Benefits and Compensation

Free Coverage for 11 Months Eliminates Need for COBRA Notice Penalties, Court Rules

Due to an administrative error, an employer clearly did not provide a qualified beneficiary with a COBRA election notice. However, the qualified beneficiary also benefited from that mistake by receiving 11 months of free health coverage. For that reason, a federal district court in Iowa rejected claims that the employer should be subject to COBRA penalties for its notice failure.

Facts of the Case

Bonnie Cole, an employee of Trinity Health Corp., was covered under the company’s group health plan, along with her husband and son. Blue Cross Blue Shield of Michigan was the insurer.

Bonnie went on leave under the Family and Medical Leave Act beginning in December 2010. Her FMLA leave expired on March 2, 2011, and she went on short-term disability leave, which expired on June 8, 2011. Cole temporarily received long-term disability; the LTD insurer ultimately denied benefits but did not request repayment of what it already paid.

Cole’s employment termination date should have been June 8, 2011, the last date on which she was qualified for disability benefits and considered an employee. However, her termination was not processed at that time and she remained on the health plan. In late April 2012, Trinity Health discovered that Cole had not been terminated, so that was processed on May 8, 2012, effective June 8, 2011, and Blue Cross was notified. The Coles’ coverage was terminated effective Jan. 1, 2012. At this time, they had received covered benefits through April 2012.

The Trinity Health system indicated a “COBRA Term Sent Date” of May 8, 2012, but a COBRA notice had not been sent.

After a doctor told Cole’s husband that they no longer had health coverage, Cole got confirmation from Blue Cross that their coverage had ended. However, it still covered all claims through April 30, 2012. The Coles had $1,307 in medical claims denied by Blue Cross beginning on May 1, 2012. The Coles did have access to coverage through her husband’s employer, however, which became effective June 1, 2012.

The Coles sued Trinity Health, alleging among other things that the company violated COBRA’s notice requirements. They sought statutory penalties of  up to $110 per day. Trinity Health conceded that it did not send a COBRA notice but argued that a penalty was unwarranted because the Coles received about 11 months of free health coverage. This far exceeded the $1,307 in medical claims incurred before they were covered under her husband’s plan. The court agreed, noting that because of the Coles’ benefit of receiving extended free health coverage, they were already in a better position than they would have been in but for the COBRA notice violation.

More details on the case, Cole v. Trinity Health Corp., 2014 WL 222724 (N.D. Iowa, Jan. 21, 2014), can be found in Mandated Health Benefits — The COBRA Guide, at