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COBRA or Not COBRA: That’s a Good Question

Posted in Court Cases, Plan Administration, Welfare Plans

For employers with around 20 employees, finding out whether they are subject to COBRA can be confusing.  Many states have "mini-COBRA" that are state laws that provide for a continuation of health insurance even if employers are too small to be subject to COBRA.  But as a recent case lays out, it is very important to know whether COBRA applies and what are the consequences if it does or does not.

First, to determine whether or not you are subject to COBRA, you have to decide if you have 20 or more employees.  The DOL specifies that the rule for measuring employees for COBRA is if you "employed at least 20 employees or more on more than 50% of a typical business day during a previous calendar year."  If you meet that measurement, you are subject to COBRA.  And that is important because in Hanysh v. Buckeye Extrusion Dies, Inc., the issue was one where the employer made a mistake and ended up having to pay. 

Factually, the case came from a former employee that sued his employer after his COBRA continuation coverage was retroactively terminated by the employer’s insurer.  The employee received a COBRA notice and election form and elected COBRA coverage and paid the required premiums.  For some reason, the employee filed a complaint with the DOL regarding his COBRA coverage and when the DOL investigated the complaint, the DOL determiend that the employer was not subject to COBRA.  The employer’s insurer then retroactively terminated the employee’s COBRA coverage.  The employee sued to stop the employer from denying his COBRA coverage and made a claim for his medical expenses.  He claimed he had relied on "material misrepresentations" about his COBRA eligibility.  The court ultimately found that the employer could be liable for the employee’s continuation coverage and the medical expenses because it was responsible for knowing how many people they employed and whether COBRA applied.

So notwithstanding whether or not you properly administer COBRA, step one is to figure out whether you are subject to COBRA.  Don’t assume, make the calculation.  If you are subject to COBRA, know that you are and comply.  If you are not, know whether you are subject to state mini-COBRA and comply with those rules.  And if you are not sure, ask your attorneys at Fox Rothschild for help.