Lutheran Hospital of Indiana, Inc. v. Business Men's Assurance Co. of America

CUMMINGS, Circuit Judge. The issue in this case is whether a laid-off employee is ineligible for COBRA continuation health care coverage because of her preexisting coverage under the group health plan provided by her husband’s employer. Background In 1986 Congress passed the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), which amended the Public Health Service Act (“PHSA”), the Employee Retirement Income Security Act (“ERISA”) and the Internal Revenue Code (“the Code”). The COBRA amendments to ERISA, 29 U.S.C. §§ 1161-1168, provide that individuals who lose coverage under their employer’s group health plan due to certain qualifying events, e.g., lay-off or reduction in hours, may continue their coverage in the group health plan at their own expense for a period of 18 or 36 months depending on the qualifying event. The continuation coverage must be identical to that received by any “similarly situated beneficiaries under the plan” who have not had a qualifying event. 29 U.S.C. § 1162(1). The critical provision for the present case, 29 U.S.C. § 1162(2), provides in relevant part that: The coverage must extend for at least the period beginning on the date of the qualifying event and ending not earlier than the earliest of the following (D) The date on which the qualified beneficiary first becomes, after the date of election— (i) covered under any other group health plan (as an employee or otherwise) “which does not contain any exclusion or limitation with respect to any pre-existing condition of such beneficiary.’ As originally passed in April of 1986, 29 U.S.C. § 1162(2)(D)(i) read, “a covered employee under any other group health plan.” COBRA Pub.L. No. 99-272, § 10002(a), 100 Stat. 82, 228. In October of 1986 it was amended to read, “covered under any other group health plan (as an employee or otherwise).” Tax Reform Act, Pub.L. No. 99-514, § 1895(d)(4)(B)(ii), 100 Stat. 2085, 2938. Finally in 1989 Congress amended the statute again, adding the ‘“which does not contain any exclusion or limitation with respect to any preexisting condition of such beneficiary’” language, bringing it to its present form. The “first becomes, after the date of the election” qualifying language was in the original statute and has remained unchanged through this series of amendments. The facts in this case were largely stipulated by the parties. Mary Isch was admitted to Wells Community Hospital of Bluffton, Indiana, on April 28, 1991.1 She was transferred to Lutheran Hospital of Indiana two days later and transferred again to St. Joseph Medical Center on September 26, 1991, and discharged December 27, 1991. At the time of her hospitalization, she was a teacher at Community and Family Services, Inc. (“Community”) and received group health insurance under the Community group health insurance plan provided through Business Men’s Assurance Company of America (“BMA”). She was also a covered dependent under her husband’s group health insurance provided by the Teamsters Local 135 Welfare Fund (“Teamsters”). On May 1,1991, Mary Isch took a leave of absence from her employment because of her illness. On May 25, 1991, Mary Isch and the other teachers at Community were laid off for the summer. Effective June 1, 1991, Community switched insurers from BMA to Associated. In early June 1991, an Associated representative told Community that Mary Isch would not be eligible for COBRA coverage because of her coverage under the Teamsters’ plan. Plaintiffs brought suit in the Northern District of Indiana on July 13, 1992, seeking a declaratory judgment as to which if any of — 1311 — the four named defendants2 was responsible for providing benefits to Mary Isch after June 1, 1991. St. Joseph Medical Center intervened in the action on June 14, 1993, with a complaint against the Isches and all defendants. All parties filed motions for summary judgment on July 17, 1993. The district court granted summary judgment against Teamsters and in favor of the other defendants, finding that Mary Isch had lost her coverage due to a qualifying event but was not entitled to COBRA continuation coverage because of her preexisting coverage under the Teamsters’ plan. 845 F.Supp. 1275 (N.D.Ind.1994).3 Teamsters appeal the district court’s ruling holding them exclusively liable for Mary Isch’s medical costs. Plaintiffs appeal the district court’s ruling, that Acordia and Associated are not also liable. Both plaintiffs and Teamsters contend that Associated is primarily and Teamsters secondarily liable for Mary Isch’s medical expenses. Discussion Three other Circuits have addressed this issue with differing results.4 In Oakley v. City of Longmont, 890 F.2d 1128 (10th Cir.1989), certiorari denied, 494 U.S. 1082, 110 S.Ct. 1814,108 L.Ed.2d 944, the plaintiff was covered under both his employer’s and his wife’s group health plans. Plaintiff suffered a serious head injury in an auto accident. His employer ultimately terminated him and discontinued his health coverage. His employer also denied plaintiff continuation coverage because of his preexisting coverage under his