An employer whose COBRA/leave policy did not align with a stop-loss policy’s terms continues to be on the hook for a COBRA qualified beneficiary’s medical claims that were rejected by the stop-loss insurer.
The employer unsuccessfully appealed a lower court ruling that the claims were ineligible under the policy terms because they did not include provisions mirroring the employer’s continued coverage policy during employees’ short-term disability period. In affirming the lower court decision, the 6th U.S. Circuit Court of Appeals noted (in an unpublished opinion) that part of the employer’s predicament was that it offered COBRA coverage at the wrong time.
COBRA should have been offered after leave under the Family and Medical Leave Act had terminated, rather than after a termination of employment that occurred several months after the individual was transitioned from FMLA leave to STD leave.
For more details on what went wrong for the employer in Clarcor, Inc. v. Madison Nat. Life Ins. Co., Inc., 2012 WL 3089339 (6th Cir., July 31, 2012), go here.