Human Resources News & Insights

COBRA subsidy — and lawsuit victory — denied

Recently terminated employees may not find suing your company over a denied COBRA subsidy credit as easy as you might have feared.

A federal district court ruled a former employee couldn’t sue her employer over a denied credit until she filed with the Department of Labor (DOL) a form, “Application for Expedited Review of Denial of COBRA Premium Reduction.” Any individual who feels he or she was improperly denied the subsidy should file the form with DOL. The agency must then issue a decision within 15 days.

In this particular case, employee Debra Dorsey notified her former employer that she wanted to take advantage of the subsidy program, adding that a DOL worker had already told her she qualified.  The company disagreed, though, because she voluntarily resigned by not returning to work after her time off under the Family and Medical Leave Act expired.

When she contacted DOL for help, the agency told the employer it had determined Dorsey indeed did qualify. When the employer continued to deny Dorsey the subsidy because she hadn’t filled out the proper DOL application, she sued … and lost.

The court sided with the employer, saying that an employee can’t pursue a lawsuit until it exhausts its administrative remedies – i.e., filling out the application and getting an expedited DOL response.

Who qualifies?

Only certain workers who were involuntarily terminated between Feb. 17, 2009 and May 31, 2010 qualify for the COBRA subsidy credit. To be an “assistance eligible individual,” the employee must:

  1. Be eligible for COBRA coverage
  2. Elect to continue that coverage and pay part of the premium cost, and
  3. Have been involuntary terminated or suffered a reduction in work hours that revokes eligibility for health insurance.

Cite: Dorsey v. Jacobson Holman

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  • L Ramos

    I have a question, if the employee files for FMLA and after 6 months, the doctor did not release her yet. We sent a letter to the employee putting her on “inactive employee status” and the company offerred COBRA due to reduction of hours. Is she eligible for the subsidy considering that she availed of COBRA when it was offered to her. To date, her position is still open.