Iowa Union Plan Hit with $5,885 COBRA Notice Penalty

February 13, 2004 (PLANSPONSOR.com) - A federal judge has fined an Iowa union health plan $5,885 for not providing a participant and his wife timely notice of their rights for continuing health coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA).

>Chief US Magistrate Ross Walters of the US District Court for the Southern District of Iowa assessed the penalty of $55 per day for 107 days against the Five River Carpenter District Council Health and Welfare Fund. According to Walters’ ruling, the penalty came in a lawsuit filed by Iowa carpenter Gregg Burris and his wife Michelle.

>Burris notified the plan in September 2000 that he was no longer a union carpenter and that the couple requested continuing health coverage under COBRA requirements.

>Eastern Iowa Fringe Benefits Funds (EIFBA), a third-party plan administrator, did not send the Burrises the required COBRA notice on the advice of fund attorney Joe Day who had issued a legal opinion that Gregg Burris wasn’t eligible for COBRA coverage because of an October 2000 plan amendment concerning how the plan would determine such eligibility.

>Burris formally requested COBRA coverage on September 19, but the letter was apparently lost in the mail that had to be forwarded when EIFBA moved its offices, Walters’ opinion said. The fund notified Burris on September 27 that he was no longer eligible for plan benefits as of September 30, 2000.

>Walters’ ruling, noting that Michelle Burris suffered from a¬†genetic blood-clotting disorder, said the couple grew anxious when they didn’t receive the required COBRA benefits notice and began repeatedly contacting the plan and the US Department of Labor. But, as late as January 16, 2001, the plan trustees stuck to their position that Burrises were not eligible for coverage.

>However, the trustees relented two weeks later and notified Burris that they had decided to grant the couple COBRA benefits. The couple signed the required paperwork, paid premiums retroactive to October 1, 2000 and got any pending medical expenses paid by the plan, Walters’ ruling said. Although Michelle Burris had not had any blood-clotting episodes, “both she and her husband felt considerable anxiety about the uncertainty of coverage and what would happen if Mrs. Burris needed treatment for her condition,” Walters wrote.

>In his ruling, Walters found that, contrary to the opinion of plan attorney Day, the October 2000 amendment didn’t apply to Burris and his wife and they, in fact, had always been entitled to proper COBRA notices and coverage.

>Walters rejected arguments by fund trustees that they shouldn’t be penalized because they were acting on the advice of their lawyer. “Gregg Burris made a number of phone calls to the Fund seeking continuation of coverage and an explanation why he and his wife were not entitled to it,” Walters wrote. “He enlisted the assistance of the Department of Labor. He wrote letters. Only as a result of his persistence, did the Fund relent and accord plaintiffs the opportunity to elect (COBRA) coverage to which they were clearly entitled. They should not have been put to this burden.” Walter declined to penalize the fund for not providing Burris an explanation for the COBRA coverage denial.

>The case is Burris v. Five River Carpenter Dist. Council Health and Welfare Fund, No. 3:01-cv-30091 (S.D. Iowa 1/15/04). Walters’ latest ruling is available¬† here .

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