The article below is from EBIA a source we use to keep up todate on changes in Employee Benefits. This article I find quite interesting because EBIA which has many people that help create and write the current laws disagrees with the court on this case. I like their statement at the end for need to CLEARLY have a written document SPD detailing your benefits and what happens within the plan. We welcome your comments or how you handle an issue such as this.
EBIA article from 07-02-2009
COURT FIXES EMPLOYMENT TERMINATION DATE BASED ON TIMING OF ELECTION NOTICE, REQUIRING LONGER ACTIVE COVERAGE FOR EMPLOYEE
[Jennings v. D.F. Crane Const. Corp., 2009 WL 1405167 (W.D. Ky. 2009)]
The employee in this case was away from work for a month and a half, due to medical complications following elective surgery. While he was away, the employee remained in regular contact with his manager. He also incurred significant medical expenses, which were reimbursed under the employer’s health plan. When the employee later called his manager about returning, he was told that the project he had worked on was finished and that his services were no longer needed. The employer subsequently notified the plan insurer that the employee had been terminated when he first left work, and the insurer retroactively terminated coverage and obtained reimbursements from the employee’s medical providers. A few weeks later, a COBRA election notice was sent to the employee that informed him for the first time that his employment (and active health plan coverage) had terminated when he first left work. The employee did not elect COBRA, contending that his active coverage should cover the prior expenses because he had not been terminated that early. When the providers sued the employee for the expenses, the employee sued the employer and insurer to obtain reimbursement.
The court rejected the argument of the employer and insurer that the employee should have elected COBRA when it was offered. Rather, noting that COBRA required the employer to provide an election notice within 44 days after a termination of employment (since the employer was also the plan administrator), the court held that ERISA restricted the employer’s ability to “back-date” the termination. Counting 44 days back from the date the employee received the election notice, the court held that the employee’s termination of active coverage could not have occurred any earlier. As a result, the employee was entitled to coverage of the disputed medical expenses, less any copayment or premiums owed as an employee under the plan.
EBIA Comment: We think other courts would have dismissed the employee’s claim because he failed to elect COBRA within 60 days after it was offered (even though the election notice was late, relative to the date the employer said the employment termination occurred). We also disagree with the court’s analysis because we don’t think that either COBRA or ERISA restricts an employer’s ability to fix the date of a termination of employment. Nevertheless, the court was clearly disturbed that the employee had not received earlier notice of the effect his absence would have on his health coverage, and it reached for a remedy. As a result, the case is yet another example of the need for clear policies regarding leaves of absence, including their impact on COBRA. For more information, see EBIA’s COBRA manual at Sections VII.L (”Special Issues:
Leaves of Absence”).
Contributing Editors: EBIA Staff.
