PHSA COBRA Claim Dismissed for Lack of a Remedy

An employee who was terminated from his job with a state court system sued his former employer, alleging (among other things) that the employer had failed to notify him of his rights under COBRA, compelling him to purchase alternative insurance “nearly three times more costly” than his employer-provided coverage. He asked the court for compensatory damages to cover his extra medical expenses and increased premiums, plus punitive damages, attorney’s fees, and costs. The employer did not dispute that it had violated COBRA but argued that the employee’s requested relief was statutorily barred under the Public Health Services Act (PHSA)—the statute containing COBRA provisions applicable to governmental plans.

The court agreed with the employer, explaining that the PHSA allows qualified beneficiaries to seek only “appropriate equitable relief” for COBRA violations, and that equitable relief typically does not include money damages. The court acknowledged that the statute might allow the employee to seek payment in the form of equitable restitution if the employer held money or property that belonged to him. But, in this, case, the employee made no such allegations; rather, he requested money damages to cover expenses he incurred from third parties. Such a remedy is not equitable relief, the court concluded, and thus is not available under the PHSA.

EBIA Comment: The PHSA’s COBRA provisions apply to group health plans maintained by states or their political subdivisions, agencies, or instrumentalities. Small employer plans are excepted, as are plans maintained by the District of Columbia and territories and possessions of the United States. The PHSA’s enforcement provisions are much narrower than ERISA’s. While ERISA allows for statutory penalties of up to $110 a day, “other relief” in the form of nonequitable damages (such as monetary damages for the deterioration of health), and recovery of fines or attorney’s fees, the PHSA allows for equitable relief only. Thus, qualified beneficiaries of governmental health plans face an uphill battle in legal challenges involving COBRA violations. For more information, see EBIA’s COBRA manual at Sections III.B.3 (“PHSA’s COBRA Provisions”) and XXV.K (“Lawsuits Under the PHSA”). You may also be interested in our upcoming webinar, “Learning the Ropes: An Introduction to COBRA Continuation Coverage” (live on 10/15/2020).

Contributing Editors: EBIA Staff.