Blog

Costly COBRA Calculation

By Lehr Middlebrooks Vreeland & Thompson, P.C.

May 23, 2019

In the recent case of Morehouse v. Steak-N -Shake, Inc., the district court for the Southern District of Ohio concluded that the company failed to comply with the notice requirements under COBRA and owed the employee the cost of the employee’s medical expenses and a $50 per day fine for each day of non-compliance from 45 days after the qualifying event to the date on which the plaintiff in that case obtained other medical insurance. Furthermore, Steak-N -Shake was ordered to pay the plaintiff’s attorney fees.

Employers can easily overlook basic COBRA requirements, which end up potentially costing employers a fair amount of money. COBRA applies to those employers with 20 or more full time employees. Employers are required to offer for a limited amount of time to employees and their dependents continuation coverage with the employer’s medical plan if there is a qualifying event.

Once a qualifying event occurs, the Election Notice is required to be sent to the employee and any qualifying dependent or beneficiary. The notice explains to the recipient the right for them to obtain continuation coverage and how to do so. Many employers outsource the notice provision of COBRA to a third party, such as a plan administrator. Note that ultimately, it is the employer’s responsibility to ensure that the notices are mailed in a timely manner.

The employer does not have to prove that the notice was received, but only that it was mailed. Regular U.S. mail is appropriate. We suggest that the employer maintain a log that shows the date, address and to whom the COBRA notice was mailed. We suggest not to use certified mail, because an individual may not be physically capable of going to the post office to pick the letter up, which is required in some regions. Where you have contracted with a vendor to provide the COBRA notice, be sure to (1) confirm how the vendor will prove that notice was sent and (2) provide that the vendor assumes the liability risk in the event the notice is not sent in a timely manner.

Tweets Follow

We are having a problem with our Twitter Feed right now.