The COBRA Qualifying Event Dilemma
Maria, age 52, was covered under her employer's group health plan for 8 years. She was terminated for cause on March 15 due to alleged misconduct. The employer's group health plan has 45 employees and is fully insured. Maria elects COBRA continuation coverage on April 10, within the 60-day election window. She pays the premium of $650 per month (the full cost plus 2% admin fee). On June 1, Maria is diagnosed with breast cancer and begins chemotherapy. Her employer later claims that because the termination was for gross misconduct, COBRA should not apply and retroactively cancels her coverage. Maria has incurred $25,000 in medical expenses since June 1. She also has a pre-existing condition of diabetes that was covered under the group plan.
1. Was Maria eligible for COBRA continuation coverage? Explain the qualifying event and any exceptions.
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Under COBRA, a qualifying event includes termination of employment (other than for gross misconduct). Maria was terminated for alleged misconduct, but the employer must prove gross misconduct to deny COBRA. If the termination was for cause but not gross misconduct, COBRA applies. The employer's claim of gross misconduct is a factual determination. Maria elected coverage timely. Therefore, she likely was eligible unless gross misconduct is proven. The plan must provide notice of COBRA rights within 44 days of the qualifying event. Maria's coverage should continue.
2. If Maria's COBRA coverage is retroactively cancelled, what are her options and what recourse does she have?
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If COBRA is cancelled retroactively, Maria can appeal through the plan's internal claims and appeals process and then seek external review. She may also file a complaint with the Department of Labor. She could sue under ERISA for breach of fiduciary duty and to recover benefits. Since she incurred expenses, she may request that the plan honor the coverage because she relied on it. The plan cannot retroactively cancel without proper basis. She may also seek individual coverage, but pre-existing condition exclusions may apply if she goes to individual market; however, under ACA, pre-existing conditions are covered. She can enroll in a Marketplace plan with a special enrollment period due to loss of coverage.