David B. (Self-funded plan)
David B. was admitted to a residential treatment facility for treatment of alcohol dependence. He underwent approximately 4 weeks of inpatient rehab, followed by 45 days of outpatient care. When a claim was submitted, the plan paid only a small portion of the claim, alleging that David’s coverage terminated one week after commencement of his treatment.
A review of the medical file disclosed two issues presented by the claim: (1) a possible problem relating to the pre-existing condition exclusion of the plan; and (2) a definite problem relating to an alleged termination of coverage as of March 31, 1998 (i.e. one week after commencement of treatment). I was able to immediately resolve the first issue in David’s favor, which left only the second one regarding coverage. Resolution of that issue turned upon whether a proper COBRA notification was ever sent out to David and (assuming there was) whether the COBRA form was timely returned with the COBRA premium payment. David had quit his job two weeks before checking into the facility. Therefore, a timely COBRA should have been within 14 days after he terminated employment.
Apparently, what happened was a notification was likely mailed by the administrator to David, but it was sent to his last known address, (which was an apartment in Anaheim, CA). However, David had remained at the treatment facility throughout the entire duration of treatment (including the outpatient phase) and his mail was not forwarded to him. The apartment manager had kept his incoming mail in a shoe box, which consisted mostly of bills. Therefore, if there was a COBRA notification sent to his apartment, it went unnoticed.
The financial file documented that the treatment facility contacted the independent third-party claims administrator (TPA) to verify benefits and obtain certification for treatment, but nothing documented any discussion about COBRA or any activities related to COBRA. Since COBRA coverage was something that could be opted to for up to 60 days after receipt of the notification form, the persons at the TPA, who verified benefits and pre-certed the admission, would not necessarily know whether COBRA had become effective or whether there would have been a retroactive termination of coverage for failure to opt for COBRA.
I spoke to David at length, following his discharge from the treatment facility. He confirmed that approximately 2 weeks before entering treatment, he told his District Manager that he was quitting his job, and thereafter he failed to show up for work. He explained that at the time of his admission, he was too sick to even appreciate what was going on with regard to his benefits coverage or anything else. He had sunk so low into addiction that he was actually considering suicide. Therefore, his focus was on his recovery, not insurance coverage; and that he honestly believed that any coverage issues had been resolved between the treatment facility and the TPA, prior to his admission.
The TPA was an agent of the Plan Administrator and the employer was the Plan Administrator. The TPA case-managed the entire course of inpatient treatment, from start to finish. Therefore, plan representatives were well aware of the fact that David was residing at the facility. If the COBRA notification had been mailed to him at the facility address, the notification would have been brought to the attention of the financial manager, and the election form would have been completed, signed, and promptly returned to the plan administrator, accompanied by the proper premium payment. I managed to find some case law on the issue holding that where an administrator mailed the COBRA notification to the employee's last known address, such was deemed to be a “good faith” compliance with the COBRA notice requirements. Under later enacted regulations, direct notice would be given to medical providers in a situation such as this one.
Result: The case was resolved satisfactorily, without the need for litigation.