HR, in writing, misrepresented end date of Health Insurance and possible start date of COBRA
Client employee has an employer/group plan in Indiana; Client gave notice in May for advising of a resignation in August (a typical amount of notice for their field of work). Employer terminated client immediately in May and agreed to pay wages for the remaining period. Employer’s HR representative, in writing and verbally, misrepresented the end date of the employer health insurance plan as 6/30 and possible start date of COBRA as 7/1. The COBRA notice as received states coverage ended 5/31 and COBRA is available 6/1.
Usually we would suggest using the COBRA grace for June, taking the free month if client doesn’t have any claims and enrolling a Marketplace plan using the loss of coverage SEP for a prospective July 1st start date on the Marketplace. This, however, this is a problem as the client used the last month rule to max out their HSA in 2021 and needs to maintain unbroken coverage under an HSA eligible plan for all of 2022 to avoid paying roughly $2,000 in back taxes and penalties for tax year 2021.
Accepting COBRA for June and then enrolling in a replacement Marketplace plan for July would prevent a gap in coverage and allow for continued coverage in an HSA eligible plan, but the total COBRA premium is $1500 more than the lowest cost Marketplace HSA eligible plan for the client and the client would have to absorb that additional cost due to reliance on the employer’s misstatement.
Client relied on employer’s representations regarding the end date of the employer plan when they did not enroll in a Marketplace plan in May for a June 1st effective date. Had they been accurately informed, they would have enrolled in an HSA eligible Marketplace plan for a June 1st effective date.
The plan right now is to request the employer either correct the COBRA offer and coverage such that employee is covered under the employer/group plan for June or to request the employer cover the difference between what the former employee would have paid as an employee under the group plan and what they will be required to pay for COBRA coverage for June.
Client hasn’t made the request yet, but is worried HR/former employer will resist. Does anyone have any experience dealing with a misrepresentation like this by an employer’s HR professional which conflicts with the language on COBRA offer? Any tips on the best way forward?
