Medicare Reform - COBRA Notice

SECOND CIRCUIT COURT SAYS COBRA NOTICE REQUIRED
EVEN WHEN DIVORCE IS LATER INVALIDATED

The Second Circuit has ruled that an employer must provide notice of the right to COBRA health care continuation coverage upon learning of the divorce of a covered employee from his spouse, regardless of whether the divorce is later invalidated. Phillips v. Saratoga Harness Racing, Inc., 2001 U.S. App. LEXIS 2426 (2d Cir. Feb.1, 2001). In so ruling, the Second Circuit overturned a lower court decision that had a particularly harsh effect on the wife and children of the worker.

Tired of protracted divorce negotiations with his wife, a worker went to the Dominican Republic, obtained a divorce, and married his secretary. Upon his return, he informed his employer of the divorce and asked that health insurance coverage be dropped for his first wife and children. The employer gave the COBRA election packet to the employee to give to his former wife. The former wife did not learn about the Dominican divorce or the loss of health coverage until the medical bills she submitted to the plan were rejected. The Dominican divorce was found null and void after suit under COBRA was filed. The district court then ruled that, since no valid divorce had occurred, the wife had not experienced a COBRA qualifying event and the court lacked jurisdiction to hear the case.

According to the Second Circuit, the triggering event for COBRA notice purposes was the notice to the employer that a divorce had occurred, not the divorce itself. COBRA requires a plan administrator who is told by the worker of a divorce to notify the workers' beneficiaries of their COBRA rights. Any other interpretation makes no practical sense, according to the court, because a beneficiary is rarely competent to make a legal determination of when a qualifying event - such as a divorce or legal separation or becoming entitled to Medicare - occurs. Further, the underlying purpose of COBRA, to provide health insurance to those who lose it because of divorce, would be defeated if the plan administrator had to second guess divorce decrees. Finally, the court said that even if notice of the divorce to the plan administrator was not enough, the facts presented strong arguments that a divorce had occurred, and the divorce was presumably still valid in the Dominican Republic. COBRA does not require that a divorce be valid and recognized in all jurisdictions; notice obligations arise even if the divorce is subsequently invalidated.