Joshua Richmond Is a Twenty-Five-Year

Joshua Richmond is a twenty-five-year employee of the company. Approximately nine months ago he was injured when a forklift he was operating fell off the loading dock. He suffered a compound fracture to his right femur which required surgical repair. He received temporary total worker's compensation benefits for the six months that he was unable to work. As is company policy, Richmond paid his own health insurance premiums. Unfortunately, during the period of time that he was on worker's compensation, he was under the impression that as part of his worker's compensation benefits that the company was paying his premiums. As a result of his failure to make his payment his health insurance was terminated. Unfortunately, the notices regarding the termination were sent to the company's plan administrator and not to Richmond. The plan administrator, believing that Richmond received notice as well, did not notify Richmond. Now, Richmond has been diagnosed with cancer. He has no insurance and with a pre-existing condition has little chance of qualifying for new coverage.

Issue

The issue is whether or not the company is liable for the failure of its health plan administrator's failure to notify the employee of the termination of his insurance coverage and, if so, how far does that liability extend.

Rule

ERISA requires the sponsor of a group health care plan subject to its provisions to inform plan participants, including any former employees eligible for plan benefits, of (1) a material reduction in covered services or benefits within 60 days of adopting the change and (2) any other material modification to the plan within 210 days of adoption.

Application

In a case arising out of the Eastern District of Pennsylvania the court held in Aquilino v. Solid Waste Services, 2008 U.S. Dist, LEXIS 47168 (E.D. Pa.) that a change in the method or means by which a participant is required to make premium payments is "an implicit term and condition of the health plan," the court found that the employer neither continued to deduct contributions for health coverage nor told the employee how he was to make such contributions when his leave began. According to the court, this change in the method by which the employee was required to make contributions resulted in a loss of coverage for COBRA purposes.

The company was not involved in the payment of Richmond's health insurance premiums but the plan was set up through the company. Due to the lowered premium advantages gained through group coverage the company had negotiated the plan for its employees but had never paid the premiums. Unfortunately, on the insurance application the company's human resource office was listed as the plan administrator.

The fact that Richmond paid his own premiums and had for some time works to the company's advantage. He was obviously aware that this had been the case for some time. Why he thought that the company would pay his premiums during his period of disability is unknown.

The problem for the company is that the only notice provided regarding the failed premium payments is the company and the results of the insurance being terminated are so disastrous. Richmond has been placed in an untenable position. He is facing astronomical medical costs and the inability to acquire new coverage.

The effort needed to notify the employee relative to the health insurance company's notification regarding the missing insurance premium was minimal. The fact that the premium were automatically deducted from the employee's check and that once he went on worker's compensation such deductions were no longer being deducted should have alerted the human resource office of potential problems. This was a breakdown in the internal operations of this department.