wife’s, health plan. The Tenth Circuit held that the clear language of the statute “cannot be construed to include a spouse’s preexisting group plan as a condition to terminate continuation coverage.” Id. at 1132. Consequently the defendant city was required to provide continuation coverage to its previously covered plaintiff employee. Because the plaintiff needed expensive rehabilitation not covered by his wife’s plan, the court noted that [sjurely the facts of this case illustrate the precise gap in coverage which troubled Congress. Mr. Oakley was terminated because of a catastrophic event which otherwise would have put his family at risk and jeopardized his treatment had the continuation rules not been in effect to maintain his rehabilitation for a limited period of time. (Emphasis supplied.). Id. at 1133. In Brock v. Primedica, Inc., 904 F.2d 295 (5th Cir.1990), the Fifth Circuit ignored the clear holding of the Oakley court and fastened instead on the above-quoted reference to a “gap,” holding that since the plaintiff, Karen Brock, suffered no gap between her employer’s plan and her preexisting coverage under her husband’s plan she was not entitled to continuation coverage. The Eleventh Circuit in National Companies Health P. v. St. Joseph’s Hosp., 929 F.2d 1558 (11th Cir.1991), recognized the conflict between Oakley and Brock and embraced the Fifth Circuit’s gap analysis. The court held that [i]n the case of an employee covered by preexisting group health coverage ... such an employee is ineligible for continuation coverage ... [unless] there is a significant gap between the coverage afforded under his employer’s plan and his preexisting plan. Id. at 1570-71. Faced with these conflicting holdings, this Court shall proceed with our own analysis of the relevant COBRA statute and its application to the present case. — 1312 — In attempting to effectuate Congress’ intent we start^-and if it is “sufficiently clear in its context,” end — with the plain language of the statute. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 201, 96 S.Ct. 1375, 1384-85, 47 L.Ed.2d 668. 29 U.S.C. § 1162(2)(D)(i) provides that an employer can terminate continuation' coverage on The date on which the qualified beneficiary first becomes, after the date of the election— (i). covered under any other group health plan (as an employee or otherwise) which does not contain any exclusion or limitation with regard to any pre-existing condition of such beneficiary. The statute clearly provides that the employee’s right to continuation coverage terminates only when he or she first becomes, after the election date, covered by any other group health plan. The statute does not say that an employee is ineligible for continuation coverage if he or she is covered by a preexisting group health plan. Nor does the statute say that a beneficiary’s rights terminate when he or she becomes eligible for additional or alternative group health insurance. Therefore, an employee loses the right to continuation coverage only if he or she chooses after the election date to accept coverage under another group health plan. The statutory distinction between preexisting and after-acquired health care coverage is reasonable and facilitates the preservation of the beneficiary’s health care, status quo. The plain language of the statute dictates that an individual only loses COBRA eligibility if he or she chooses to accept alternative group health insurance after .the qualifying event. By the terms of the statute, the individual has the choice whether to preserve the status quo and continue the prior level of coverage under COBRA or accept alternative coverage and discontinue COBRA. In either case, for the 18- or 36-month statutory period provided in 29 U.S.C. § 1162(2)(A), the individual is never forced to accept a lower level of health care coverage than he or she received as an employee before the qualifying event. If on the other hand the language of the statute is ignored and preexisting double coverage disqualifies one from COBRA continuation coverage, upon termination an employee’s status quo is not preserved and the level of coverage automatically drops to the level provided by the preexisting coverage as a beneficiary of a spouse’s employer’s plan. In many instances that level of coverage will be perfectly adequate and no harm will be suffered by the individual because the prior double coverage was in fact redundant. But those situations are not the ones we or Congress are concerned with, because in those situations the individual will not pay the premiums to continue COBRA coverage that he or she does not need. In situations in which double coverage is in fact redundant and unnecessary, whether or not COBRA coverage is available is a non-issue because no one would choose to pay the premiums to obtain it. Therefore, we, like Congress, must focus on those cases in which the double coverage is not completely redundant. The question then becomes whether individuals should be forced to accept what they perceive to be inadequate coverage and be denied the “privilege” to pay (up to 102% of the cost) to maintain their prior level of