just one of several companies that have faced putative class action complaints as a result of allegedly inadequate COBRA notices.... Among the allegations listed was that the required information was 'piecemealed' throughout Wal-Mart's notice, and the notice did not provide contact information for the plan administrator; the notice did not explain that a covered employee's spouse may elect continuation coverage on behalf of all other qualified beneficiaries; and the notice did not explain how electing continuation coverage would affect the qualified beneficiaries' future group health coverage rights." (Perkins Coie LLP)
COBRA Administration: Back to Basics
"Over the past two years, courts have approved settlements for COBRA violations that range from $290,000 to $1 million.... Much of the recent COBRA litigation pertains to whether qualified beneficiaries have been given the initial COBRA notice (sometimes referred to as the General Notice) and/or the COBRA Election Notice in a timely manner, or whether the contents of these notices were adequate." (Morgan Lewis)
New Broker Rules Might Help Employers
"In recent years, many employers sought to control costs by turning to companies that promote individual medical plans to certain employees, like... Those eligible for COBRA [or] Part-time workers not eligible for the employer's group plan.... Now, new regulations bar insurers from discouraging sicker people from enrolling through the practice of altering broker commissions for mid-year enrollments." (bswift)
How COBRA Intersects with Medicare and Retiree Health Plans
"If an employer offers retiree health coverage that is a non-COBRA alternative to COBRA coverage for eligible retirees, then the retirees are still considered 'covered employees' for COBRA purposes. Furthermore, the Medicare statutory rules allow employer-sponsored group health plans to reduce or terminate coverage if retired employees become entitled to Medicare. Thus, if a covered retiree becomes entitled to Medicare, and that entitlement would cause a loss of coverage for his or her spouse and dependents under the terms of the employer's retiree coverage, then a qualifying event has occurred." (HR Daily Advisor)
Non-Compliant COBRA Election Notices May Be Costly
"Earlier this year, an employer was sued in a class action ... for violating the notice provisions ... with respect to its COBRA election notice.... After failing to convince the court that the case should be dismissed, the employer agreed to establish a settlement fund for the affected employees and to correct the alleged deficiencies in its COBRA election notice. Since then, two similar lawsuits have been filed in Florida courts by employees who claim that the election notices provided by their respective employers were deficient and non-compliant with COBRA." (Benefits Bryan Cave)
Can Employer Recover Health Coverage Costs If Employee Doesn't Return from FMLA Leave?
"[T]he employer can try to recoup its cost of group health plan coverage for the unpaid portion, if any, of the FMLA leave period. For this purpose, 'returning' means returning to work for at least 30 calendar days, For self-insured plans, this amount is limited to the employer's share of allowable COBRA premiums, not including the 2-percent administrative fee.... The employer's responsibility to provide health coverage (and, for self-insured plans, to pay claims incurred) during the period of FMLA leave does not change." (Wolters Kluwer Law & Business)
Did You Consider the COBRA Implications of Your Severance Arrangement?
"[T]wo examples ... will help illustrate the risk: [1] Under the employer's severance program, covered employees are entitled to six months of company-paid health premiums.... [2] Employer enters into a severance agreement with an employee, which provides for three months of paid 'garden' leave, after which employment is terminated. The agreement provides that during the leave period, the company will pay the health premiums. In both cases, the terms of the arrangement do not address COBRA. This leaves open the question of whether the applicable COBRA period begins at severance/leave commencement, or after." (Thompson Coburn)
IRS Letter Affirms Notice Obligation of Qualified Beneficiary Seeking Disability Extension
"A plan that does not establish and communicate reasonable notice procedures faces an indefinite notice period and risks being bound by oral or informal notices from covered employees and qualified beneficiaries, even if notice is given to individuals within the employer's or insurer's organization who do not ordinarily handle COBRA matters for the plan." (Thomson Reuters / EBIA)
Warning for Employment, Severance, and Change in Control Agreements and Plans
"Employers that pay for all or a part of a terminated employee's COBRA coverage should consider providing notice to terminating employees that electing to receive subsidized COBRA coverage could affect their ability to elect coverage under the public health exchange or 'Marketplace' established under the [ACA]." (Winston & Strawn LLP)
[Guidance Overview] Can We Allow Laid-Off Employees to Spend Down Their Health FSAs Without Electing COBRA?
