I am always fascinated when I see a video of someone “messing” with a COBRA. While I am not terrified of snakes, I have no desire to be within the striking distance of a poisonous one. The problem is, I am not really sure of the range of all snakes. Accordingly, I stay as far away as possible. Some employers aren't so worried about keeping their distance. They are perfectly content to “mess” with COBRA (the Consolidated Omnibus Reconciliation Act of 1985), which provides ongoing health insurance for employees in certain circumstances. This puzzles me. Why would you risk a COBRA strike when it's easily avoidable?
The Fifth Circuit recently considered the striking distance of COBRA in the Randolph v. E. Baton Rouge Par. Sch. Sys., No. 21-30022, __F.4th__, 2021 WL 5577014 (5th Cir. Nov. 30, 2021) (Before Higginbotham, Smith, and Ho, Circuit Judges). An employee was placed on paid leave which lasted about one and a half months. Then she used sick leave to remain on paid leave. When her sick leave was exhausted, she was placed on unpaid leave, which lasted about six months. While she was on leave she continued to receive her health insurance coverage. She finally retired in was February 2016, and thus her employment was terminated. Her health insurance ended at the end of February 2016, but the employer neglected to tell her it had ended. It wasn't until September 2016 when a claim was denied that she learned she had lost her health insurance coverage.
She contacted her employer and learned that the health insurance was terminated. She owed about $2900 for past insurance and was going to have to pay $480 a month going forward. She was then sent the COBRA notice, which was in October 2016. This was about two years and a month after she first stopped working actively at her occupation. The question arose then as to what her qualifying event was – when was she eligible for continuing her health insurance coverage under COBRA. How long after the qualifying event was the COBRA notice required to be provided?
She filed a lawsuit contending that she was due to receive a statutory penalty going back to 44 days after she was first placed on unpaid leave. The District Court disagreed and entered summary judgment for her employer. She appealed to the Fifth Circuit.
The Fifth Circuit affirmed the district court in part and reversed in part. “We affirm the district court's holding that the placement on unpaid leave was not a qualifying event; we reverse the district court's holding regarding Randolph's retirement and find that her retirement was a qualifying event and insufficient notice was given following her retirement.” Randolph v. E. Baton Rouge Par. Sch. Sys., 21-30022, at *5 (5th Cir. Nov. 30, 2021). The District Court ruled against Randolph because the qualifying event and the loss of insurance did not occur contemporaneously. This of course would allow an employer to simply pay for a month or two of insurance and then terminate it without offering COBRA. The Fifth Circuit ruled “A loss of coverage does not need to be contemporaneous to the qualifying event.” The loss of coverage need only occur within 18 months of a qualifying event. Randolph should have received notice within 44 days or by the end of March 2016. There was a COBRA violation because Randolph did not receive timely notice of her COBRA rights. Thus, the Fifth Circuit remanded the matter to the district court to calculate the penalty commencing 44 days after she retired. That reduced the penalty amount at stake significantly but did leave open the possibility of obtaining attorney's fees.
So, what is the lesson for the employer? If there is a qualifying event, but the employer continues to pay for health insurance, it must provide a COBRA notice if the health insurance is lost within 18 months of that event. Loss of health insurance triggers the time for the required COBRA notice. In other words, in the Fifth Circuit, the striking distance of COBRA is 18 months.