QUESTION: We have a qualified beneficiary who was severely injured in a car accident a few days after the 60-day COBRA election period began. Should we suspend the election period?
ANSWER: Neither the COBRA statute nor the regulations address this question, but several courts have held that the 60-day COBRA election period must be tolled (suspended) when a qualified beneficiary becomes incapacitated during the election period. The tolling period would generally start when the qualified beneficiary’s incapacity begins, and would end when the incapacity ends or when a representative is appointed to act on the qualified beneficiary’s behalf. (The representative would have the balance of the election period in which to make an election.) In general, tolling is only warranted if there is evidence that the qualified beneficiary is mentally or physically incapable of making an election. Thus, your decision should be based on the qualified beneficiary’s mental and physical condition.
As a related matter, your plan should be prepared to accept a COBRA election from a third party on behalf of the incapacitated qualified beneficiary. According to IRS regulations, if a qualified beneficiary becomes incapacitated or dies, then his or her legal representative, estate, or spouse may make the election. Furthermore, at least one court has concluded that there was a fiduciary duty on the part of the employer/plan administrator and the insurer to recognize a “deemed election” by an incapacitated qualified beneficiary under circumstances where it was clear that the qualified beneficiary would have elected COBRA if able to do so.
If your group health plan is insured (or self-insured with stop-loss insurance), be sure to examine your insurance contract and obtain the insurer’s written approval before deciding whether to suspend a qualified beneficiary’s election period. You may also want to consider developing procedures for handling suspensions and elections by third parties when qualified beneficiaries are incapacitated. And because suspending an election period (or choosing not to) can have long-term and expensive consequences, we recommend seeking the advice of experienced legal counsel.
For more information, see EBIA’s COBRA manual at Sections XIX.D (“Tolling the Election Period”) and XIX.F (“Who May Elect COBRA for a Qualified Beneficiary?”).
Contributing Editors: EBIA Staff.