"No. Under the cafeteria plan rules, health FSA participants can only be reimbursed for eligible medical expenses incurred while their health FSA coverage is in effect, and coverage stops when the participant stops making contributions. Furthermore, any amounts remaining when coverage stops are subject to the 'use-or-lose' rule, which generally requires forfeiture of health FSA contributions not used to reimburse expenses incurred during the coverage period." (Thomson Reuters / EBIA)
[Guidance Overview] DOL Permits Additional ACA Marketplace Information as Part of COBRA Election Notice (PDF)
"DOL clarified in an FAQ that plans may provide their qualified beneficiaries with more information on ACA marketplace coverage than the current COBRA model election notice contains. This information could explain how to get help with marketplace enrollment, the availability of financial assistance, and/or any other aspect of marketplace coverage that could help qualified beneficiaries choose between COBRA and marketplace alternatives." (Xerox HR Services)
Is Healthcare FSA COBRA Continuation Really Required?
"[T]here are specific circumstances where employers may either have the option to limit the timeframe for coverage, or may even not be required to offer the option at all. For example, if the employee has 'overspent' their FSA account by the time the qualifying event has occurred (in this case, termination of employment), the employer is not required to continue coverage in the Healthcare FSA account." (Frenkel Benefits)
[Guidance Overview] Health Insurance Marketplace Information Can Be Included in COBRA Notices
"[S]hould employers or their COBRA administrators opt to amend their COBRA notice election forms to include additional information about ACA Marketplace coverage options, they need to ensure the amended election notice meets all COBRA requirements, and is easily understood by the average plan participant." (Lockton)
[Official Guidance] Text of Agency FAQs on ACA Implementation, Set 32: Notice of Coverage Options -- COBRA and Health Insurance Marketplace Coverage (PDF)
"[P]lan administrators may include with the COBRA election notice other information about the Marketplaces, such as: how to obtain assistance with enrollment ... the availability of financial assistance, information about Marketplace websites ... general information regarding particular products offered in the Marketplaces, and other information that may help qualified beneficiaries choose between COBRA and other coverage options.... COBRA election notices may be tailored to particular groups like young adults aging out of dependent coverage on their parents' health plan. In all cases, they are required to be 'easily understood by the average plan participant' and, therefore, information should not be too lengthy or difficult to understand." (U.S. Department of Health and Human Services [HHS]; U.S. Department of Labor [DOL] and U.S. Treasury Department)
When Might a TPA Be Liable for COBRA Penalties?
"Generally, a third-party administrator (TPA) will not be directly liable for statutory COBRA penalties unless the TPA is designated by a plan as its plan administrator. But, depending on the circumstances, [a TPA] might have excise tax, contractual, or other liability." (Thomson Reuters / EBIA)
Bad COBRA Notices Can Cost You
"The plaintiffs who brought the lawsuit claimed that the COBRA notice was materially deficient in that it failed to provide the name and address of the party responsible under the plan for COBRA administration and that it failed to provide an adequate explanation of the plan's procedures for electing COBRA. Instead, the notice directed plan participants to a general human resources website and phone number.... In addition to making the changes to the COBRA notice, Sun Trust has agreed to fund a settlement fund of $290,000 which will be used to compensate class members and to pay attorneys' fees, expenses and special awards to the class representatives." (Stinson Leonard Street)
Former Employee Challenges Provision of COBRA Notice to Wrong Address
"The employee had submitted a change of address form shortly after his termination and alleged that he had also notified the employer of the new address four years earlier. As evidence, he provided earlier mailings from the health insurance company and a W-4 withholding certificate showing his updated address. Regardless, the employer instructed the TPA to send the COBRA election notice to the employee's previous address.... The court [stated] that an employer does not act in good faith if it sends the notice to an address at which it knows the employee no longer lives." [Newton v. Prator, No. 14-3116 (W.D. La. Feb. 18, 2016)] (Thomson Reuters / EBIA)
[Official Guidance] Text of IRS Q&As: Information Reporting by Employers on Form 1094-C and Form 1095-C -- Revision Underway
"17. How should an ALE member complete Part II of Form 1095-C for an ongoing employee who receives an offer of COBRA continuation coverage due to a reduction in hours? The answer to this question is currently being revised. Please check back later for the updated response." (Internal Revenue Service [IRS])
Court Allows Employer to Sue Former HR Director for Fiduciary Breach in Failing to Disclose DOL Investigation
"An HR director who contended that she was discriminated and retaliated against when she was fired from her job will be unable to proceed with her claims after summary judgment, a federal district court in Texas ruled, although her employer's counterclaim for breach of fiduciary duty will proceed. The HR director was fired while she was on medical leave, for allegedly failing to send out COBRA notices, which led to a [DOL] investigation." [Clarke-Smith v. Business Partners In Healthcare, LLC, No. 3:14-CV-2732-M (N.D. Tex. Jan. 22, 2016)] (Wolters Kluwer Law & Business)
[Guidance Overview] Coding COBRA Coverage on the Form 1095-C: Confusion and Contradictions
"The coding of the Form 1095-C for COBRA rights is extremely complicated. Several oddities exist and an employer is left with too many coding combinations for the various COBRA scenarios. Perhaps the best solution would be a line 14 code specifically for COBRA rights and leaving line 16 blank." (Health Care Attorneys P.C.)
