Court Finds COBRA Election Timely: Statutory Time-Frame is Minimum, Not MaximumThe Fifth U.S. Circuit Court of Appeals has issued a decision that illustrates the importance of specifying in a healthcare benefit plan's summary plan description the maximum time period a beneficiary has to elect COBRA coverage after a qualifying event.
Court Finds COBRA Election Timely: Statutory Time-Frame is Minimum, Not MaximumThe Fifth U.S. Circuit Court of Appeals has issued a decision that illustrates the importance of specifying in a healthcare benefit plan's summary plan description the maximum time period a beneficiary has to elect COBRA coverage after a qualifying event. See Lifecare Hospitals, Inc. v. Health Plus of Louisiana, Inc. In Lifecare, the Fifth Circuit held the COBRA statute's 60-day time period for election of coverage is a minimum time period, not a maximum. Therefore, since the beneficiary in that case elected coverage during the 18-month coverage period, the election was timely.
In Lifecare, the beneficiary became seriously ill and was hospitalized from July 2001 until December 2001. He was discharged from employment in August 2001 and attempted to elect COBRA coverage in December 2001. The health insurance company refused to pay for hospital expenses incurred after August 31, 2001, arguing that the beneficiary's election of COBRA coverage was untimely. The hospital sued the employer and the insurance company for reimbursement of the beneficiary's medical expenses, arguing that his election of COBRA coverage was timely. The federal trial court granted judgment in favor of the hospital against the insurance company, holding that the beneficiary's election of coverage was timely because he did not receive a valid COBRA notice until November 2001. The trial court also ordered the employer to reimburse the health insurance company for the medical expenses because the employer failed to satisfy its duty to provide proper COBRA notice.
The Fifth Circuit affirmed the trial court's decision against the health insurance company, but on different grounds. The Fifth Circuit held that the beneficiary's election of COBRA coverage was timely because the summary plan description did not identify a time by which the beneficiary must elect COBRA coverage and that, absent a specified maximum election period, the beneficiary could elect coverage any time during the 18-month period of coverage.
The court rejected the health insurance company's argument that the COBRA statute provides a default maximum time period of 60 days following the qualifying event in which to elect COBRA coverage. The Fifth Circuit held that the plain language of the statute requires a COBRA election period of at least 60 days, measured from the later of either the date of the qualifying event or the date on which the beneficiary receives notice of his COBRA options. The court held that this is a minimum period of time that a beneficiary must be given to elect COBRA coverage, not a default maximum time period.
Therefore, since the employer's plan in this case did not limit the time by which the employee must elect COBRA coverage, his election, which was made during the time period for coverage, was timely. Accordingly, the court affirmed judgment in favor of the hospital against the insurance company. Because the court found the employee's COBRA election to be timely, it reversed the trial court's order requiring the employer to reimburse the insurance company for the employee's medical expenses due to its failure to provide proper COBRA notice.
Employers' Bottom Line:
Employers should ensure their summary plan descriptions, plan documents, and COBRA notices provide for a maximum time period during which employees can elect COBRA coverage. If you would like our firm to review and update your documents, please contact any member of our Employee Benefits Group.