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Read The Case
Declining COBRA, Then Making Premium Payment.
The Eighth Circuit reversed a lower federal court's decision, holding that a former employee properly secured COBRA continuation coverage even though she paid the premium to a carrier whose contract with the plan sponsor was ending.
The plaintiff, Fink, asserted numerous state law claims against her mother's employer, Dakotacare HMO and the program administrator. The district court found that all the state law claims were pre-empted by the Employee Retirement Income Security Act, or ERISA, and granted summary judgment in favor of the defendants.
In reversing, the Eighth Circuit ruled that while the plaintiff's state law claims were indeed pre-empted by ERISA, the plan and the other defendant fiduciaries had a duty to provide continuation coverage benefits when the premium payment from Fink's mother was received, even though the employer switched to a new plan.
In administering the Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA), an employer cannot necessarily rely on a COBRA beneficiary’s initial written statement that he or she will discontinue coverage; rather, the COBRA beneficiary’s actions after an election is made may dictate the rights of the COBRA beneficiary.
A covered employee had a qualifying event and elected to receive COBRA coverage. Subsequently, the employer/sponsor decided to switch insurers for the plan from Dakotacare to Lincoln Mutual. Notice of the carrier change was given to Margaret Fink, who then notified the plan sponsor she was applying for benefits with her new employer and would decline coverage with the new insurer, Lincoln Mutual. Four days after Fink sent in her response, Fink’s daughter was admitted to a hospital. Not wanting to have a gap in her insurance, Fink sent the COBRA premium for the next month.
She sent the premium to the old insurer, Dakotacare, and not the new insurer, Lincoln Mutual. The claims for benefits were rejected by Dakotacare.
While the determination of who was liable to pay the claims was remanded to the federal district court, the Eighth Circuit Court of Appeals ruled the responsible ERISA fiduciaries for the plan were obligated to apply the COBRA premium payment so that Fink’s coverage was maintained. (Fink v. Dakotacare, __ F.3d __ , 2003 WL 1618467 (8th Cir. 2003).)
©2007 CobraAid
CobraAid is not engaged in the rendering of legal advice. This article should not be considered legal advice. The information contained in this article is subject to change and should be used for information purposes only. If legal advice is needed, seek competent counsel.
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