COBRA is more than just a poor exercise in anagram creation. The often-confusing law gives employees (and dependents) the right to continue buying health insurance after a so-called qualifying event, such as termination or reduction in hours.
COBRA law says you must notify your health plan administrator within 30 days if an employee incurs a qualifying event. You then have 14 days to notify the employee and his or her dependents of their COBRA rights. Those COBRA notifications must be legally sound, and court rulings sometimes tweak those duties. Here are three recent examples and the lessons learned:
1. Clearly identify the qualifying event. In the COBRA notice, you should identify exactly what the qualifying event is and what options are available to each individual involved. State that the person has 60 days to elect coverage or risk a gap in coverage.
In one case, the husband of a deceased employee sued the company and won because the COBRA notice failed to adequately explain in easy-to-understand terms what the term qualifying event meant.
2. Be specific when defining divorce. COBRA calls for employees' spouses to be notified of their COBRA rights when they become divorced or legally separated. These terms may mean different things in different states. Check with local attorneys who are well-versed in COBRA.
In a recent Oklahoma case, a married couple split and the wife obtained a protection-from-abuse order. The company viewed this as a qualifying event and sent COBRA forms to the woman. When she didn't respond, the insurance lapsed.
The woman sued, arguing that she was neither legally separated, nor divorced. The court agreed, saying a protection order isn't the same as separation or divorce.
3. Know your limits on time to respond. To prevent gaps in coverage, employees or dependents should elect COBRA within 60 days. However, recent court decisions show that they can elect to start insurance coverage at any time within the length of coverage for their particular qualifying event (18 to 36 months).
For example, a Louisiana insurer had to pay $250,000 in hospital bills because it denied coverage to an employee who applied for COBRA four months after leaving the company. The court ruled that because COBRA gives no time limit, former employees could obtain coverage any time during the COBRA coverage period.
Insurance plans may impose time limits. But if they are silent, then former employees are free to choose coverage at any time during the COBRA period.