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Coverage cannot be denied a former employee simply because the employee has another health plan option

by Bob Lawson

Is an employer allowed to deny or terminate COBRA coverage of its health insurance plan to an eligible beneficiary when that beneficiary is covered under another group health plan at the time

the beneficiary elects coverage under

COBRA?

A federal court in Missouri concluded an employer could. This decision was upheld by the U.S. Court of Appeals for the Eighth Circuit. However, the United States Supreme Court recently reviewed this case, since various federal courts differ on this issue.

The case involved a Missouri employer, Moore Medical Corporation, that, in July 1993, fired one of its employees, James Geissal. After his discharge, the corporation informed Mr. Geissal of his rights under COBRA to elect continued coverage under its health plan.

Mr. Geissal, who was suffering from cancer, elected to continue the coverage and paid his health premiums. However, after six months, Moore Medical Corporation informed Mr. Geissal that the

COBRA coverage would be discontinued because he was also covered by his wife's employer's health insurance plan at the time he elected continued coverage under their plan.

Generally, COBRA requires employers who have 20 or more employees and who sponsor a group health plan to give "qualified beneficiaries" (for example, former employees) the opportunity to elect continued coverage upon certain "qualifying events," such as the death of an employee, the divorce from a covered employee or the termination of an employee.

The statute also requires the employer to advise beneficiaries of their COBRA rights within 14 days of the qualifying event, at which time the beneficiary has 60 days to elect continued coverage. In the case of a terminated employee, continued coverage usually lasts for 18 months after the COBRA election period.

However, the terminated employee is required to pay the insurance premiums during the coverage period.

COBRA benefits can cease if the former employee fails to pay necessary premiums or the former employer discontinues the health insurance plan entirely.

However, in this case, Moore Medical Corporation relied upon a COBRA statute which provides that COBRA coverage to a former employee may also be terminated on "the date on which the qualified beneficiary (former employee) first becomes, after the date of the (COBRA) election, covered under any other group health plan which does not contain any exclusion or limitation with respect to any pre-existing condition of such beneficiary."

Moore Medical Corporation inter-preted this statute to mean that COBRA coverage terminates after the COBRA election when the individual becomes covered by another group health plan.

Mr. Geissal argued that he did not "first become" covered under his wife's employer's group plan after the date of the election and, therefore, Moore Medical Corporation could not terminate his continued coverage.

The federal court in Missouri and the Eighth Circuit agreed with Moore Medical Corporation's interpretation.

On June 8, 1998, the United States Supreme Court disagreed and ruled in favor of Mr. Geissal. The court, accepting Mr. Geissal's arguments, reasoned that the statute plainly states that the beneficiary must "first become" covered after the election.

Accepting the employer's arguments, the court stated, ignores the modifier "first," giving it no meaning within the statute. In other words, since Mr. Geissal was already covered by his wife's health plan before he elected COBRA coverage, then he did not "first become" covered after his election of the COBRA benefits.

The court acknowledged, though, its strict interpretation could provide an unusual application of COBRA coverage.

Specifically, the court stated, "It is true that if during the interim between the qualifying event (such as termination) and election (of COBRA) a beneficiary gets a new job, say, with health coverage, he will have the benefit of COBRA, whereas he will not have it if his new job and coverage come after the election date."

The court inferred, though, that since a former employee has to pay for COBRA premiums, he or she is not likely to want duplicate health insurance.

Missouri employers can no longer assume that because a former employee has alternative health insurance it can summarily deny or terminate COBRA benefits.

(Bob Lawson is an attorney with the firm of Blackwell Sanders Matheny Weary & Lombardi LLP in Springfield.)

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