Question

In: Operations Management

An employee was terminated in the aftermath of a change of ownership at a company, The...

An employee was terminated in the aftermath of a change of ownership at a company, The employee’s wife had breast cancer at the time and he wanted to maintain health insurance coverage for the two of them. He asked at the office whether he would be able to continue coverage after his termination. On his last day of work, he was informed verbally that his health insurance would be continued. However, when his wife sought medical treatment about 9 months later, she was told that she had no insurance coverage. Did this employer violate COBRA? (See, McDowell v. Krawchison, 125 F.3d 954 (6th Cir. 1997)). What specific steps should employers take to administer continuation of health insurance under COBRA?

Solutions

Expert Solution

Yes, Employer violate the COBRA because Employer only verbally informed while a proper notice is mandatory like Employers are required to provide a former employee with a notice at the time of termination of employment describing the employee's rights to continue coverage and the cost of doing so. A court can impose on an employer a penalty of up to $110 a day for failure to provide that COBRA notice.

Steps An employer could take is that he is subject to COBRA requirements is required to notify its group health plan administrator within 30 days after an employee's employment is terminated, or employment hours are reduced.

COBRA administration requires four basic compliance components:

  • Notifying all eligible group health care participants of their COBRA rights.
  • Providing timely notice of COBRA eligibility, enrollment forms, duration of coverage and terms of payment after a qualifying event has occurred.
  • Collecting premiums, reinstating coverage and supplying appropriate notices if premiums are not received.
  • Providing timely notices when COBRA coverage ends before the expected duration and responding to individuals seeking coverage who are not eligible for COBRA.

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