Health Insurer Says Data Drives Missing, Contain Client Information
"Health insurer Centene Corp said on Monday it is missing six hard drives containing the personal and health information of about 950,000 people. The hard drives do not include any financial or payment details of customers, the company said. It said it was conducting an internal search for the hard drives and believed the information has not been used inappropriately." (Reuters)
Don't Miss Insider Threats to Wellness Program Information
"[A recent survey] of more than 1,100 organizations ... showed internal actors were responsible for 43 percent of information loss.... There are two types of insider threats: [1] The disgruntled employee who tries to do something with company data to harm the company and [2] The employee who inadvertently does something with data that comes back to harm the company.... Or, it can be when employees/contractors use their personal devices for work, regardless of policy." (HealthFitness)
[Guidance Overview] Health FSAs and COBRA Continuation
"[Notice 2015-87] states that the carryover amount must be included in determining the amount of the benefit that a qualified beneficiary is entitled to receive.... The Notice clarifies that this does not include any unused carry-over amounts carried over from the previous plan year.... [H]ealth FSAs must allow carryovers by similarly situated COBRA beneficiaries, on the same basis as non-COBRA beneficiaries. However, the FSA is not required to allow a COBRA beneficiary to elect additional salary reduction amounts for the carryover period, or to have access to any employer contributions to the health FSA made during the carryover period." (Compliance Dashboard)
Repeat Violators of Health Privacy Laws Often Go Unpunished
"CVS is among hundreds of health providers nationwide that repeatedly violated the federal patient privacy law known as HIPAA between 2011 and 2014 ... Other well-known repeat offenders include the U.S. Department of Veterans Affairs, Walgreens, Kaiser Permanente and Wal-Mart. And yet, the agency tasked with enforcing the Health Insurance Portability and Accountability Act took no punitive action against these providers[.]" (National Public Radio)
Antidote Needed for the COBRA Trap
"For working seniors with employer-sponsored plans, it may make sense to delay enrollment in Parts B and D to avoid paying premiums for coverage they don't yet need.... Medicare allows seniors to delay enrollment without penalty if they have coverage through work. But once they retire and coverage ends, they have an eight-month window ... to enroll in Medicare Parts B and D without incurring fines. If they miss that window, they could face late enrollment penalties of up to 10 percent for every year late -- and have to pay higher premiums for the rest of their lives. They could even have to go without insurance while they wait for the next sign-up period." (Morning Consult)
[Official Guidance] Text of Agency Final Rules For Grandfathered Plans, Preexisting Condition Exclusions, Lifetime and Annual Limits, Rescissions, Dependent Coverage, Appeals, and Patient Protections Under the ACA
379 pages. "This document contains final regulations regarding grandfathered health plans, preexisting condition exclusions, lifetime and annual dollar limits on benefits, rescissions, coverage of dependent children to age 26, internal claims and appeal and external review processes, and patient protections under the Affordable Care Act. It finalizes changes to the proposed and interim final rules based on comments and incorporates subregulatory guidance issued since publication of the proposed and interim final rules....

