Anna Bradley-Smith  |  June 10, 2021

Category: Labor & Employment

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Costco ‘Scares’ Away Employees From Accessing Health Insurance Benefits With False Threats, Class Action Lawsuit Claims
(Photo Credit: Ilze_Lucero/Shutterstock)

UPDATE:

  • Costco has reached a settlement in a COBRA class action lawsuit in which it will pay $750,000. Each class member will receive about $9.72 if the proposed deal is approved by the courts, including the maximum attorney fees and an award for the lead plaintiff, John Baja.
  • The Costco class action lawsuit alleged the wholesale giant issued COBRA enrollment notices that were difficult to read and scared former employees off with a warning about filling out paperwork incorrectly. Per the settlement, Costco denies any wrongdoing and liability. 
  • The proposed class involves about 38,818 former Costco employees who received similar COBRA notices between June 9, 2018, and June 9, 2021, and did not continue their benefits through COBRA.

(6/10/2021)

Costco gives “inaccurate and misleading threats” in its COBRA insurance notice that scare employees away from gaining the continuation coverage they are entitled to, a new class action lawsuit alleges.

The nationwide class action lawsuit was filed in Fort Lauderdale on June 9 by lead Plaintiff John Baja, who says that Costco’s COBRA notice confused him with misleading language, and resulted in him losing medical, dental, and vision insurance he was entitled to.

“Plaintiff suffered an additional concrete harm in the form of stress and anxiety caused by the loss of his health insurance.”

According to the class action lawsuit, Costco has repeatedly violated ERISA by failing to provide participants and beneficiaries in its insurance plan with adequate notice, as prescribed by COBRA, of their right to continue their health insurance coverage following an occurrence of a “qualifying event” – such as termination of employment.

The purpose of COBRA is to help individuals in electing continuation coverage should they so choose, not discourage them from doing so as Costco does, the claim states.

Baja worked at Costo for 11 years, during which time he got medical insurance for himself and his wife, before he was abruptly fired when he asked to be excused from lifting heavy things due to his ongoing heart condition, the claim states.

Because Baja was not terminated for gross misconduct, he was eligible for continuation coverage and was sent “the deficient COBRA notice” by Costco’s insurance administrator, the class action lawsuit says.

“The COBRA notice was not written in a manner calculated to be understood by the average plan participant,” the claim states, adding that it did not provide Baja with the “substantive information he was entitled pursuant to federal law.”

“The loss by Plaintiff of his medical, dental, and vision coverage are directly attributable to the ‘warning’ language needlessly included in Defendant’s COBRA notice because their inclusion led to Plaintiff not enrolling in COBRA continuation coverage,” the claim states.”

According to the claim, Baja incurred medical-related bills for which he had to pay out of pocket due to not understanding Costco’s COBRA notice, and at least one of those medical bills was sent to collections where it remains today.

Baja says in the class action lawsuit that Costco’s COBRA notice “attempts to scare individuals away from electing COBRA.”

“It does so by including an ominous warning suggesting that the submission of even ‘incomplete’ information when electing COBRA may result in civil, or even criminal, penalties,” the claim states, adding the notice also “needlessly” references a $50 penalty from the IRS.

The claim says that the information is included without context, “much less with an explanation of why potential criminal penalties, or IRS penalties, are somehow relevant to the COBRA election process.”

“Adding such information discourages people from electing continuation coverage and distorts the information provided in the notice while also discouraging people, including Plaintiff here, from electing COBRA,” the class action lawsuit states.

Baja wants to represent anyone in Costco’s health plan who was sent one of the company’s COBRA notice. He is suing for violations of the Employee Retirement Income Security Act of 1974, and seeks certification of the Class, order of enjoinment, damages, legal fees, interest, and a jury trial.

In May, Costco was hit with another class action lawsuit alleging it duped consumers with its Interstate free battery replacement warranty, instead issuing a refund and then charging them for a new, more expensive unit.  

Have you ever received a COBRA notice from your employer? Was it easy for you to understand? Let us know in the comments section!

Baja is represented by Luis A. Cabassa, Esq. Brandon J. Hill, Esq. of Wenzel Fenton Cabassa, P.A.

The Costco COBRA Class Action Lawsuit is Baja v. Costco Wholesale Corporation, Case No. 0:21-cv-61210-XXXX, in the U.S. District Court for the Southern District of Florida Fort Lauderdale Division.


 

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5 thoughts onCostco ‘Scares’ Away Employees From Accessing Health Insurance Benefits With False Threats, Class Action Lawsuit Claims

  1. D. Cleve says:

    During this time (Covid) I returned back to work and someone (Unum or Costco) did not correctly get me back in our system so my hours, my time etc were not being accrued. I brought it to management many times. As a result I lost my Insurance. From Nov-may? They said I could get a 1 time favor and pay all the back Cobra fees 7months! (Thousands) and they’d reinstate me this one time. Turns out, costco was providing ALL EMPLOYEES health insurance at that time due to Covid and people missing work. They dropped the 24 hr minimum average to keep it anyways I was there and working, the system thought i was on leave, my mgr called me in for a meeting cuz I had been looking so bad just sickly. By the time I got in to my dr for blood work etc due to insurance, the sheriff had showed up to my home for a wellness check from my dr to instruct me to get the hospital now. Turns out my hemoglobin was so low I was close to death. I had to get my affairs in order. I ended up having to take blood (against my religion) to live all because of Costco taking my health insurance. Management won’t discuss it all. Not sure what to do. I owe thousands too due to this.

  2. Tanya says:

    I received over 10 pages of reading to enroll in cobra. I was afraid my insurance would lapse so I called and they said to wait for the Notice. They assured me I was fine that there would be no problem—I could back bill through the insurance. I ended up lapsing in coverage. I had to pay out of pocket for medicine, my glasses, and I had to reschedule my appointments because the doctor could not “back bill.” I paid my bill on time! And they still said I had to wait an additional 2 weeks before they could process the payment, so no coverage! It’s been a nightmare on top of having my disability with no healthcare during that time.

  3. Terri says:

    I am in the process to trying to get my cobra insurance and have called and spoken to several people who said they mailed my coupons for cobra out. I’ve still not received them and I’m on the phone with them again trying to get them to mail it again. I cannot be without my medical insurance and I’m willing to pay for cobra but they aren’t sending me what I need to start the process and it’s been 60 days already. I feel like they are just dragging their feet and then it will be too late for me to file….. so I am desperate in trying to get someone to help me….. please!!!

  4. Shirley Lacey says:

    I’m at the spot were I need to sign up for cobra & yes it’s hard to understand. I spent yesterday calling for more info. Still don’t know much. Like does cobra cover the same things as Aetna. How do I go from Aetna to cobra.
    At this point I’m hoping UNUM will just make it happen.

  5. William E says:

    Yes, I have gotten cobra notices and the are very had to understand and had wrong plans

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