Class Action Claims The Hershey Company Omitted ‘Critical Information’ from COBRA Notice

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A former Hershey Company employee claims in a proposed class action that the snack maker failed to send proper notice of her right to continued health insurance coverage following her termination.

According to the lawsuit, group health plan administrators such as the defendant must apprise those who experience a “qualifying event,” i.e. a termination, of their right to continued health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). 

The plaintiff alleges the COBRA notice she received from the Hershey Company unlawfully lacked “several critical information items,” including the termination date for COBRA coverage and the identity of the plan administrator. In all, the form was not written in a manner calculated to be understood by the average plan participant as required by law, the lawsuit says, alleging the defendant’s failure to do so amounts to a violation of the Employee Retirement Income Security Act (ERISA).

Rather than use a model COBRA notice issued by the U.S. Department of Labor, the defendant “deliberately authored and disseminated” a form that left out “critical information required by law,” the case avers. According to the complaint, Hershey purposely left out the required details in order to discourage plan participants from enrolling in COBRA coverage. Hershey’s “standard practice” during the time period specified in the complaint was to send the omitted details in a second letter only to those who elected COBRA coverage, the suit claims.

According to the case, the plaintiff was notified of the length of continuation coverage but not of the specific date on which coverage would end, which the lawsuit notes is “very important” for plan members deciding whether to elect coverage. From the complaint:

Moreover, the lawsuit claims the defendant’s COBRA form mentioned the phrase “plan administrator” at least 10 times yet “not once” identified the administrator by name. Instead, the notice mentioned a third-party administrator, WageWorks, who the case says is different from the plan administrator. The suit stresses that the identity of the plan administrator is “crucial” given the party is responsible for proving that adequate COBRA notice was provided to the employee.

Combined, the defendant’s failure to fully explain the procedure for electing COBRA coverage, state the coverage end date, explain the consequences of late or missed payments, and identify the plan administrator equate to a failure on Hershey’s part to provide notice “written in a manner calculated to be understood by the average plan participant,” the lawsuit claims.

The plaintiff says she was confused by the defendant’s COBRA notice to the extent that she was unable to make an informed decision on whether to elect coverage. She suffered a loss of insurance coverage as a result, and incurred out-of-pocket medical expenses for herself and her dependents, the lawsuit says.

Several other large companies, including Amazon, Starbucks and Southwest Airlines, have been hit in recent weeks with proposed class action litigation over their alleged failure to provide proper COBRA notices.

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