Q & A w/ BBBA: If a fraudulent claim is submitted under COBRA, can the coverage be terminated for the qualified beneficiary?
Q: If a fraudulent claim is submitted under COBRA (Consolidated Omnibus Budget Reconciliation Act), can the coverage be terminated for the qualified beneficiary?
A: Let’s begin with clarification of COBRA – it is a health insurance program that allows an eligible employee and their dependents the continued benefits of health insurance coverage in the event an employee loses their job or experiences a reduction in work hours. This law was passed by Congress in 1985.
Should a qualified beneficiary submit a fraudulent claim you may terminate coverage, however, the following three (3) requirements need to be met in order to do so:
- First, your health plan must permit you to terminate active employees’ coverage for the same reason;
- Second, your health plan must allow you to terminate COBRA coverage for cause;
- Third, the health plan’s COBRA notices and communication must disclose the plan’s right to terminate coverage for cause.
Termination of COBRA coverage for a qualified beneficiary before the end of the maximum coverage (generally 18 – 36 months) period can occur for specified reasons in the COBRA statute and regulations. The regulations specify that termination for cause must be the same for both active employees and qualified beneficiaries of COBRA under the terms of the health plan, and inclusion of the fraudulent claim(s) submission. This reason (if allowed by the health plan), as well as disclosure in COBRA notices and the plan’s summary plan description (SPD) will allow the qualified beneficiary to be terminated.
If the decision is made to terminate the qualified beneficiaries COBRA coverage due to the fraudulent claim, remember the required notice of termination must be sent to any qualified beneficiary whose COBRA coverage terminate before the expiration of the maximum coverage period.
There is little guidance on early termination of COBRA for cause and a fraudulent claim(s) is the only basis that is specifically mentioned in the regulations. Always be cautious and consult with your legal counsel and the health plan’s insurer (or stop-loss insurer if applicable) regarding all decisions to terminate coverage early.
For more information regarding Employee Benefits for your organization, or to speak with one of our advisors, email Jason Della Penna, Executive Vice President at Brown & Brown Benefit Advisors at firstname.lastname@example.org.
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