Employer's Late COBRA Notice Did not Extend Coverage Period

March 3, 2006 (PLANSPONSOR.com) - The US District Court for the Eastern District of Wisconsin has ruled that an employer COBRA notice to a contract worker 10 months after his contract expired did not change the 18-month coverage period.

EBIA reports that the court did, however, say that due to the late notice, the worker could ultimately be entitled not only to significant statutory penalties but also to “significantly more,” under the Employee Retirement Income Security Act (ERISA) Section 502’s “other relief” provision, if the late notice prevented the worker and his spouse from obtaining replacement coverage free of a preexisting coverage exclusion for their medical conditions.

The worker was an independent contractor, but was covered under an employer-sponsored health plan, according to EBIA.   Ten months after his contract terminated, he received a COBRA election notice from the employer that erroneously stated that his plan eligibility had terminated that month, making him eligible for 18 months of COBRA coverage starting from that date.

The worker elected COBRA coverage and paid premiums.   A year after the first notice, the employer sent another letter to him saying he had received all his COBRA coverage and the coverage would terminate in one month.   The worker sued the employer and also sought a temporary injunction to prevent the employer from terminating coverage while the case was being decided.

The court denied the worker’s injunction request, saying that the late notice did not change the COBRA period, which began on the date of his contract termination.   The court rejected the worker’s argument that the termination of coverage before expected would cause irreparable harm, because the plaintiff offered no evidence that he could not obtain comparable replacement coverage even with extra time and because he failed to show that he had a critical need for health care as opposed to a mere financial hardship in paying for care with his own funds.

The case is Koopman v. Forest County Potawatomi Member Benefit Plan, No. 06-C-0163 (E.D. Wis. Feb. 15, 2006).