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COBRA/SPOUSAL
NOTICE REQUIREMENT
COBRA
requires administrators of group health plans to notify "qualified
beneficiaries" (covered
employee and any covered spouse or other dependents) at the time of
any "qualifying
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. Andrew
S. Williams
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