Archive for November, 2013

The Defense of Marriage Act Ruling and COBRA Considerations

On June 26, 2013, the Supreme Court struck down section 3 of the Defense of Marriage Act, a federal law that had given the definition of “marriage” as a legal union between one man and one woman as husband and wife, and “spouse” as a person of the opposite sex who is a husband or a wife (United States v. Windsor, 570 U.S.__ (2013). Prior to this Windsor decision, the Defense of Marriage Act virtually meant that employers were not required to offer equal benefits to their employees in same-gender marriages. Although these same-gender partners were allowed the legal right to marry in many states, the majority of these couples were not receiving equal treatment from their employers with regards to health insurance and other employee benefits. But after the Supreme Court’s ruling, many employers are offering domestic partnership coverage – after all, the federal government now generally recognizes same-gender spouses as married in regards to federal laws, protections and legal obligations.

When the Defense of Marriage Act was declared unconstitutional it basically tossed the definition back into the hands of the individual states. If a state legally recognizes someone as a spouse, then the federal law will follow suit; however; the Windsor decision doesn’t force a state to recognize same-sex marriages. This could be confusing for employers in those stated that have chosen not to recognize these same-sex marriages and a bit tricky when it comes to the COBRA implications.

When employers are making the decision on whether to offer benefits to same gender spouses, many considerations must be given. For example, the date of the decision to offer COBRA benefits could be a somewhat sketchy because one could argue that because if the Defense of Marriage Act was declared unconstitutional does that say that it was always unconstitutional? Should employers go back retroactively and offer COBRA benefits to same-gender spouses that were not offered coverage at the time before the Windsor decision was made? The answer is not so clear and brings up many questions regarding effective dates.

Residency requirements can be another challenge – what if a same-gender couple that is legally married in one state moves to another that does not recognize their marriage? What about employers that operate in multiple states? The federal government seems to make no distinction on the state of residency and there has been legislation introduced that opts for the “place of celebration” to be the determining factor in same-gender marriages that would ultimately recognize that “if a marriage is valid anywhere, then it is valid anywhere.”

It is our opinion, employers must ponder the recent legal decisions regarding same-gender marriage very carefully in terms of the implications it will have on COBRA administration. It would be extremely important to proceed with legal counsel and keep in mind that there are many factual questions that need to be addressed in order to determine the outcome in a variety of scenarios.

Simple Mistakes and COBRA Compliance

When analyzing the grounds for complaints involved in the hundreds of COBRA cases reported, a vast majority involve very basic errors. All too often these cases illustrate that employers and plan administrators often lack the understanding of basic COBRA compliance. These misunderstandings and errors not only open up exposure to possible litigation which involves costly legal fees and penalties; but, employers and plan administrators often find themselves responsible for thousands of dollars in excise taxes for these COBRA compliance issues as well. On top of keeping up with COBRA compliance requirements, employers and administrators also need to be cognizant of other laws affecting their group health insurance plans – namely health care reform, HIPAA and the Mental Health Parity Act. Furthermore, regulations need to be properly deciphered and translated from the pertinent state governments, as well as other agencies such as the IRS and Labor, Health and Humans Services.

Because litigation and the aggravation caused by compliance issues can be costly even if you win the case, it is a wise move to take time to look at your COBRA notification process and check for basic documentation clarity. To begin with, have you updated your COBRA notices with the most recent guidance from the U.S. Department of Labor regulations? Does your notice include both the rights and responsibilities of the qualified beneficiaries? Your notice should clearly outline the election date deadlines as well as the premium payment due dates. The consequences of tardiness in both electing coverage and paying premiums should be clearly spelled out in the notice. Addressing possible multiple qualifying events should also be part of the notice along with an explanation of how the qualified beneficiary should inform the plan administrator of these events should also be included.

Remember to read your group health plan document as well as your official Summary Plan Description and check to make sure the legally required language is up-to-date. Furthermore, it is your ERISA fiduciary responsibility to administer the plan according to its terms. Make sure that your administration is consistent with the actual written plan terms. Using the excuse that you were administering the plan on what you were verbally told, rather than what was written in the Summary Plan Description simply won’t hold up in court.

Once an employee is terminated, a common mistake is often made at the time of the exit interview – employers are frequently overly glib in giving out misinformation to the terminated employing by promising far too much in terms of COBRA coverage. Another possible instance where verbal misinformation can easily be conveyed is the time frame during the election period. Specific special messages are required in terms of how claims are handled when health care providers or health care institutions are calling to confirm coverage and yet the qualified beneficiary has not elected and/or paid for COBRA coverage.

Check to make sure qualified beneficiaries are afforded their open enrollment rights and given the proper notification. If you change or add a group health plan ensure you are also notifying COBRA qualified beneficiaries and remember not to forget those that are in the middle of their election periods – these potential qualified beneficiaries can often slip through the cracks.

In summary, it is often the simple mistakes that get most employers and plan administrators into trouble when it comes to COBRA compliance. Taking the time to go over your documents and notification process – as well as reminding well-intentioned employees of the dangers of making verbal promises that cannot be met – will save countless hours and costly fees by avoiding future litigation.

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