10 Oct COBRA STRIKES EMPLOYER UNAWARE

Most employers recognize that under the Comprehensive Omnibus Budget Reconciliation Act of 1986 (COBRA) employees must be informed they have the right to maintain healthcare coverage after experiencing a “qualifying event.”  A “qualifying event” generally occurs when an employee is laid off or terminated from employment and thus experiences a “loss in coverage.”  However, as one employer learned the hard way, a “qualifying event” can occur in other unexpected ways.

In Green v. Balt. City Bd. of Sch. Comm., Dist. Md., 2015 U.S. Dist. LEXIS 32523, two employees were placed on unpaid leave pending investigation until a final determination was made as to their employment status.  The employees’ working hours were adjusted to zero, but both employees remained eligible to participate in the employer’s healthcare plan and were automatically enrolled into the plan.  However, the employer stopped paying any share of the employees’ healthcare premiums.

During the pendency of the leave, both employees effectively resigned their employment.  Because the employees’ employment was formally terminated, they became ineligible for coverage.  At the time the employees were removed from coverage, the healthcare plan discovered their premiums had not been paid during the ensuing months.  Therefore, both employees received bills for the total cost of the unpaid premiums.  

The employees sued the employer under COBRA.  The employer argued that a reduction in hours was not a “qualifying event” requiring COBRA notice.  The employees argued they experienced a “loss in coverage” when their hours were reduced to zero because they became responsible for the entire healthcare premium.

The court sided with the employees and reasoned that a “loss in coverage” occurs when an employee ceases “to be covered under the same terms and conditions as in effect immediately before the qualifying event.”  Since the reduction in hours caused the employees to suffer increased premium costs, the court found the reduced hours constituted a “qualifying event” that required COBRA notice.  As a result, the court held that all bills received by the employees were null and void.

Employers who fail to ensure appropriate COBRA notices are provided to employees can be subjected to significant monetary penalty for premiums and healthcare costs.  Therefore, employers are strongly cautioned to seek out legal advice any time an employee’s access to healthcare benefits is altered.

If you have any questions about COBRA or any other labor and employment related matter, please contact Masud Labor Law Group.