Wells Fargo COBRA Notices Miss the Mark, Class Action Claims [UPDATE]

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A proposed class action alleges Wells Fargo has repeatedly failed to provide health plan participants and their beneficiaries with proper notice of their right to continued insurance coverage following a qualifying event.

The 19-page case says that Wells Fargo’s failure to write its COBRA notices in a manner calculated to be understood by the average plan participant amounts to an attempt to scare individuals away from electing continued health insurance coverage. Although the U.S. Department of Labor has made available a model COBRA notice to help companies comply with the law, Wells Fargo, the complaint claims, chose instead to send a notice that left out critical information and included language meant to “deter and otherwise ‘chill’” election of continued health benefits. 

According to the suit, Wells Fargo has run afoul of the Employee Retirement Income Security Act (ERISA) by including in its COBRA notices an “ominous” warning that suggests to the reader that the submission of incomplete information when electing continued health insurance coverage may result in civil, or even criminal, penalties. Wells Fargo is also alleged to have needlessly referenced in its COBRA notices a potential $50 penalty from the IRS for each failure to provide an accurate tax ID number for a covered individual. 

As the case tells it, this information is “thrown into Defendant’s notice without context, much less with an explanation of why potential criminal penalties, or IRS penalties, are somehow 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 intimidating people into not electing coverage,” the complaint reads. 

Omitted from Well Fargo’s COBRA notices are any clarifying examples or illustrations as to how or why a plan participant risks criminal and/or IRS penalties for submitting incomplete information, the suit says. Moreover, the lawsuit argues that Wells Fargo, by failing to note in a highlighted sentence that “knowledge” or “intent” are necessary to commit actual fraud, has led recipients to believe that someone who merely files an incomplete application, regardless of whether they had knowledge or intent to conceal information, has committed fraud. 

The lawsuit also alleges Wells Fargo failed to identify in the notices the administrator of its health plan, and highlighted its third-party administrator instead. 

The plaintiff, who worked for the defendant as a personal banker from October 2013 through January 2020, claims to have not elected to continue health insurance coverage after her termination, which the suit says occurred while she was on leave to take care of a terminally ill family member, based in part on the “threats and warnings” in Wells Fargo’s COBRA notice. The former employee, in turn, incurred medical bills for which she had to pay out of pocket, the suit says. 

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