"[T]hese final regulations clarify that, to maintain status as a grandfathered health plan, a group health plan, or health insurance coverage, must include a statement that the plan or health insurance coverage believes it is a grandfathered health plan in any summary of benefits provided under the plan. It must also provide contact information for questions and complaints. These final regulations also retain the model disclosure language.... These final regulations continue to provide that the elimination of all or substantially all benefits to diagnose or treat a particular condition will cause a group health plan or health insurance coverage to relinquish its grandfathered status and contain an example ... [T]hese final regulations provide that an insured group health plan that is a grandfathered health plan will not relinquish its grandfather status immediately based on a change in the employer contribution rate if, upon renewal, an issuer requires a plan sponsor to make a representation regarding its contribution rate for the plan year covered by the renewal, as well as its contribution rate on March 23, 2010 (if the issuer does not already have it).... [T]he final regulations retain the rules regarding loss of grandfathered status based on imposition of annual dollar limits to allow issuers of grandfathered individual health insurance coverage to analyze grandfathered status.... These final regulations adopt the clarification outlined in the FAQs that a plan or coverage will cease to be a grandfathered health plan when an amendment to plan terms that exceeds the thresholds described in paragraph (g)(1) of these final regulations becomes effective -- regardless of when the amendment is adopted. Once grandfather status is lost there is no opportunity to cure the loss of grandfather status....

"After issuance of regulations in 2010, the Departments also released Affordable Care Act Implementation FAQs Part V, Q6 32 to provide additional clarification on the prohibition of preexisting condition exclusions. These final regulations finalize the 2010 interim final regulations without substantial change and incorporate the clarifications issued to date in subregulatory guidance ...

"With respect to annual dollar limits, ... these final regulations adopt the 2010 interim final regulations without substantial change and incorporate certain pertinent clarifications issued thus far in subregulatory guidance ...

"The Departments clarify that the regulatory exception to the prohibition on rescission for failure to timely pay required premiums or contributions toward the cost of coverage also includes failure to timely pay required premiums towards the cost of COBRA continuation coverage. Accordingly, if a group health plan requires the payment of a COBRA premium to continue coverage after a qualifying event and that premium is not paid by the applicable deadline, the prohibition on rescission is not violated if the plan retroactively terminates coverage due to a failure to elect and pay for COBRA continuation coverage ...

"These final regulations provide that, to the extent such restrictions are applicable to dependent children up to age 26, eligibility restrictions under a plan or coverage that require individuals to work, live or reside in a service area violate PHS Act section 2714.... These final regulations also codify some of the enforcement safe harbors, transition relief, and clarifications set forth through subregulatory guidance."

(Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]; U.S. Department of Health and Human Services [HHS]; and Internal Revenue Service [IRS])
[Guidance Overview] ACA Reporting Requirements for Carriers and Employers (Part 15 of 24): Coding Form 1095-C, Part II for Offers of COBRA Coverage
"[T]he recently issued final 2015 Instructions for Forms 1094-C and 1095-C changed certain of the rules relating to the reporting for offers of COBRA coverage where the COBRA qualifying event occurs in the reporting year. This post explains these changes in detail and also covers the reporting of COBRA in years subsequent to the year in which the qualifying event occurs." (Mintz Levin)
[Guidance Overview] From EBSA: An Employee's Guide to Health Benefits Under COBRA (PDF)
"This [article] explains your rights under COBRA to a temporary extension of employer-provided group health coverage, called COBRA continuation coverage. This [page] will: [1] Provide a general explanation of your COBRA rights and responsibilities; [2] Outline the COBRA rules that group health plans must follow; [3] Highlight your rights to benefits while you are receiving COBRA continuation coverage." [Updated Sept. 2015] (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
[Guidance Overview] New Law Restores the Health Coverage Tax Credit But Effect of COBRA Unclear (PDF)
"Under the previous version of HCTC, individuals who had dropped or not elected continued health coverage under [COBRA] would, under limited circumstances, have a 60-day special enrollment right triggered by becoming eligible for [Trade Adjustment Assistance (TAA)]. The [DOL] has not yet issued guidance as to the application of COBRA to the new extension of HCTC. Moreover, the DOL has not yet provided guidance on whether COBRA notices should include information about the HCTC extension." (Segal Consulting)
