COBRA “Loss of Coverage” Trigger is Broad
A recent case from the Southern District of Ohio, Morehouse v. Steak N Shake, emphasizes the importance of identifying a COBRA qualifying event. In this case, an employee took FMLA leave and began receiving workers’ compensation benefits after a workplace injury. While she was working, her health insurance contributions were automatically deducted via biweekly payroll deductions; after her injury, she continued to be covered by the plan and her premiums were deducted from her workers’ compensation benefits. The employee was terminated after her FMLA period expired and her insurance was cancelled. She was never provided with COBRA notice and eventually sued the employer for coverage of medical claims incurred after her termination.
In order for an employer to be required to continue health coverage under COBRA, there must be a qualifying event that leads to the loss of coverage. Determining what constitutes a “loss of coverage” may not be as straightforward as it sounds. Under Treasury regulations and court cases, a loss of coverage can be any changes to the terms and conditions of coverage in effect prior to the qualifying event.
The employer argued that no qualifying event had occurred. The court disagreed, however, and held that the employee’s reduction in hours while she was on FMLA leave (a COBRA qualifying event) lead to the change in her method of paying premiums (a change to the terms and conditions of coverage, which the court considered a loss of coverage), which then triggered COBRA requirements. Because the employer did not provide the appropriate COBRA notice or offer the appropriate COBRA coverage, the court awarded the employee the cost of her medical claims incurred after her coverage ended, along with attorney’s fees.