COBRA Denials and Gross Misconduct
When an employer has an employee who has been terminated for gross misconduct, an employer does not have to offer COBRA continued health coverage to the employee, spouse or dependents who were covered under the company’s health plan. However, denial of COBRA coverage based on gross misconduct is uncommon. COBRA laws and rules do not have a clear definition of gross misconduct, leaving it to the courts to define the term.
Terminating an employee for cause is not the same as terminating for gross misconduct. Employees who show incompetent or careless behavior might justifiably be fired but cannot be denied COBRA coverage.
|Qualifying Event||Who May Elect Cobra||Maximum Coverage Period
|Termination||Employee, spouse, dependent child||18|
|Reduced hours||Employee, spouse, dependent child||18|
|Employee starts Medicare||Spouse, dependent child||36|
|Divorce/separation||Spouse, dependent child||36|
|Death||Spouse, dependent child||36|
|Child loses dependent status||Dependent child||36|
Note on chart: If one of the qualified beneficiaries in a family is disabled and meets certain requirements, all of the qualified beneficiaries in that family are entitled to an 11-month extension of the maximum period of continuation coverage (for a total period of 29 months of continuation coverage). Please see the Department of Labor Employer’s Guide to Group Health Continuation Coverage under COBRA for additional information on disability.
While there is no formal definition of what constitutes gross misconduct in the workplace, some accepted descriptions include: deliberate acts of violence or hostility, having an accident with a company vehicle while intoxicated, embezzlement, theft and racial slurs.
Employers who do not offer COBRA coverage to an otherwise qualified beneficiary, spouse or dependents can face a penalty of up to $110 a day, including retroactive reinstatement of coverage and payment of medical expenses that would have been covered. Employers should tell employees about company rules when they are first hired and any time new policies are put into effect. Any actions that violate company rules should be documented. Employers should also meet with an employee benefits adviser or legal counsel when considering talking with an employee about a COBRA denial.
This Focus Benefits Flash is for informational purposes only and should not be construed as legal advice or legal opinion. You should consult your own professional adviser or attorney regarding your situation and questions you may have.