COBRA Notice: Continued Medical Coverage Class Action Lawsuit Investigation

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What is COBRA Insurance?

COBRA insurance is continuation health coverage that prevents the individual and his or her family members from having a lapse in coverage in situations where such benefits would come to an end.

In general, COBRA coverage is applicable to all private sector health plans as well as those sponsored by state and local governments. It does not apply to those sponsored by federal agencies and religious organizations.

What are the COBRA Insurance Rules?

In order to be eligible for COBRA coverage, a qualifying event must occur that causes an individual to lose their job or group health coverage. Under COBRA, workers who are terminated or in other qualifying situations have the opportunity to extend healthcare benefits for themselves and their families temporarily while between jobs.

This may also apply to those who have recently experienced a reduction in hours or a pay cut.

Employers with 20 or more workers who sponsor group health plans over the prior 12 month period are required under COBRA coverage to offer the opportunity for this temporary extension of medical coverage to the employee and any other beneficiaries.

Employees who have health coverage through their employer are supposed to be made aware that COBRA coverage will be offered in the event they lose their coverage in what is called the COBRA general notice within 90 days of beginning the coverage.

How Long Does COBRA Last?

COBRA coverage lasts for a limited period of 18 or 36 months from the date of the qualifying event. The specific time frame is determined by the type of event that led to the need for COBRA coverage.

Typically, if the event is related to an employee’s termination or reduction in hours, the beneficiary will be eligible to receive 18 months of continued coverage. However, if the employee became entitled to Medicare benefits less than 18 months before the termination or reduction in hours then the COBRA benefits can last for 36 months after the date that the employee becomes entitled to Medicare benefits.

What are the COBRA Notice Requirements?

If an employee and other beneficiaries lose their coverage through an employer, the plan administrators have to send a COBRA election notice within 14 days if they are using an outside administrator, and if they don’t use outside administrators, they have 44 days.

A COBRA notification letter must inform the employee and all beneficiaries of all his or her rights under the plan in language that is easy to understand.

This is important because without it beneficiaries may not be able to continue their medical coverage and may incur expensive medical costs if they aren’t insured during this transition period.

A COBRA notice is required to contain a number of details including the following:

• Name of the plan that will continue
• Name, address, phone number of the plan administrators
• Identification of qualifying event
• Identification of qualified beneficiaries
• The date in which the current plan will be terminated if COBRA coverage is not enacted
• Explanation that each beneficiary has the right to decide to continue coverage
• The procedure for continuing coverage
• An explanation of what will happen if coverage is not continued
• An explanation of what the coverage will include
• When coverage will begin
• More

Are There Penalties for Failure to Provide COBRA Notices?

An employer who fails to follow COBRA notice requirements can face an excise tax penalty of $100 per day ($200 in situations that affect multiple family members), statutory penalties under ERISA of up to $110 per day, and lawsuits.

A COBRA lawsuit can help employees and other beneficiaries the ability to obtain compensation for losses they may have incurred as a result of not having medical coverage.

A number of COBRA notice lawsuits have been filed against companies for failing to comply with the requirements under federal law.

In April 2019, a federal judge in Florida ruled that Walmart must face a COBRA class action lawsuit that was filed by a woman who claims that she experienced a lapse in medical coverage because the COBRA notice sent by Walmart was missing required information.

Best Buy was hit with a COBRA class action lawsuit on Jan. 15, 2020 for similar reasons.

JPMorgan Chase reached a COBRA coverage settlement in November 2019 with a former employee who claimed that the bank had sent a deficient COBRA notice after he lost his job.