Class Action Challenges Adventist Health System/Sunbelt ‘Church Plan’ Status, Claims COBRA Notices Were Deficient

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A proposed class action contends Adventist Health System/Sunbelt has failed to provide employees with lawful notice of their right to elect to continue their healthcare coverage on the incorrect basis that it is a “church plan” exempt from COBRA requirements.

According to the 21-page lawsuit, Adventist employees would have been able to opt to continue their healthcare coverage under the government’s May 2020 extension of the COBRA enrollment deadline in the early days of the COVID-19 pandemic if not for the defendant’s improper application of the “church plan” exemption, which pertains only to non-profit, church-affiliated hospital organizations. 

“In other words, Plaintiff and the putative class members each could have received health care coverage for free,” the case, filed in Florida on July 14, reads. “But, of course, because Defendant has improperly claimed the church exemption, neither Plaintiff nor any of the putative class members are able to take advantage of this important Government subsidy.” 

Adventist, the sponsor and de facto administrator of the health insurance plan at issue, has repeatedly violated the Employee Retirement Income Security Act (ERISA), namely COBRA’s notice requirements, to the detriment of proposed class members, who’ve incurred real-world harm by way of medical bills and lost insurance, the suit claims. 

Per the lawsuit, COBRA—the Consolidated Omnibus Budget Reconciliation Act of 1985—requires the sponsors of each group health plan normally employing more than 20 workers on a typical business day in the prior year to provide each qualified plan beneficiary who would lose coverage after a qualifying event of their right to elect to continue coverage under the plan. The case stresses that COBRA notices are of great importance in that employees are not presumed to know that they have the federally protected right to continue their healthcare coverage upon a qualifying event. 

To facilitate COBRA compliance, the U.S. Department of Labor has made available a model COBRA election notice containing each piece of information that would allow an employer to comply with the law, the suit continues. Here, however, Adventist has failed to use the DOL’s model notice, in part because of its use of ERISA’s “church plan” exemption. 

“Defendant has not and cannot satisfy ERISA’s strict requirements for the ‘church plan’ exemption,” the case claims. “As a threshold matter, the Plan cannot be considered as ‘established’ and/or ‘maintained’ by a church.” 

The lawsuit says that according to Adventist’s own consolidated financial statements, the hospitals under its jurisdiction were only formerly operated by various conferences of the Seventh-day Adventist Church. Thus, the defendant’s healthcare plan falls well short of the “church plan” exemption given it is not maintained by a church, convention or association of churches, the suit relays. 

“It is simply not a church,” the complaint reads, noting the defendant reported nearly $5 billion in revenue in 2020 alone.

The COBRA notice received by the plaintiff and proposed class members fell short of what the law requires in that it was, according to the lawsuit, “deliberately authored and disseminated” with a lack of critical information and cut the election deadline short by at least a month. Adventist’s COBRA notice omitted certain mandatory explanations, including a description of the circumstances under which the maximum period of continued coverage could be extended, identification of the qualifying event and the consequences of failing to elect or waiving continued coverage, the suit claims. 

As a result of the insufficient notice, the plaintiff did not elect COBRA coverage and incurred out-of-pocket medical expenses thereafter, the lawsuit says. Further still, the plaintiff’s deadline to enroll in COBRA benefits would have been extended indefinitely under the government’s pandemic-related guidelines, or at least until the national emergency ended, had the defendant not improperly claimed a church exemption, according to the suit.  

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