The ACA Is (Apparently) Here to Stay: What Employers Need to Know
"Once you have decided how you will determine the full-time status of employees, and once you've written down those rules, you can tackle an issue that employers face nearly every day: how to treat employees during leaves of absence. In the past, employers subject to the Family and Medical Leave Act (FMLA) would offer COBRA to employees who need additional time off upon the expiration of their protected FMLA leave. For employers not subject to FMLA, employees on approved leaves of absence would often be offered COBRA at the beginning of their leave. That option is no longer available for employers who use the lookback measurement and stability period method to calculate eligibility." (Fisher & Phillips LLP)
Health Coverage Tax Credit Adds One More Consideration for Employers
"[T]he Health Coverage Tax Credit (HCTC) ... [had] expired at the end of 2013 and even though prior to its expiration it was not widely used, the reinstatement is one more consideration for employers to tackle in what seems to be an unending list. The legislation pays 72.5% of healthcare premiums for eligible beneficiaries -- employees who have lost jobs due to foreign competition or worked for companies whose pension plans failed. This applies to COBRA which means that employers should begin to think about adding language about the HCTC into COBRA notices." (Frenkel Benefits)
Employer Ordered to Reimburse Employee for Medical Expenses Incurred During FMLA Leave
"Failing to recognize a request for time off as a request for FMLA leave can result in what this court called a 'constellation of federal violations.' Employers and plan administrators frequently have questions about their COBRA obligations with respect to employees who take FMLA leave, but their first hurdle is simply to identify the leave as subject to the FMLA -- and not, for instance, a layoff." [Hosler v. Jay Fulkroad and Sons, No. 1:13-CV-1153 (M.D. Pa. June 23, 2015)] (Thomson Reuters / EBIA)
[Guidance Overview] Employers: Are You Ready to Report Offers of Health Insurance?
"[A]pplicable large employers should be thinking about ... If the employer contributes to a multiemployer plan on behalf of some or all of its employees, has it coordinated reporting and information exchanges with the multiemployer plan administrator? ... How does an employer ensure compliance with COBRA when it is using the look back method to determine full-time employee status?... Does the employer have an administrative process in place to ensure that it promptly responds to exchange notices indicating that employees have claimed eligibility for exchange subsidies?... Employers sponsoring self-insured plans generally have to transmit to the IRS the Social Security numbers of spouses and dependents of employees covered under the plan. Is the employer able to comply with this requirement?" (Jackson Lewis P.C.)
Federal District Court Calls Out Insufficient COBRA Election Packet
"The court found that the actions taken by the employer's personnel to prepare and mail the notice were sufficient to meet COBRA's notice delivery requirements but determined that the content of the notice was deficient. The court observed that the employer's notice completely omitted 9 of 14 required categories of information. The court also pointed out that the notice directed the employee to follow the instructions on the next page to complete the enclosed election form, but the instruction page was not actually included." [Griffin v. Neptune Tech. Grp., No. 2:14cv16-MHT (M.D. Ala. 2015)] (Thomson Reuters / EBIA)
COBRA Considerations When Medicare-Eligible
"With rare exceptions, COBRA coverage is secondary to Medicare Parts A and B. That means that Medicare Parts A and B cover 80% of costs, leaving 20% for COBRA.... [W]hen Medicare-eligible individuals do not have Medicare Parts A or B, they are left to pay 80% of their costs out of their own pocket." (Investment News)
Recent Federal Court Rulings on COBRA Notification Requirements
Article provides a summary of four recent federal court decisions addressing: [1] whether a reduction in hours worked was a qualifying event entitling a participant to COBRA coverage [Green v. Baltimore City Board of School Commissioners (D. Md.) vacated on other grounds]; [2] whether a same-sex spouse had standing to assert a claim even though he was never a beneficiary under his spouse's group health plan [Sacchi v. Luciani (D.N.J.)]; [3] whether COBRA penalties for failure to provide the COBRA notice should be imposed on the plan sponsor where the participant mistakenly received free coverage [Cole v. Trinity Health Corp. (8th Cir.)]; and [4] a COBRA class action settlement with a record settlement of $1 million for failing to provide COBRA notices [Slipchenko v. Brunel Energy (S.D. Tex.)]. (Weil Gotshal & Manges LLP)
No Liability for Late COBRA Election Notice Accompanied by Request for Lump Sum Premium for Retroactive Coverage
