Sound Process and Good Recordkeeping Demonstrate Compliance with COBRA Notice Requirements

Earlier this year the Eleventh Circuit Court of Appeals provided a reminder of how important it is for an employer to establish and follow proper COBRA notice procedures and preserve some type of evidence that the procedures are followed. Employers who do those things will find that their efforts are rewarded if a COBRA beneficiary claims the employer failed to comply with COBRA’s notice requirements.

In DeBene v. BayCare Health System, Inc., the Eleventh Circuit upheld a summary judgment issued against Paul DeBene, a former employee of BayCare Health Systems. Among other claims, DeBene alleged that he did not receive the required COBRA notice after terminating employment. In ruling for BayCare the court cited BayCare’s notice procedures, evidence that those procedures were followed, and evidence that other notices sent on the same day successfully reached their intended recipients. The court determined that such evidence was sufficient to show that BayCare met its obligations under COBRA, regardless of whether DeBene actually received the notice.

COBRA requires employers to notify terminated employees of their right to continue healthcare coverage. The employer is required to notify its plan administrator within thirty days of an employee’s termination, and the administrator is required to provide a COBRA notice to the employee within fourteen days. If an employer fails to provide notice to an employee, COBRA grants the employee a private right of action to sue the employer. Under Department of Labor regulations an employer is required to “use measures reasonably calculated ensure actual receipt” of the notice, but an employer is not liable simply because the employee does not receive the notice. In DeBene, the Eleventh Circuit noted that simply hiring a third-party administrator and instructing it to notify employees is not sufficient for an employer to avoid liability.

BayCare, however, provided undisputed evidence of its notification procedures, as well as its third-party administrator’s procedures, and evidence that those procedures were followed. In addition, BayCare provided a copy of DeBene’s notification letter and a report from the third-party administrator showing that the letter was sent. Finally, BayCare was able to provide evidence that other notices sent on the same day successfully reached their intended recipients, and that no other former employees whose notices were sent on that day reported not receiving their notice. The Eleventh Circuit upheld the district court’s determination that this evidence was sufficient to demonstrate that BayCare satisfied its responsibilities under COBRA, whether or not DeBene received his notice.

This decision serves as a reminder of the benefit to employers of having established procedures in place for providing notices required under COBRA and similar laws. It is also an example of the importance of working with an employer’s third-party administrator to ensure effective compliance, and to ensure that errors made by the third-party administrator do not result in employer liability. To this end, employers should review their agreements with third-party administrators, make sure they include performance guarantees regarding COBRA notice procedures, and keep records (or make sure the administrator keeps records) demonstrating those procedures are followed. Employers should also seek to include in contracts with third-party administrators indemnification provisions that will protect the employer in the event the third-party administrator’s notice failures result in liability to the employer.