Whistleblower: Tiny error? Big problem

Greg Lee couldn't afford to shell out $428 a month for COBRA health care coverage after losing his job at LA Fitness last November, so he went without insurance for six months. When Lee, who has Type I diabetes, found out this spring that he could get federal help with the COBRA payments, however, he signed up right away.

A few months later, Lee said, he is without health insurance again because of an inadvertent mistake -- his payment was short $6.82. He didn't have any idea until he got a termination letter from the company that administers his plan.

"There was no ... contact of any kind indicating that there was a problem with the premium payment," he said. "I was shocked when I got that letter."

Laura McKinlay, CEO of Igoe Administrative Services, the San Diego-based COBRA administrator for LA Fitness, said the company ended his coverage because he had not fully paid his share of the premium. After Whistleblower inquired about Lee's situation, the company said his coverage would be reinstated.

"We are required to notify them of what their payment amounts are," McKinlay said. "We are not required to give them any type of monthly balance statement."

Gloria Della, a spokeswoman for the federal Department of Labor, which helps oversee COBRA, said the agency is looking into Lee's situation. "The bottom line is that they have to give you some kind of notice of insufficient payment," Della said.

Unemployed, without health insurance

When Lee was terminated from his sales job at LA Fitness, it was the first time in his life that he had to go without health insurance.

"It incredibly complicates my life," said Lee, 58, who lives in Mendota Heights.

One of his first concerns was a planned cell transplant at the University of Minnesota that, if successful, might end his need for six to 10 insulin shots each day. Lee is already approved for the clinical trial, and his surgical costs will be covered. But he has to pay for anti-rejection drugs, which can cost $500 to $1,000 a month.

In April, Lee found out that he qualified for a $278 COBRA premium reduction through the federal economic stimulus package. He got a confirmation letter from Igoe dated May 20 saying his monthly premium payment would be $150.12. Another letter dated May 27 said he would have until July 3 to send in his payments and also stated that his premium payment was $150.12.

What Lee didn't notice was a schedule showing his June payment climbing to $156.94. So on June 1, he sent a check covering the April, May and June premiums without knowing the June amount was short. The company accepted his payment and the check cleared on June 11.

"If they had told me I was off, I would have sent them a check," he said. "I mean, it's $6.82."

In early July, he got a letter stating that his coverage was terminated as of June 1. The reason: failure to pay premium on time.

Lee then sent checks for the amount due and for July's premium. The company returned the checks and his June premium, enclosing a letter saying that the payment was past due and that the 45-day grace period had expired.

There has been at least one similar case in which a premium underpaid by 75 cents resulted in someone's coverage getting terminated, Della said. But federal law states that minimal underpayments, as in Lee's case, do not allow termination of COBRA coverage, she said.

"You should give the participant an amount of time to make up that amount and give them a notice," Della said.

The federal agency asked Igoe to reinstate Lee's account as of June 1. Lee has until Sept. 14 to send in his payments for June, July and August. He planned to put a check in the mail this weekend.

"It's a major relief," Lee said.