Q&A: Can We Terminate COBRA Coverage Early Due to Fraud?
August 30, 2024
Understand regulations surrounding terminating COBRA coverage early due to potential fraudulent activities.
Understand regulations surrounding terminating COBRA coverage early due to potential fraudulent activities.
A former employee of ours elected COBRA coverage on our medical plan. She later underwent a rhinoplasty, which the surgeon submitted to the plan as medically necessary. However, she bragged to a former coworker that she had just wanted a nose job and convinced the surgeon – who was a family member – to classify it as medically necessary.
We believe this to be fraud on the part of the employee and surgeon and have instructed our third-party administrator to deny the claim. We would also like to terminate the employees’ COBRA coverage early. Is this allowed? If so, how should we go about it?
Yes, it is possible to terminate an individual’s COBRA coverage early due to fraud. However, I would be very careful before doing so. It may be wise to fully investigate the situation rather than taking the current employee’s word at face value. I recommend discussing this matter with your attorney before taking any action.
If you are able to support the idea that the former employee committed fraud, you may terminate her COBRA early if:
You are also required to provide a notice of termination of COBRA coverage. This notice must be given as soon as practicable after the decision is made and provide the following information:
I recommend working with your COBRA administrator on this. If you administer COBRA yourself and don’t have an early termination notice, let us know. Although the DOL doesn’t provide a model notice for this purpose, we can provide a sample upon request.