Today’s General Counsel published an article titled “Class Actions Target COBRA Election Notices” which went on to describe lawsuits related to the mass furlough and terminations across the country due to COVID-19. These class action suits are related to employer’s failure to comply with election notices under COBRA. What does this mean to employers?
In 1985, the U.S. Congress passed the Consolidated Omnibus Budget Reconciliation Act (COBRA) requiring employers with 20 or more employees that provide group health plan coverage to offer continuation of coverage. The employer must offer continuation of coverage to qualified beneficiaries who have lost coverage as a result of certain qualifying events. COBRA required employers to send “election notices” to its covered beneficiaries. These election notices are supposed to inform laid off or furloughed employees that they can continue to receive healthcare coverage, for some specified period of time.
Due to the disastrous economic effect of COVID-19, our country has experienced widespread layoffs triggering this notice requirement and subsequently, a tidal wave of employment lawsuits based on an employer’s failure to issue election notices compliant with the Department of Labor’s model notice. A number of large companies have been forced to settle in exorbitant amounts to avoid the ever-increasing costs of class action litigation.
The authors reviewed many of these lawsuits and pulled out the primary complaints, defenses, and tips which are listed as follows:
It appears the common defenses for these claims, although success of theses are yet to be determined, are as follows:
Statutory penalties are $110 per day, per employee, or $200 per day, per family, as the plan administrator if the COBRA notice is not issued properly. In addition, Court have the discretion to award medical expenses incurred by a qualified beneficiary, actual COBRA coverage, and attorney’s fees and costs.
If facing the decision to layoff or furlough employees, it is important that employers are complying with COBRA’s election notice requirements, and to have counsel assist in drafting compliant election notices. A skilled and knowledgeable attorney should be able to assist an employer in periodically reviewing COBRA election notices; evaluating proprietary and necessary information in the COBRA election notice beyond what is required by the COBRA notice requirements; timely notifying the group health plan of any qualifying events (such as termination) to ensure beneficiaries are timely notified of their COBRA rights; providing timely notices when COBRA coverage ends before the expected duration and responding to individuals seeking coverage who are not eligible for COBRA; and reviewing agreements with third-party COBRA administrators ensuring that the vendor as agreed to adequately indemnify the employer for any acts of negligence.