The COBRA Blog

Health Insurance Fraud or Forgetfulness? How Divorce Impacts COBRA Administration

Posted by Robert Meyers on Wed, Feb 11, 2015 @ 12:02 PM

cobra-during-divorceDo you know if any of your divorced employees are carrying a former spouse on your insurance plan?

Employees should submit a Change Event Notice to remove their former spouse from your company’s plan within 60 days of divorce finalization, or they should pay the COBRA premium if they want coverage to continue. That’s what’s supposed to happen, but sometimes it doesn’t.

In fact, many companies are surprised to discover a former spouse has remained on an employee’s health plan for a year or more. When this happens, it is difficult to unravel the facts and may ultimately cost you an otherwise excellent employee.

Why Good Employees Take Advantage
What would cause an exemplary employee to take advantage of your company’s goodwill? Often it comes down to financial desperation. The financial cost of divorce plus alimony creates financial pressure. Often the divorce court orders the employee to provide health benefits for the former spouse and the employee simply can’t afford the COBRA premium. Employees sometimes assume the added expense won’t hurt your company, or they feel they have no choice but to lie, especially if the former spouse is unemployed or under insured.

Protect Your Company
Protect your organization by ensuring that you are 100% compliant in sending COBRA rights notices to divorcing employees and their spouses. This is a key point. The rights notice not only informs the employee and the former spouse of their rights, it clearly outlines their notification responsibilities in writing. Ideally, you should have proof of mailing. 

Notice of Rights Plays a Pivotal Role
Divorce is considered a COBRA-qualifying event. The ex-spouse can receive up to 36 months of continuation coverage but they must pay the premium. Let’s assume it’s come to your attention that one of your best employees has added her new husband to the plan and failed to remove her ex-husband. It has been almost two years since they divorced. What do you do now? How do you determine if your employee deliberately misled you or was merely mistaken about the requirement to notify you?

Unless you have proof that you delivered the COBRA Rights Notice, it will be difficult to prove your employee knew of her responsibility to notify you or the plan when their divorce was finalized. By then, you have overpaid benefits but have no legal leg to stand on. Here are some steps you can follow:

  1. Contact your COBRA administrator immediately.
  2. Review all of your COBRA documents for this employee very carefully. You should have:
    1. A copy of the initial COBRA Rights Notice, which was sent to the couple.
    2. A copy of the plan documents which were also provided to them.
    3. Proof of mailing from the United States Postal Service indicating the date when the Initial COBRA Rights letter was mailed to both of them.
  3. This is important: confirm beyond all doubt that no one in your company received a record of notification of the divorce from either the employee or the former spouse within 60 days of the final date of the divorce. This includes conversations or emails to supervisors. Notice may not even be required if the employer has independent knowledge of the divorce. Finally, contact the former spouse and ask them to explain their understanding of the situation. Keep detailed notes of your conversation.
  4. Contact your attorney and the carrier(s) involved once you have all of this information and documentation. The quality and detail of your records will determine whether the outcome of this dispute swings in your favor, so be sure your records are robust and complete.
  5. Always keep your attorney and insurance carrier(s) informed regarding your actions and decisions.

    Here are two possible scenarios:

    1. If your company failed to adequately notify the employee of their COBRA rights and responsibilities, you cannot deny coverage to the former spouse and may be subject to penalties for the notice violation.
    2. If you can prove the employee was notified and also prove the employee and their former spouse never notified you of their divorce and that there was no independent knowledge of the divorce, the employee and former spouse have a significant problem. You can deny COBRA coverage to the former spouse retroactive to the date of divorce leaving the former spouse with no coverage and rendering them liable for claims paid incorrectly on behalf of the former spouse. 

      Losing a good employee to an error in judgment can be as costly as overpaying insurance premiums. It makes good business sense to protect your investment in personnel and your bottom line by establishing best practices now. 

      To learn more about COBRA laws and how to protect your company visit:

      Tags: COBRA during divorce

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