Imagine this scenario: In a COBRA lawsuit against your company, the lawyer for a poor-performing ex-employee goes before a jury and says, “Not only did they kick my client out the door, but they also saddled him with $20,000 in medical bills.”
Then the jury looks at the forlorn plaintiff and your deep-pockets company. Guess which one wins. In fact, COBRA suits are so tough for companies that most give up before the case ever gets to court. They just swallow hard and pay the ex-employee’s medical bill. And much of the time, companies find themselves in such a bind just because of a simple mistake in following COBRA’s notification provisions.
With a little prep work, however, you can avoid problems because most of the notification regs aren’t all that difficult to follow.
The new regs put strong emphasis on delivering COBRA-related information to employees on time. Here are the timeframes you’ll want to remember:
Initial Notice. Employees must get an initial notice informing them of their COBRA rights within 90 days after their health coverage begins.
To cover yourself, consider making the notice part of the document package an employee gets on sign-up day for health coverage. You can put the notice in your plan description, but a separate notice is better.
Caution: Employees’ spouses must get a continuation-coverage notice, too. It should be mailed to the spouse at the last known address – preferably by first-class mail. Don’t hand the notice to the employee with the instruction that it should be given to the spouse. That’s not legal under COBRA.
Notice of Qualifying Event. Beneficiaries and employees are required to let you know when they experience a “qualifying event” for COBRA coverage (such as divorce). As soon as they do, you have 30 days to notify the plan administrator. (Note: The notice requirement is null if your company is self-insured.)
The new reg calls for employers to provide “reasonable” means for employees and beneficiaries to let you know about qualifying events. Best bet: Make it clear they must do it in writing, and provide contact methods in the Initial Notice.