In a recently settled class-action lawsuit filed in the Southern District of Florida, the court found that fast-food restaurant McDonald’s failed to give former employees proper notice of their right to continued health insurance coverage under COBRA. The lawsuit also alleged that McDonald's wanted to save money by discouraging people from selecting COBRA coverage.
Tax, employment and benefits counsel Greg Demers told the Society of Human Resource Management (SHRM), "there has been an uptick over the last few years in cases challenging the adequacy of COBRA notices, some of which actually claim that the notices were inadequate, even when they followed Department of Labor guidelines. Many of these cases settle for modest sums, and it is unclear to what extent this trend will persist in the years ahead."
Group health plans can require beneficiaries to pay for their COBRA continuation coverage, although plan sponsors may choose to pay for part or all of it, according to the Department of Labor. Employers, however, do not have to send monthly COBRA premium notices, but must provide a notice if they end coverage early due to the beneficiary not sending a payment on time.
"Deprioritizing and lack of oversight tend to be the most common issues we see," Greg said. "Treating COBRA notices as low-priority administrative matters and farming out the task to third-party administrators without proper oversight can create unnecessary headaches down the line. The statute is explicit about employers' notice obligations, and communication is key to ensure that beneficiaries get the information they need when they need it in order to avoid lapses in coverage."
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