Possibly. First, if an employer discovers a failure to offer COBRA in a timely manner, they should consult with their own legal counsel. This is important because qualified beneficiaries interested in maintaining health coverage are typically more likely to file complaints with the DOL to enforce their COBRA rights. A failure to meet COBRA requirements can potentially result in an employer facing significant penalties, participant lawsuits, and even the self-funding of participant claims. For these reasons and more, it is important to consult with legal counsel.
Generally speaking, the correction for a compliance failure is to attempt to put the qualified beneficiary in the position they should have been in absent the error. Whether or not retroactive COBRA is a solution may depend on the period of time between the loss of coverage and when the correction is discovered and made. It may be possible to offer retroactive coverage if the time period was relatively short, although the carrier (for a fully insured plan) or TPA and stop-loss carrier (for a self-insured plan) would need to be in agreement. If many months have passed, it may not be as meaningful to a qualified beneficiary to have retroactive coverage. The DOL generally frowns upon requiring a COBRA beneficiary to pay for retroactive COBRA since the individual could not access it during that time and thus could not benefit from it.
In those cases, and in consultation with their legal counsel, the employer may determine that offering coverage on a prospective basis is a better solution. Prospective coverage goes beyond what COBRA requires but may address complaints by those who declined or postponed medical care they would have otherwise pursued had COBRA coverage been timely offered. Prospective coverage can have downsides as well, such as potential liability for claims incurred during the gap in coverage and the need to obtain consent from the carrier or stop-loss carrier that they are on board with essentially expanding their COBRA liability now that the start date for COBRA is months after it should have been.
Accordingly, it will depend on the facts and circumstances of the failure as to how an employer should fix the situation. Working with legal counsel is key to ensuring the employer adopts an appropriate correction approach designed to fulfill its COBRA obligations and make the qualified beneficiary whole, to the extent possible.
Additionally, employers should review their COBRA administrative procedures to determine how the error occurred and what steps should be taken to prevent it from happening in the future.
For further information on employer obligations under COBRA, including a discussion on the consequences of COBRA noncompliance, please ask your broker or consultant for a copy of the NFP publication COBRA: A Guide for Employers.