Do Verbal Elections Count?

Chances are you've heard the buzz about verbal COBRA notice rulings or verbal COBRA benefits elections. In recent years, there have been multiple lawsuits involving employers and employees who duke it out in the courtroom over "he said, she said" benefits problems and in most cases, the court rules in favor of the verbal notice.

"What does this mean for employers in terms of compliance and best practice when COBRA enrollment does not go as smoothly as it should? The short answer is--make sure you take those conversations about benefits seriously, carefully documenting and following up. These simple steps can keep your company out of the courtroom."

CobraHelp recently assisted with a situation involving a verbal notice of event, and subsequent verbal COBRA election, where the employee allegedly informed his employer of a pending divorce and subsequent need for COBRA coverage earlier in 2018. The employee verbally advised his HR department of the pending divorce, which was to be finalized in March. The employer failed to do anything at the time of the event simply because she didn't realize her obligations to the member and divorced spouse at the time. She likely thought this was a casual conversation, and that the employee would eventually provide something in writing.
Months passed by, and the former spouse was not only not notified of COBRA rights, she was also left on active employee plan, receiving free health insurance for about five months before an inquisitive insurance broker reached out to our office about the matter.

The employee called Human Resources and wanted to know what happened to the coverage for the former spouse. Understandably, the employer wanted to receive premium reimbursement for the previous months during which the spouse had been receiving "free" employer benefits. However, being that the employer did have conversations with the employee regarding the divorce earlier in the year, the employer bears most of the responsibility in this case.
Here's the breakdown of what transpired in response to this sticky compliance situation after the Employer and Broker consulted the COBRA Experts and legal counsel on the matter:

1) Employer should confirm that all employees and spouses are being provided with Initial Rights Notifications (general notice) within 90 days of enrollment into group health benefits. The General Notice is the employers proof that it has done its duty in advising plan participants of their rights and obligations regarding dependent events such as divorce, and that employees generally have 60 days from the divorce to inform the employer or plan administrator of the event. Note that the statute does not require written notice of a divorce; therefore the verbal notice of the employee involved should not have been taken lightly.

2) Carrier was willing to retro-terminate the benefits as far as July 2018, so the employer was ultimately on the hook for the premiums from March through July in this case. As unfortunate as this was, it was a far less risky (and much more ethical) option than denying the member COBRA altogether or holding her responsible for all retro-premiums given that she was never properly notified.

3) Employer sends official COBRA Notice of Right to Elect, allowing the ex spouse to be advised of her right to continue coverage for up to 36 months from the original event date. She was also informed that she will not have to pay the premiums prior to July given that she wasn't properly notified and had been left on the plan.

4) QB (divorced spouse) is now on COBRA and responsible for her premiums going forward. She is eligible for a total of 36 months of coverage so long as she remits premium timely.

5) In the future, employer should document benefits related conversations, and follow up with employees in writing with emails or letters, ensuring that COBRA notices are distributed timely by forwarding Notices of QE's to their COBRA Administrator. As a general best practice, any COBRA or benefits related matter should be handled using proper notification procedures and thorough documentation. Save the verbal stuff for cocktail hour.

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Author: Heather Underwood
HR Management | ERISA Specialist | Compliance Expert | Blogger

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