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Wednesday, December 14, 2016

Earlier this year, an employer was sued in a class action in Federal District Court for the Southern District of Florida for violating the notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) with respect to its COBRA election notice. Specifically, the employees alleged that the COBRA election notices provided by the employer did not include the information required by COBRA regulations. After failing to convince the court that the case should be dismissed, the employer agreed to establish a settlement fund for the affected employees and to correct the alleged deficiencies in its COBRA election notice. Since then, two similar lawsuits have been filed in Florida courts by employees who claim that the election notices provided by their respective employers were deficient and non-compliant with COBRA.

COBRA provides that any employer with 20 or more employees that maintains a group health plan must provide a covered employee who experiences a qualifying event (and his or her covered spouse and dependents) with continuing health insurance coverage for at least 18 months. A qualifying event encompasses a number of situations which result in a loss of health insurance coverage.  The most common of these events are: (i) a covered employee’s voluntary or involuntary termination of employment (for reasons other than gross misconduct), (ii) a reduction in a covered employee’s work hours, (iii) a covered employee’s divorce or legal separation, (iv) a covered employee’s death, and (v) the loss of dependent child status.

The COBRA regulations specify that employers must provide certain notices to employees, including a notice of their rights to elect continued health insurance coverage under the employer’s group health plan if the employee experiences a qualifying event. An employer’s (i) failure to provide the required notice or (ii) provision of a deficient notice may result in the assessment of statutory penalties of up to $110 per day for each employee who does not receive the notice or who receives a defective notice until the failure is corrected.

The two later cases were filed in November and December 2016. While we await their respective outcomes, employers may wish to review their COBRA election notices against the DOL model COBRA election notice.

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