COBRA/SPOUSAL
NOTICE REQUIREMENT
COBRA requires administrators of group health plans
to notify Aqualified
beneficiaries@(covered employee and any covered spouse or other
dependents) at the time of any Aqualifying
event@
(such as termination of employment) of their
rights to continue group health coverage upon payment of the cost of such
coverage.
Qualified beneficiaries in the same family may have
rights to COBRA notices at different times.
For example, the spouse of a newly-married participant is required to
receive notice of COBRA rights upon initial coverage of the spouse by the group
health plan. A covered dependent
who attains age 22 or is no longer a full-time student will be entitled to a
COBRA notice if, as a result, he no longer qualifies for dependent coverage.
Courts have considered whether notice to a covered
employee constitutes notice to the employees'
covered dependents. Although minor
dependents living at the same address may be deemed to be properly notified if
the COBRA notice is addressed to the employee, courts have held that proper
notification to a covered spouse requires a separately addressed notice.
A recent U.S. Court of Appeals decision (Underwood
v. Flour Daniel, Inc., 1997 U.S. App. Lexis 1410, 4th Cir., 1997) found that
a separate notice addressed to a spouse is required even if it is clear that the
spouse was fully aware of her COBRA rights.
In Flour Daniel, Inc., the employee was laid
off. He and his spouse elected
COBRA coverage, but made only one premium payment. As a result, the COBRA coverage ceased.
The ex-employee and his wife sued for payment of medical claims arising
after the termination of COBRA coverage because no separate COBRA notice was
sent to the wife. The Court held
that, because the ex-employee and his wife clearly had knowledge of their COBRA
rights, they would not be entitled to recover benefits under the group health
plan. In other words, they were not
prejudiced by the failure of Flour Daniel, Inc. to provide the wife a separate
COBRA notice. However, the Court
went on to award statutory damages of $100 per day for 365 days because of the
employer's
general disregard for COBRA's separate notice requirement.
Although not all courts may follow the Flour Daniel,
Inc. decision, its lesson to employers subject to COBRA is clear.
You must send separate COBRA notices to covered spouses to avoid
possible statutory sanctions or, even worse, liability for group health benefits
as if the souse had elected COBRA coverage.
And remember, qualified beneficiaries are entitled to notice of their
COBRA rights both at the time of initial coverage as well as upon the occurrence
of a qualifying event.
Andrew
S. Williams
Aronberg Goldgehn Davis & Garmisa
One IBM Plaza, Suite 3000
Chicago, Illinois 60611
312/755-3145
awilliams@agdglaw.com
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