Failure of Employer to Provide COBRA Election Notice on Time Results in Retroactive Coverage and Penalties

In Buford v General Motors, LLC, case number 4:16-CV-14465-TGB-MKM, the U.S. District Court in Michigan ruled that General Motors violated COBRA election notice requirements by failing to timely provide a employed a COBRA election notice upon retirement. As a result, General Motors was subject to legal penalties for violating federal law.

Buford retired from General Motors on January 1, 2014, which should have resulted in the change of his health insurance plan from active employer-paid coverage to self-paid retiree health coverage. Nevertheless, General Motors did not terminate Buford’s active coverage health insurance and continued to pay premiums until February 28, 2014. General Motors also provided Buford with COBRA election notice with an election period of 60 days based on a termination of February 28, 2014 from the date of hire. This notice gave Buford the option of continuing to be covered by COBRA or by default in the General Motors Self-Paid Retiree Health Plan.

In April 2014, however, Buford received a notice from General Motors’ Third Party Administrator (TPA) stating that his 60-day election period had expired because his termination date was January 1, 2014, not February 28, 2014. Buford unsuccessfully appealed this decision through the plan’s administrative appeals process, with the TPA ultimately informing him that he could only obtain retroactive COBRA coverage by paying all COBRA premiums due as of January 1, 2014. until today.

Buford then sued General Motors to challenge the denial of retroactive COBRA coverage and legal penalties. He argued that his former employer prevented him from exercising his COBRA rights by providing him with a COBRA election notice with an incorrect termination date of February 28, 2014, and then ignoring that date for COBRA coverage.

Generally, federal law requires employers to provide COBRA election notices to former employees and other qualified beneficiaries within 44 days of the occurrence of qualifying events. Qualifying events under COBRA include:

  • Termination of employment leading to loss of coverage
  • Reduction of hours
  • Death of an employee
  • Divorce or separation from the employee
  • Employee eligibility for health insurance
  • Cease to be a dependent child under the plan

Penalties for failing to provide COBRA election notices may include payment of fines of up to $110 per day and medical expenses incurred by the qualifying beneficiary who did not receive timely election notice. .

In that case, the court sided with Buford, finding that General Motors’ failure to correct its COBRA eligibility date was arbitrary and capricious. His decision to use January 1, 2014 as the termination date for COBRA coverage purposes was inconsistent with the COBRA election notice and his continued payment of his health insurance premiums through February 28, 2014.

As a result, Buford could recoup medical expenses he incurred during the time he should have had General Motors COBRA coverage, as long as he paid COBRA premiums from March 1, 2014 through today.

The court ruled that General Motors would face penalties for its conduct in failing to provide timely COBRA election notice to Buford. Since Buford retired on January 1, 2014, General Motors had 44 days to provide the required COBRA notice, or until February 13, 2014. General Motors did not send the notice until 13 days past the deadline, or until February 26, 2014. to this 13-day delay and failure to comply with the election period specified in the notice it provided to Buford, General Motors was liable to a fine of $1,300, or $100 per day for 13 days.