COBRA Case Provides Lesson on Late Payments

Wednesday, October 07, 2009

The check was in the mail. The problem – from a COBRA perspective – is that the envelope had a postmark date that was one day after the 30-day payment grace period expired.

In the case of Harris v. United Auto Insurance Group, the Qualified Beneficiary was an attorney who offered two legal arguments as to why the COBRA administrator should have accepted the late payment. First, he blamed his wife, asserting that she either inadvertently put the check in the mail after the mail carrier came by or the envelope was picked up and postmarked a day later.

Second, he argued that the grace period should have been longer than 30 days because the COBRA regulations require additional time if the plan has provisions allowing for additional time to pay the carrier.

The trial court had ruled in favor of the health plan. On appeal, the appellate court had the same result. Regarding the first argument, the court examined the election notice, which made it clear that the payment date would be determined by the postmark date. The election notice also had a specific warning on the risks of mailing payments at the end of the grace period, notifying Qualified Beneficiaries that they would “risk not having sufficient time to correct [any] errors . . . (such as . . . late/missed pick-ups by the U.S. Postal Service).”

Regarding the second argument, the court observed that the plan was self-funded. Thus, the regulations regarding a longer time frame did not apply because benefits were paid directly from the employer’s assets.

Infinisource’s election notices and monthly invoices contain comprehensive language about both the grace period end date and the postmark date.