Amazon Facing Class Action Over Allegedly ‘Deficient’ COBRA Health Coverage Notices

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Amazon Corporate, LLC faces a proposed class action filed by a former employee who claims she never received proper notice of her right to continued health insurance coverage after her termination.

As the sponsor and administrator of the Amazon Health & Welfare Benefits Plan, the defendant is required under the Consolidated Omnibus Budget Reconciliation Act (COBRA) to send to those who experience a qualifying event—i.e. termination from the company—notice of their right to continued health insurance coverage, the lawsuit explains.

According to the suit, Amazon’s COBRA notice failed to comply with federal law given it omitted several critical pieces of information and contained threats of civil and criminal penalties.

The suit alleges Amazon’s COBRA form was not written “in a manner calculated to be understood by the average plan participant”—a requirement under federal law—in that it lacked any reference to the plan administrator’s name, address and telephone number. Not only did the notice fail to sufficiently identify the plan administrator as required, but it included contradictory dates as to the deadline for COBRA election, the lawsuit claims.

Also included in Amazon’s COBRA notice was “an ominous warning” suggesting to plan participants that “any person who knowingly provides materially false, incomplete, or misleading information is considered to have committed an act to defraud or deceive the Plan Sponsor(s),” the case alleges. The notice went on to warn that applying for insurance or other benefits “based on false, misleading, or incomplete information” could result in civil, or even criminal, penalties, the suit says.

The lawsuit argues that the defendant included such as a warning to “scare individuals away from electing COBRA coverage,” which the case notes is typically expensive for employers.

The complaint goes on to challenge Amazon’s reference of a possible “$50 penalty from the IRS for each failure to provide an accurate tax identification number for a covered individual.” According to the case, this information is “thrown into Defendant’s notice without context” or even an explanation as to why potential criminal or IRS penalties are relevant to the COBRA election process.

“Threats of criminal penalties and IRS fines simply have no place in a COBRA election notice, a process which is supposed to facilitate COBRA coverage election rather than intimidate people into not electing coverage,” the complaint scathes.

According to the complaint, the defendant deliberately chose not to use the model COBRA form issued by the U.S. Department of Labor to facilitate compliance. While Amazon “partially adhered” to the model notice, the company omitted critical details and included misleading and extraneous items meant to discourage consumers from electing coverage, the lawsuit argues. According to the case, the model DOL notice conveys the required information in only seven pages while Amazon’s COBRA form includes 19 pages of “conflicting, inadequate, and misleading information.”

The plaintiff alleges she was confused by Amazon’s COBRA notice and consequently unable to make an informed decision regarding whether to enroll in COBRA coverage. As a result of Amazon’s conduct, the plaintiff lost her health coverage and was forced to pay out-of-pocket medical expenses after her Amazon insurance ended, per the complaint.

The plaintiff looks to represent all participants and beneficiaries in Amazon’s health plan who, within the application statute of limitations period, were sent a COBRA notice in the same form as the plaintiff as a result of a qualifying event and did not elect continuation coverage.

The suit’s filing comes a little more than two months after that of a similar lawsuit alleging Amazon Corporate has disseminated non-compliant COBRA documentation.

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