Over the past few months, there have been a slew of class action lawsuits filed against several large employers alleging technical violations of COBRA’s election notice requirements and seeking penalties and damages – even where the employer used the model COBRA election notice form provided by the Department of Labor (DOL).
Cases have mostly been limited to the Middle and Southern Districts of Florida as firms are targeting national companies with Florida operations and employers headquartered in Florida. These cases may expand to other states as they gain traction.
The fact pattern among the cases is similar – the cases are brought by a former employee who terminated employment, did not elect COBRA coverage, and later incurred medical expenses. The cases allege that the former employees did not elect COBRA coverage because of alleged deficiencies in the COBRA election notices that they received. Since employers generally use the same COBRA notice form for all employees, the cases are being brought as class actions on behalf of all affected individuals.
The DOL’s model COBRA election notice form requires some employer customization, and the lawsuits generally allege that employers have not been customizing the forms correctly. While many employers outsource COBRA administration to a third party, ultimately, the employer is responsible for COBRA compliance.
The specific allegations are slightly different in each case, but all revolve around technical defects. For example, one common allegation is that the notice fails to provide the name, address, and telephone number of the plan administrator. Other allegations maintain the notice:
- does not adequately explain how to elect coverage;
- does not include an election form;
- fails to identify the specific end date for COBRA coverage (it only includes the starting date and the duration of coverage, e.g., 18 or 36 months);
- fails to provide the address to which COBRA payments should be sent (even if an envelope with the address is included);
- fails to explain that a qualified beneficiary’s decision whether to elect COBRA will affect the qualified beneficiary’s future HIPAA rights;
- is not written in a manner calculated to be understood by the average plan participant; and
- does not meet foreign language requirements.
None of the cases have substantively been decided yet, but courts have denied some employers’ motions to dismiss, indicating that plaintiffs have a plausible cause of action. Several cases have reportedly settled.
MMM will continue to monitor this trend and keep you updated. In the meantime, we recommend that employers take this opportunity to review their COBRA notices to ensure compliance with applicable law.
In addition, there have also been a few changes to the COBRA election rules due to recent COVID-19 guidance, which generally provides an extended period of time to elect COBRA and provide the required notices. The DOL has updated their model election forms for these changes too. Those rules are summarized in our prior alert on this topic here.
If you have any questions about this legal update, please reach out to the MMM Employee Benefits & Executive Compensation Team.