COBRA Coverage Notices Are Being Widely Challenged in Court

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The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires employers to issue notices to employees that there are options to continue healthcare coverage at their own expense following their termination or certain reductions in work hours. While applicable rules set forth the requirements of such notices, COBRA provisions also include a potential for fines of as much as $110 per employee per day. 

As a result, certain plaintiffs' law firms are getting involved in suing large employers for failure to meet the legal details in the notices.  Over 50 cases have been filed in federal court over the last four years, many of them resulting in large settlements: Home Depot settled a case for $815,000, Fiat Chrysler settled for $600,000, and Costco agreed to pay $750,000.  Most of the cases are based on an allegation that the COBRA notices do not contain required information, that they are too complicated for people to understand, or that they were designed to scare people from filing for COBRA by warning against filing false information.  In an unusual move, the U.S. Department of Labor has filed an amicus brief supporting one employer, Southwest Airlines, saying the argument used by many plaintiffs' law firms is wrong.  The plaintiffs' firms have argued that COBRA notices incorrectly fail to include contact information for health plan administrators, but the DOL in its brief says that their regulations allow for COBRA notices to include contact information for those responsible for administering COBRA benefits. 

Because of this new litigation target by plaintiffs' firms, wise employers will take a look at their COBRA notices to make sure they are clear and consistent with legal requirements.

This is part of our June 2022 Newsletter.

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