"Although this employer escaped liability, plan administrators should carefully consider the amount and timing of the initial COBRA premium payment, especially when providing a late election notice. It may not be wise to demand -- as a condition of providing COBRA coverage -- that the qualified beneficiary pay several months of premiums in one lump sum. While some courts have upheld charging a lump sum for retroactive COBRA premiums, at least one reported case suggests that an employer might be required to provide full retroactive COBRA coverage while the qualified beneficiary pays monthly installments going forward." (Thomson Reuters / EBIA)
Federal District Court Rules Premium Increase Is Loss of Coverage for COBRA Purposes
"The case was brought by two employees who were suspended without pay and subsequently terminated. For both, coverage under their employer's health plan automatically continued during their suspensions -- a fact they first became aware of months later, upon receiving invoices for the full accumulated premium amount (both employer and employee contributions).... While acknowledging the employer's correct assertion that a reduction in hours alone is not sufficient to trigger a COBRA notice obligation, the court explained that the employer too narrowly construed 'loss of coverage' as a loss of eligibility." [Green v. Baltimore City Board of School Comm'rs, No. WMN-14-3132 (D. Md. Jan. 22, 2015)] (Thomson Reuters / EBIA)
COBRA Compliance Failures Cost Employers Millions (PDF)
"Historically, courts have been hesitant to certify COBRA claims for treatment on a class action basis because proving a COBRA notice violation can involve individual, fact-specific issues. Plaintiffs have successfully established class certification in recent years, however, in lawsuits concerning systematic failures to comply with COBRA notice requirements.... Outsourcing COBRA administration to a TPA does not relieve the plan administrator of liability for COBRA-related errors. The plan administrator must monitor the TPA's systems and performance to ensure COBRA compliance." (Buck Consultants at Xerox)
Eighth Circuit Affirms Denial of Statutory Penalties for Failure to Timely Provide COBRA Election Notice
"Leaves of absence often present COBRA compliance challenges, and when disability benefits are included in the mix, confusion can result. This employer's difficulties likely started with its continuation of medical plan coverage pending the outcome of the employee's LTD benefit application. Employers wishing to extend coverage in such situations should have procedures in place to ensure that COBRA obligations are not overlooked." [Cole v. Trinity Health Corp., No. 14-1408 (8th Cir. Dec. 15, 2014)] (Thomson Reuters / EBIA)
Court Approves $1 Million Settlement in COBRA Class Action
"The employer in this case was in the staffing business -- it leased workers out to client companies for short-term assignments, after which employment and health plan participation generally terminated. One wonders if the nature of the business may have contributed to the employer's misunderstanding or neglect of its COBRA notice obligations." [Slipchenko v. Brunel Energy, Inc., No. H-11-1465 (S.D. Tex. Jan. 23, 2015)] (Thomson Reuters / EBIA)
Federal District Court Signs Off on $1 Million COBRA Class Action Settlement
"The settlement resolves a class action lawsuit alleging that an employer/plan administrator violated COBRA's notice and premium subsidy rules by failing to distribute on a timely basis initial COBRA notices, COBRA election notices and notices related to the subsidies. The settlement consists of a $375,000 payout to nearly 70 class members (who on average will receive more than $5,000), a $12,000 'service award' to the class representatives as well as a separate payout of nearly $625,000 for attorney's fees and other costs." [Slipchenko v. Brunel Energy, Inc., No. 11-1465 (S.D. Tex. Jan. 23, 2015)] (HR Daily Advisor)
Employer Violated COBRA When Hours Reduction Hiked Premiums
"The fact that the reduction in hours resulted in an increase in their premiums constituted a 'loss of coverage' for COBRA purposes. Also, the employer's disclosures were inadequate in explaining this outcome. This resulted in both a COBRA notice failure and a breach of fiduciary duty under ERISA.... Here, the two individuals had to pay 100 percent of premiums once they were suspended -- prior to that, they only paid 5 percent and 18.5 percent of the premium, respectively. This increase of premiums was a loss of coverage for COBRA purposes that was a direct result of their reduction in hours, the court found." (HR Daily Advisor)
Eighth Circuit: No Statutory Damages for Employer's Failure to Provide Notification of COBRA Entitlement
"The district court had reasoned that Cole was not entitled to actual damages because the amount of her unreimbursed medical bills from May 2012 was less than the COBRA premiums she would have had to pay to maintain medical insurance. The district court also reasoned that Cole was not entitled to statutory penalties because 'Trinity Health acted in good faith,' '[Cole was] not harmed or prejudiced by Trinity Health's tardy notice of ...COBRA rights,' and '[Cole was] provided continued medical coverage for approximately eleven months after [her] termination.' " [Cole v. Trinity Health Corp., No. 14-1408 (8th Cir. Dec. 15, 2014)] (Cary Kane ERISA Lawyer Blog)

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