Ask the Expert: COBRA Quandary

Question: I just found out that a former employee near the end of his COBRA election period was in an accident and is currently incapacitated. What are my options administratively if the election period ends and he has not yet elected COBRA coverage?

Answer from the experts at HR.BLR.com:

The Consolidated Omnibus Budget Reconciliation Act (COBRA) has very specific timeframes on when parties must act—from when to send notices and deadlines for paying premiums. But neither the law nor the regulations address unexpected events, like illness or an accident, that may leave a qualified beneficiary unable to act in a timely manner.

As a result the courts have filled that gap; and case law shows that when a qualified beneficiary is incapacitated, a doctrine is applied called “equitable tolling.” This rule allows COBRA timeframes to be “tolled,” or held in abeyance, until a legal representative is appointed to act for the qualified beneficiary. Generally, this doctrine can apply to both the election and premium payment periods.

Here is some of the reasoning and principles to consider from case law:

1. In Branch v. G. Bernd Co. a court allowed a reasonable period for a guardian to be appointed, plus a reasonable period afterward for the guardian to exercise the COBRA rights for the incapacitated qualified beneficiary. Therefore, the court allowed the administrator of a qualified beneficiary’s estate to elect COBRA coverage even after the end of the 60-day period.
2. The Branch rule was followed in Sirkin v. Phillips Colleges Inc., which held that if an insured misses a premium deadline under COBRA due to the insured’s incapacity to know of or meet obligations, the deadline for that premium payment is tolled for a reasonable period until the insured or her legally appointed guardian is able to cure the deficiency.
3. In Meadows v. Cagle’s Inc., a court indicated that a proper COBRA election notice is required as a prerequisite to the beginning of a COBRA election period. The court found that for a COBRA election to be valid, it must be sent to a person who is legally capable of acting on the information and must provide enough information for that person to act intelligently.
4. In Lincoln General Hospital v. Blue Cross/Blue Shield of Nebraska, a court held that the COBRA election and payment periods are tolled to protect incompetent qualified beneficiaries but only until a personal guardian is appointed.
5. In Hummer v. Sears, Roebuck & Co., a court held that even where tolling applies, it does not start a new COBRA election period. Rather, it allows a qualified beneficiary’s representative to elect COBRA coverage during a period equal to the number of days remaining in the original COBRA election period.

These and other cases were very fact specific but clearly indicate that the election and premium payment periods would be tolled when a qualified beneficiary is incapacitated. But employers and plan administrators should consult with legal counsel regarding the specific application of the equitable tolling doctrine.