COBRA Compliance Requires More Than Technology

It seems, these days that a computer application exists to do almost everything – including COBRA administration. Entrusting your COBRA compliance to a computer program, though, is not foolproof, as one Ohio employer recently learned in court.

Proper COBRA administration requires employers to notify Qualified Beneficiaries of their rights to continuation coverage after experiencing a Qualifying Event. These election notices should be in writing and via first-class mail to the last known address. The law clearly states that it is the employer’s responsibility to prove that the notice was sent to the Qualified Beneficiary.

When University Hospital (UH) terminated the employment of Daphne Nero, she claimed she never received the election notice. UH claimed it sent the required notice through its Oracle system. However, UH was not able to provide any evidence of a COBRA notice being sent to Nero. UH argued, that there were “good faith” procedures in place to comply with COBRA. Essentially, UH claimed that Oracle was its “good faith”. UH was not able to provide a copy of the exact notice and Nero’s employment record had blank lines next to “COBRA sent” and “send COBRA”.

UH also argued that the reason for termination – simple mistakes that could have had far-reaching consequences – amounted to gross misconduct, negating the need to offer COBRA. The court dismissed this argument, as there was no evidence that the mistakes were deliberate.

Prior to trial, UH made two extraordinary concessions. First, UH agreed to waive medical bills related to four doctor visits after Nero’s termination. Second, UH agreed to offer Nero COBRA coverage through February 2007, almost three years after the Qualifying Event (termination of employment is an 18-month Qualifying Event). In addition, the court awarded Nero statutory damages in the amount of $7,020 ($15 per day for 468 days) and attorney’s fees and costs of $2,427.70. The statutory damages could have been much higher. Current law permits courts to assess damages of up to $110 per day (potentially, $51,480).

While technology continues to take on a big role in an employer’s day-to-day tasks, you should not overlook the procedures and documentation required for a successful compliance program. At Infinisource, our commitment is to provide the power of people backing technological systems that deliver the benefit compliance services that customers expect.

###

News & Review sign-up sheet | Archive