Penalties for Insufficient COBRA Notice

Posted by BAS - 21 August, 2014

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An employer had to pay more than $25,000 in penalties for failing to provide a COBRA election notice to a terminated employee and her children.  A recent court case out of Nevada underscores the importance of employers understanding the COBRA rules and implementing solid COBRA administration.  Benefit Allocation System’s Cobra Control Services can assist employers with accurate and timely COBRA processes. 

In Honey v. Dignity Health, an employer did not provide a COBRA election to an employee who was terminated and reinstated twice during her pregnancy.  Regina Honey requested leave from her employer to go on bed-rest for pregnancy related problems.  She tried to return to work, but was fired.  Her employer provided a COBRA notice at the time of her firing. 

Honey was later reinstated in her position, but was again ordered to go on bed rest.  After her son was born, she tried to return to work but her reinstatement was not accepted by the employer.  When she was unable to add her newborn son to her health coverage, Honey was informed by the employer that her coverage was terminated back to her second leave of absence. 

The termination letter provided by Dignity Health mentioned COBRA continuation coverage, but no formal COBRA notice or election form was provided to Honey.  Honey repeatedly asked for information about COBRA and it only finally provided to her several months later. 

The notice that the employer eventually did provide had information about Honey and her husband, but not about her covered child.  The parties settled coverage issues by the employer paying for Honey’s uncovered medical expenses. 

Even though her medical bills were covered, Honey brought a claim for penalties for an improper COBRA notice.  The District Court found in her favor and held that the employer did not comply with COBRA’s requirements.  The notice was delayed and did not communicate all necessary information.  Failure to provide an adequate COBRA notice can result in statutory penalties of up to $110 per day.  The Court imposed this penalty for each family member who failed to receive notice, for a total penalty of $25,200. 

Employers can be sure that they are providing compliant COBRA notices by engaging Cobra Control Services, LLC (CCS) as its COBRA processor.  For more information about CCS and COBRA, please contact solutions@BASusa.com or contact your account manager.


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