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Employee’s Cost of Converting Health Insurance Under COBRA

Section 8-40-201(19) provides that the term “wages” shall include “the amount of the employee’s cost of continuing the employer’s group health insurance plan and, upon termination of the continuation, the employee’s cost of conversion to a similar or lesser insurance plan.”

Recently, an employer raised an interesting defense to the claimant’s request to increase his Average Weekly Wage to reflect the cost of conversion under COBRA. Fortune v. Restaurant Technologies, Inc., W. C. No. 4-915-420-01 (January 30, 3015). In Fortune, upon separation of employment the claimant received a notice pursuant to COBRA that his cost of continuing his health insurance was $1,086.22 (which converts to a weekly cost of $271.56). The employee chose not to continue his health insurance under COBRA, and requested the respondents increase in his Average Weekly Wage by the weekly cost of $271.56. At the hearing, the respondents presented evidence that the employer offered to pay an undisclosed portion of the claimant’s total cost of continuing insurance coverage, and argued that the claimant’s Average Weekly Wage should be increased only by the weekly amount the claimant would have had to pay if he had elected to continue his coverage.

The Administrative Law Judge rejected the respondent’s legal argument and awarded an increase in the Average Weekly Wage to reflect the full weekly cost of continuing the claimant’s health insurance coverage. The respondents appealed to the Industrial Claim Appeals Office, who affirmed the decision of the Administrative Law Judge, stating “Applied to another case, that argument may have merit. In this matter however, the respondents admit the employer “would have paid” a portion of the premium ‘if’ the claimant had elected to continue to pay his portion of the premium pursuant to the COBRA notice. However, the respondents then observe that the ‘claimant did not elect a COBRA plan.’ Accordingly, the respondents did not continue to pay any health insurance premium.”

As support, the ICAO referenced that portion of §8-40-201(19) which provides “If, after the injury, the employer continues to pay any advantage or fringe benefit specifically enumerated in this subsection (19), including the cost of health insurance coverage or the cost of the conversion of health insurance coverage, that advantage or benefit shall not be included in the determination of the employee’s wages so long as the employer continues to make payment.” The ICAO then found that, because there was no evidence that the employer continued to pay the cost of the claimant’s health insurance coverage “the fact that the claimant did not actually continue his health insurance coverage is inconsequential to whether the AWW should include the amount of the claimant’s cost of continuing an employer’s group health insurance plan.” Industrial Claim Appeals Office v. Ray, 145 P.3d 661 (Colo. 2006)(claimant’s AWW must include cost of continuing employer’s group health insurance plan regardless of whether claimant purchased the insurance).

However, it appears that the ICAO focused on the wrong part of § 8-40-201(19)(b) because it failed to comprehend the respondent’s argument. The portion of the statute cited by ICAO is not relevant to a determination in this case, because that section states only that the cost of health insurance shall not be included in the AWW if the employee does not continue coverage. The respondents, however, were not arguing that the AWW should not be increased at all. Rather, the respondents admitted that the AWW should be increased, and instead were arguing that, because the employer offered to pay a portion of the employee’s cost of continuing the claimant’s health insurance, under §8-40-201(19)(b) the true cost to the employee of continuing his health insurance was only that amount the employee would have had to pay if he had elected to continue coverage.

It is not clear whether this case will be appealed to the Court of Appeals. However, I do not believe that this case should discourage respondents from making a similar argument in a similar case, as it appears that the ICAO decision is not well reasoned.

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