Employer’s Failure to Time Provide COBRA Election Notice Results in Retroactive Coverage and Penalties
In Buford v. General Motors, L.L.C., case number 4:16-CV-14465-TGB-MKM, the U.S. District Court of Michigan ruled that General Motors violated COBRA election notice requirements when it failed to timely provide an employee with a COBRA election notice upon his retirement. As a result, General Motors was subject to statutory penalties due to violating federal law.
Buford retired from General Motors on January 1, 2014, which should have resulted in his health insurance plan changing from employer-paid active coverage to self-paid retiree health coverage. Nonetheless, General Motors did not terminate Buford’s active coverage health insurance and continued to pay the premiums until February 28, 2014. General Motors also provided Buford with a COBRA election notice with a 60-day election period based on a February 28, 2014, termination of employment date. This notice gave Buford the option to continue coverage under COBRA or default into General Motors’ self-paid retiree health coverage plan.
In April 2014, however, Buford received notice from General Motors’ third-party administrator (TPA) that his 60-day election period had expired because his termination of employment date was January 1, 2014, not February 28, 2014. Buford unsuccessfully appealed this determination through the plan’s administrative appeals process, with the TPA ultimately advising him that he could only obtain retroactive COBRA coverage by paying all COBRA premiums owed from January 1, 2014, to the present.
Buford then filed suit against General Motors to challenge the denial of retroactive COBRA coverage and for statutory penalties. He argued that his former employer prevented him from exercising his COBRA rights by providing him with a COBRA election notice with an incorrect termination date of February 28, 2014, and then disregarding that date for COBRA coverage.
Generally, federal law requires employers to provide COBRA election notices to former employees and other qualified beneficiaries within 44 days of qualifying events occurring. Qualifying events under COBRA include:
- Termination of employment resulting in loss of coverage
- Reduction in hours
- Death of employee
- Divorce or separation from the employee
- Employee eligibility for Medicare
- Ceasing to be a dependent child under the terms of the plan
Penalties for failing to provide COBRA election notices can include payment of fines of up to $110 per day and the costs of medical expenses incurred by the qualified beneficiary who did not receive a timely election notice.
In this case, the court sided with Buford, finding that General Motors’ failure to correct his COBRA eligibility date was arbitrary and capricious. Its decision to use the January 1, 2014, date as his termination date for COBRA coverage purposes was inconsistent with the COBRA election notice and its continued payment of his health insurance premiums until February 28, 2014.
As a result, Buford could recover the medical expense that he incurred during the period for which he should have had COBRA coverage from General Motors, as long as he paid the COBRA premiums beginning March 1, 2014, to the present.
The court ruled that General Motors would incur sanctions due to its conduct in failing to provide a timely COBRA election notice to Buford. Since Buford retired on January 1, 2014, General Motors had 44 days to provide the required COBRA notice, or until February 13, 2014. General Motors did not mail the notice until 13 days after the deadline, or until February 26, 2014. Due to this 13-day delay and its failure to honor the election period stated in the notice that it provided Buford, General Motors was liable for a $1,300 penalty, or $100 per day for 13 days.