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COBRA is the federal law that requires employees and beneficiaries to have the opportunity to continue health benefits after experiencing certain “qualifying events” that would normally cause the termination of health coverage. COBRA requires that a health plan send election notices explaining their COBRA rights to employees and beneficiaries who have experienced such a qualifying event. These notices must contain certain elements, such as the plan name, plan administrator’s contact information, identification of each beneficiary and their right to elect coverage independently, explanation of COBRA coverage and duration, and information on premiums. If the notices are not sent to a relevant participant or beneficiary, or if they are sent but are missing the required information, COBRA allows a penalty of up to $110 per person per day.
Over the past few years, class action lawsuits have been brought against employers and health plans that have failed to include the required information in the notices, and courts are often siding with participants who received deficient notices. While these notice requirements may seem like a mere technicality, plans may face huge penalties for failing to comply with the requirements; for example, a plan that fails to provide adequate notice to a single employee for a year may be assessed a penalty of over $40,000.
In addition to large penalties, health plans should confirm their notices are sufficient for the benefit of their participants—many participants may not be aware of their COBRA rights, and deficient COBRA notices will not provide them with the relevant information necessary to make the right decision regarding their health coverage. Plans should take this opportunity to review their COBRA notices to confirm they are compliant, for the benefit of both the plan itself and its beneficiaries.