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Save Envelopes to Save a Bundle on COBRA

A recent case in Pennsylvania illustrates the importance of understanding and documenting when COBRA premium payments are made.

In Hall v. Glenn O. Hawbaker, Inc., the court found that a COBRA-qualified beneficiary had mailed her premium payment for September coverage on October 5th. Based on this finding, the court denied the beneficiary’s motion for a preliminary injunction that would have reinstated her COBRA coverage.

The court noted that a plan has the right to terminate COBRA coverage if premium payments are not timely made. COBRA payments are considered made on the date they are sent to the plan. Thus, a payment is made when it is mailed, and not when it is actually received by the plan.

Typically, COBRA premium payments are due by the first day of the month to which the premium relates. COBRA also provides a mandatory grace period, however, under which payments must be considered timely if they are made within 30 days after the first day of the month to which they relate. (This grace period is 45 days for the premium relating to the initial COBRA election.)

In the Hawbaker case, the beneficiary argued that her payment had been placed in the mail on the date of the check, which was September 26th. This date was prior to the expiration of the grace period for September coverage. However, the plan successfully argued – based on the dating of other checks drawn on the beneficiary’s checking account – that the check had been backdated. Taking into account an estimated transit time for the mail, the court concluded that the payment had actually been mailed (and thus made) no earlier than October 5th.

Although the plan prevailed in this case, it could easily have lost the motion had the beneficiary’s checking account not clearly indicated backdating. Had the plan saved the post-marked envelope in which the premium arrived, the plan could have proven much more easily that the payment was not timely made.

Plan administrators should consider retaining the envelopes in which COBRA premium payments arrive – at least until they determine whether a payment was timely. The envelopes in which untimely payments arrive should be preserved as evidence whenever COBRA coverage will be terminated due to a delinquent premium.