No Disability Insurance Coverage Under COBRA


In this era of complicated and ever changing health care laws, business owners - both large and small - received some guidance recently from the U.S. Court of Appeals for the Fourth Circuit. Ruling in a case of first impression, the court held that disability insurance is not covered under the coverage-continuation provisions of the Consolidated Omnibus Budget Reconciliation Act (COBRA).

In Austell v. Raymond James & Assocs., No. 96-1974,1997 U.S. App. LEXIS 18208 (4th Cir. July 22, 1997), the plaintiff argued that the COBRA statute should be read to include coverage for disability insurance as well as group health insurance. COBRA defines "group health plan" as "an employee welfare benefit plan providing medical care . . . to participants or beneficiaries directly or through insurance, reimbursement, or otherwise," and it defines "medical care" as amounts paid for "the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body." Disability insurance, the plaintiff argued, is an amount paid for the "mitigation" of disease and, therefore, should be included within the definition of "medical care."

The court rejected the plaintiff's interpretation of the statute. Looking to the dictionary, which defines "mitigate" as "to modify; alleviate," the court concluded that disability insurance cannot reasonably be viewed as medical care because it is not an amount paid to modify or alle-viate disease. Nor is it an amount paid to diagnose, cure, treat, or prevent disease. "It is instead," the Fourth Circuit wrote, "basically designed to replace lost wages." The court held that coverage for disability insurance would not be consistent with the Congressional intent to protect against the loss of health care coverage. COBRA's purpose, the court noted, "is to prevent individuals covered under their employer's ERISA plan from having no group health coverage at all from the time a qualifying event terminates their coverage to the time in which they are able to secure some other coverage."

As further support for its ruling, the court noted that other courts have stated in general terms that the continuation requirement of COBRA is intended to focus on the provision of health care coverage."

With this ruling, the Fourth Circuit apparently becomes the first federal circuit court to rule on the issue of coverage for disability insurance under COBRA.

For more information on issues relating to COBRA, contact William W. Carrier at 410/752-9721.