Health Insurance: Amazon COBRA Notices Contained ‘Threatening’ Language, Class Action Alleges

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Amazon.com Services, Inc. faces a proposed class action that claims the online retail giant has deliberately attempted to discourage former health plan participants from electing to continue their insurance coverage under COBRA.

The 23-page lawsuit states that Amazon, as the administrator and sponsor of its group health plan, is obligated by law to notify those who’ve lost coverage due to a qualifying event, such as termination, of their right to continue their health insurance. The case alleges that Amazon’s COBRA notice unlawfully contained “threats” of criminal penalties and IRS fines as a way to discourage consumers from electing to continue coverage, presumably due to its expense to the retailer.

The complaint contends that Amazon’s COBRA notice is unlawful in that the “threatening language” misleads consumers and “creates an artificial fear of criminal prosecution or civil liability.” Per the suit, the notice was not written “in a manner calculated to be understood by the average plan participant” as required under the Consolidated Omnibus Budget Reconciliation Act (COBRA).

According to the case, the Amazon COBRA notice at issue contained the following statement just above the signature line of the enrollment form:

The suit argues that this warning is “inaccurate and misleading” because it fails to explain how an individual could face criminal or civil penalties for electing to continue health insurance. Moreover, the notice also warns of a “$50 penalty from the IRS for each failure to provide an accurate tax identification number for a covered individual,” yet again fails to provide any context for the apparent IRS penalty, the case says.

The lawsuit alleges that in light of these “ominous warning[s],” Amazon’s COBRA notice fails to meet the legal standard of being written in a way that could be reasonably understood by the average plan participant.

“Defendant’s COBRA notice, which contains threats of criminal penalties and IRS fines, does not satisfy the standard because Defendant fails to provide a single clarifying example and/or illustration demonstrating how or why plan participants risk criminal penalties and/or IRS fines by submitting incomplete information,” the complaint states. “For instance, there are no examples or illustrations of what constitutes ‘false, misleading or incomplete’ information.”

The case further alleges that Amazon’s COBRA notice fails to identify the name, address and phone number of the plan administrator and instead identifies only the name of the COBRA administrator, BenefitConnect.

The lawsuit says that although Amazon could have used a model notice issued by the U.S. Department of Labor, the company “deliberately chose to create its own notice” in an effort to discourage plan participants from electing COBRA.

The plaintiff in the suit says she worked for Amazon for several years before being terminated while on medical leave. Following her termination, the plaintiff received from the company a COBRA notice that purported to inform her of her right to continue health insurance coverage. Per the case, the plaintiff chose not to elect COBRA “because she was concerned about potential liability if she supplied inaccurate information.”

“If Plaintiff had been presented with a COBRA notice that did not cause her to believe she could be criminally or civilly liable for making an honest mistake, Plaintiff would have elected COBRA and continued her coverages,” the complaint attests.

The lawsuit looks to represent participants and beneficiaries in Amazon’s health plan who were provided COBRA notice in the same form sent to the plaintiff during the applicable statute of limitations period as a result of a qualifying event (as determined by Amazon) and who did not elect COBRA coverage.

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