Some non-California courts have ruled that the 60-day period should not begin to run until the qualified beneficiary actually receives notice, despite the impracticality of an employer knowing when that might be unless notice is sent via registered mail.

Though registered mail provides greater certainty, it also often delays the notice process because the addressee may not ever sign for the piece of registered mail. 

In one case, the Fifth Circuit Court of Appeals ruled that a good-faith effort to provide notice of COBRA rights protects an employer from liability, even if an employee never receives the notice.

The employer mailed a COBRA notice by certified mail and requested a return receipt. The post office made two delivery attempts to the employee, who was out of town. When he returned, the employee found a delivery notice and went to the post office to claim his mail. The post office could not locate it. Several days later the employee inquired again, but his mail was still lost. The employee never knew who sent him the mail or what it contained. The post office eventually returned the envelope to the employer.

The employee sued the employer for failing to give notice of his right to continue coverage under COBRA when he had medical expenses not covered by his new employer. The court ruled that COBRA only requires a good-faith effort to comply with notification requirements. The court observed that though not legally required, sending an additional copy of the notice by first class mail would have been a good practice.2

Minimally, you may want to add a grace period for electing COBRA equal to the estimated mailing period. Handing the COBRA notice to a departing employee during an exit interview (and getting a receipt for it) is helpful in the case of a single person being affected. But where other qualified beneficiaries exist, this would be only partially effective because the notice might not reach those other qualified beneficiaries.

Once coverage is elected, coverage must be provided from the date that coverage would have otherwise been lost, and a qualified beneficiary is generally required to make retroactive payment to cover the time elapsed during the election period before the qualified beneficiary did elect coverage.

A qualified beneficiary can waive coverage and then revoke the waiver and elect coverage if the election is made before the end of the 60-day period. The law requires no coverage for the period between the waiver and the revocation.3

While a COBRA election is pending and/or COBRA premiums are outstanding, a plan need not process claims if benefits are retroactively reinstated after election and payment is made. However, if a health care provider contacts the plan to confirm coverage during the election period, the plan must give a complete response as to the qualified beneficiary’s COBRA rights.

For example, if COBRA has not been elected but the election period still is open, the plan should inform the provider that coverage is covered by retroactive restoration. The plan must make similar responses when premiums for any month are outstanding but still within the grace period, if that is the plan’s practice. In the case of an HMO, the plan can give a qualified beneficiary under similar circumstances the option of either electing and paying for coverage or paying the reasonable and customary charges subject to future reimbursement after COBRA is elected and paid for. Alternatively, a plan can treat continued use of an HMO as a constructive election and the qualified beneficiary will be obliged to pay the premium.4

Second Chance for Trade Adjustment Assistance Recipients

Certain individuals are entitled to a second 60-day COBRA election period if they meet all of the following criteria:5

• Become eligible for trade adjustment assistance (as certified by the government under the 1974 Trade Act; trade adjustment assistance is federal aid for employees displaced by increased imports of competing products from foreign countries).
• Lost their group health plan coverage because of a job loss resulting in eligibility for trade adjustment assistance.
• Did not elect COBRA during their initial election period.

The new COBRA election period begins on the first day of the month in which the individual becomes eligible for trade assistance but must be exercised within six months of the initial loss of coverage. The COBRA coverage period begins with the initial loss of coverage, so the second chance election does not increase the total period of time the individual receives COBRA coverage. In addition, there is no retroactive coverage back to the initial loss of coverage.

In addition, employees may be eligible for a tax credit for COBRA premiums.

1. 29 U.S.C. 1165(a)(1)

2. Degrusie v. Sprint Corporation, 279 F.3d 333 (5th Cir. 2002)

3. Treas. Reg. sec. 54.4980B-6, Q&A-4

4. Treas. Reg. sec. 54.4980B-6, Q&A-3, 5

5. 29 U.S.C. 1165(b)