Most employers know they must send a COBRA notice to terminated workers no longer covered by the company health plan. COBRA stands for the Consolidated Omnibus Budget Reconciliation Act of 1985, which governs continuation health insurance coverage.
COBRA letters tell former employees they can continue their health insurance coverage for 18 months if they begin paying the entire premium, plus a small service fee.
But what happens if the employee hasn’t been fired, but instead has been placed on an unpaid suspension pending possible discharge?
Continuing health insurance coverage and not sending the COBRA notice may violate the law if you shift the full premium payment to the employee. It then becomes a case of no good deed going unpunished.
Recent case: Two Baltimore City Board of School Commissioners employees were suspended without pay pending an investigation. Their hours were zeroed out in, but they remained listed as employees.
Relying on a COBRA regulation that states a mere reduction in hours isn’t a COBRA-triggering event, the city continued their health benefits and didn’t send a notice. Instead, it merely mentioned in the suspension letters that they should discuss their insurance options with HR.
By the time the employees were officially terminated, they had run up thousands of dollars in premium bills. One employee hadn’t realized she was even covered and skipped needed treatment, yet received the bill. The other had health benefits at a new job.
They both sued, claiming the city should have sent a COBRA notice. Then, they said, they would have either canceled coverage or undergone treatment.
The court sided with the em-ployees. It said that when they were suspended and the premiums went to 100%, they had experienced a triggering event. The city breached its fiduciary responsibilities and had to rescind the bills. (Green, et al., v. Baltimore City, No. 14-3132, DC MD, 2015)