Geissal v. Moore Medical Corp.: Supreme Court Extends Scope of COBRA Benefits

By Ronald L. Scott

The U.S. Supreme Court held on June 8, 1998, in Geissal v. Moore Medical Corp., that an employer may not deny continuation coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) to a qualified beneficiary who is covered under another group health plan at the time he makes his COBRA election.

On July 16, 1993, Moore Medical Corporation fired James Geissal, who had been diagnosed with cancer. While employed, Geissal was covered under Moore’s group health plan as well as the health plan provided by his wife’s employer. Shortly after Geissal lost his job, Moore told him that he had a right under COBRA to elect to continue coverage under Moore’s plan. Geissal chose to continue his coverage, and made premium payments for six months. However, in January 1994, Moore advised Geissal that it had been mistaken, and that he was not actually entitled to COBRA benefits because on the date of his election he was already covered by another group health plan, i.e., through his wife’s employer. Geissal sued Moore, charging Moore with violating COBRA by renouncing an obligation to provide continuing health benefits coverage. Geissal further argued that Moore was estopped to deny him continuation coverage because it had misled him to think that he was entitled to COBRA coverage, that Moore’s misrepresentation amounted to a waiver of any right to assert a reading of the plan provisions that would deprive him of continuation coverage, and that Moore’s plan administrator had violated COBRA by failing to provide him with certain plan documents.

COBRA requires an employer that sponsors a group health plan to give the plan’s "qualified beneficiaries" an opportunity to elect "continuation coverage" under the plan when the beneficiaries might otherwise lose coverage upon the occurrence of certain "qualifying events," including the termination of the covered employee’s employment (except in cases of gross misconduct). Therefore, a "covered employee" may be a "qualified beneficiary" entitled to make a COBRA election.

COBRA also requires plans to advise beneficiaries of their rights under COBRA both at the commencement of coverage and within 14 days of learning of a qualifying event, after which qualified beneficiaries have 60 days to elect continuation coverage. Continuation coverage dates from the qualifying event, and when the event is termination or reduced hours, the maximum period of coverage is generally 18 months. The beneficiary who makes the election must pay up to 102 percent of the "applicable premium" (the cost to the plan of providing continuation coverage) for the first 18 months of continuation coverage. Benefits may cease if the qualified beneficiary fails to pay the premiums. The statute provides that COBRA coverage may also cease on "[t]he date on which the qualified beneficiary first becomes, after the date of the election… covered under any other group health plan (as an employee or otherwise), which does not contain any exclusion or limitation with respect to any preexisting condition of such beneficiary…"

The Supreme Court held that an employer may not deny continuation health insurance coverage under COBRA to a qualified beneficiary who is covered under another group health plan at the time he makes his COBRA election. To deny COBRA coverage, the beneficiary must "first become" covered under another plan after the date of a COBRA election. In this case, Geissal was continuously a beneficiary of his wife’s employee group health plan both before and after he was terminated by his own employer and elected continuation coverage. Therefore, Geissal did not "first become" covered under his wife’s employee health benefits plan after the date of his COBRA election, and Moore could not cut off his COBRA coverage on the basis of Geissal’s coverage under his wife’s plan.