Vietnam veteran Ronald Flanagan found out his COBRA insurance had been canceled because of a mere two pennies -- just as he was about to undergo a potentially life-saving stem cell transplant to treat his multiple myeloma.
Though Flanagan's treatment seems to have been legal, under the rules of the Department of Labor, insurance carriers must provide notice 30 days before terminating coverage even if there are accusations of fraud. Companies are also required to give people who send payments that are below the amount due time to cure the deficiency. That's what happened in Flanagan's case, though its unclear how that message didn't get through to him."If the amount of the payment made to the plan is made in error but is not significantly less than the amount due, the plan is required to notify the qualified beneficiary of the deficiency and grant a reasonable period (for this purpose, 30 days is considered reasonable) to pay the difference," according to the Department of Labor's website. "The plan is not obligated to send monthly premium notices."
Ceridian Cobra Services, Flanagan's COBRA services provider, sent "several" notices to the Flanagans that their payment was past due and even extended the grace period several times. Ronald Flanagan told WalletPop that he and his wife, Frances, who wrote a "7" instead of a "9" on their payment to Ceridian, first saw a past due amount on their December bill. He didn't notice any mention of a grace period until later. The company was quoted as saying that it lacks the capacity to "personally call continuants and remind them of the status of their Cobra benefits."
You can watch the TV news account on YouTube here.
Flanagan's benefits were restored after the resulting negative publicity, which painted Ceridian as the villain. Its earlier statement also exuded the warmth of Darth Vader. The fact is that the Minnesota-based company was following COBRA's convoluted bureaucratic process. Moreover, its job is to collect payments and it doesn't make a nickle by denying Flanagan, or anyone else, coverage. In fact, it loses money. Ceridian called Flanagan's former employer and got his benefits reinstated.
Ceridian's CEO seems to realize that Flanagan was not treated right.
"Going forward, in fact, we've made a commitment that any time a plan participant is terminated for a de minimis underpayment as proscribed by law and plan rules, and brings it to our attention, we will immediately call the former employer and see if they agree to reinstate benefits," said Ceridian CEO Stuart Harvey in a statement, in which he also apologized to Flanagan.
Last year, a Colorado woman suffering from leukemia lost her COBRA coverage because she was a penny short on a payment. Losing coverage for such piddly sums is probably fairly rare. Far more people lose coverage for failing to pay their premiums outright.
Millions of Americans, including me, rely on COBRA for their health insurance, which lasts for 18 months. Under the 2009 federal stimulus bill, some unemployed workers are eligible for 65% subsidies to make their coverage affordable. The Kaiser Family Foundation estimates that the cost of maintaining the average policy with a subsidy is about $398 per month for a family and $144 for an individual. Without the benefit, the costs are $1,137 per month for family coverage
and $410 per month for individual coverage.
With so much at stake, it's time for the COBRA system to become more about people and less about process.
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