COBRA, the Consolidated Omnibus Budget Reconciliation Act, provides employees with the option to continue their health insurance coverage after leaving their job. However, certain circumstances can lead to the early termination of this coverage. One such circumstance is the submission of fraudulent claims.
Terminating COBRA Coverage for Fraudulent Claims
A qualified beneficiary’s COBRA coverage can be terminated for submission of fraudulent claims if three key requirements are met:
- The health plan must allow the termination of active employees’ coverage for the same reason.
- The plan must permit the termination of COBRA coverage for cause.
- The plan’s COBRA notices and communications must disclose the plan’s right to terminate coverage for cause.
Regulatory Guidelines
COBRA regulations specify that a qualified beneficiary’s coverage may be terminated for cause on the same basis that would apply to similarly situated active employees under the terms of the plan. This includes the submission of fraudulent claims. Thus, if an active employee’s coverage can be terminated for submission of fraudulent claims, COBRA coverage can be terminated early for the same reason, provided it is allowed by the plan and disclosed in COBRA notices and the plan’s summary plan description.
Proceeding with Caution
Terminating coverage early is a decision that should be made with caution. Employers wishing to terminate COBRA coverage early for other types of misconduct would need to analyze the circumstances to determine whether the plan would allow termination of an active employee’s coverage for that type of misconduct. It is advisable to consult with legal counsel and the plan’s insurer or stop-loss insurer if applicable.
Final Steps
If you decide to terminate the qualified beneficiary’s coverage based on fraudulent submission, remember to send the required notice of termination of COBRA coverage to any qualified beneficiary whose COBRA coverage terminates before the expiration of the maximum coverage period.
In conclusion, while it is possible to terminate COBRA coverage early due to fraudulent claims, it is a decision that should be made carefully, following the guidelines set forth by your health plan and COBRA regulations.
Source: Thomson Reuters
