No COBRA Where Insurance Is Cancelled
Since COBRA is a very hot topic right now, I also thought this case might be of interest.
In Laselva v. Schmidt, the District Court for the Northern District of New York affirmed that there is no qualifying event when health insurance coverage is canceled due to an employer's non-payment of premiums. An employee sued in state court alleging that his employer breached his employment agreement by terminating health coverage and that COBRA was violated because no continuation coverage was offered. The employer terminated the coverage by ceasing to pay premiums for the coverage.
The case was removed to federal court and the federal court found that the COBRA claim was merit-less, remanding the case to state court. But in doing so, the Court found that in order for COBRA to apply, the basic rule is that there has to be a "qualifying event." A loss of coverage due to the employers termination of the health coverage, or failure to pay the premiums so that the coverage is terminated, does not create a qualifying event.
While not discussed in the decision, I believe that it is worth mentioning that the new COBRA subsidy rules have a similar restriction. A former employee can only get COBRA, and can only receive the subsidy, so long as there is a plan in which to continue. So if the employer terminates the coverage, the plan and the subsidy both disappear.