coverage. The plain language of the statute says “no.” Nonetheless, the district court and the Eleventh Circuit in National reached a different conclusion. In so doing they relied on what they posited to be Congress’ intent “that the obtention, in any manner, of almost any group health coverage would justify an ERISA-plan sponsor’s termination of continuation coverage.” National, 929 F.2d at 1571. How and from where these courts divined this intent is not clear. The National court cites Congress’ description of its amendment to ERISA’s “other coverage” termination provision as providing for the “[tjermination of continuation coverage by [an] other group health plan rather than upon reemployment or remarriage.” Tax Reform Act, Pub.L. No. 99-514, § 1895(d)(4), 100 Stat. 2085, 2938. Yet Congress’ determination that the circumstances giving rise to post-election coverage are irrelevant does not in any way undermine the statutory distinction between coverage accepted after election and preexisting double coverage. — 1313 — In fact, there is little legislative history which illuminates Congress’ intent in enacting COBRA and none which relates to the timing provision at issue here. Instead, the district court and the National court relied on Congress’ supposed general intent in passing the COBRA amendments to ERISA, “to provide some continued access to affordable private health insurance — not the maintenance of every employee’s insurance status quo.” Lutheran Hosp., 845 F.Supp. at 1287. The legislative history from which this “true intent” is gleaned is the claim that “[t]he COBRA amendments to ERISA were enacted in response to ‘reports of the growing number of Americans without any health, insurance coverage and the decreasing willingness of our Nation’s hospitals to provide care to those who cannot afford to pay.’” National, 929 F.2d at 1567 (quoting H.R.Rep. No. 241, 99th Cong., 2d Sess. 44, 1986 U.S.Code Cong. & AdmimNews 42, 622).5 This assertion of general motivation hardly seems sufficient to override the clear language of the statute. Moreover, neither the statute nor the proposed COBRA regulations support the contention that Congress intended COBRA to require only “bare-bones” coverage and not the preservation of the employee’s status quo. Preservation of the status quo is exactly what 29 U.S.C. § 1162(1) requires: The coverage must consist of coverage which as of the time the coverage is being provided, is identical to the coverage provide under the plan to similarly situated beneficiaries under the plan with respect to whom a qualifying event has not occurred. The Treasury Department’s proposed COBRA regulations further undercut the notion that Congress intended to require only “bare-bones” continuation coverage.6 Under the proposed regulations, if the employer offers a “cafeteria” plan, which gives employees a choice among various group health plans, a COBRA beneficiary must be allowed the same freedom as current, employees to choose a new plan during any open enrollment periods occurring while he is receiving continuation benefits. 52 Fed.Reg. 22,716, 22,723. Similarly,' if an employer offers a core plan and separate vision and dental plans, an employee previously covered under all three may choose to continue any of all of the three. Id. at 22,726. An employee covered only by the vision or dental plan may choose to continue coverage under just that plan. Id. at 22,727. After holding that preexisting coverage was disqualifying, the Eleventh Circuit in National went on to say:. There may be, however, instances when, despite coverage under a preexisting group health plan, an employee is entitled to receive continuation coverage under his previous employer’s ERISA plan. If there is a significant gap between the coverage afforded under his employer’s plan and his preexisting plan, an employee will be eligible for continuation coverage. This is because, in that situation, the employee is not truly “covered” by the preexisting group health plan as that term is used by Congress to effectuate its intent. National, 929 F.2d at 1571. Courts which have held that preexisting coverage was disqualifying have attempted, under the guise of — 1314 — this “gap analysis,” to avoid the harshest results of their statutory misreading. Predictably, this analysis has resulted in a “gap” morass, inviting judicial line-drawing in the absence of any specific criteria much less congressional authorization. The National court’s approach was invented from whole cloth to fill a void resulting from its misreading of the statute. Congress’ 1989 amendment limiting disqualification under 29 U.S.C. § 1162(2)(D)(i) to subsequent coverage under a group health plan “which does not contain any exclusion or limitation with respect to any preexisting condition of such beneficiary” does not buttress or affirm the type of “gap” analysis courts are forced to engage in if they ignore the language of § 1162(2)(D) and treat preexisting double coverage as disqualifying. None of the potential “gaps” that concerned the courts in Oakley, Brock, National, or the present ease are the result of a preexisting condition exclusion or limitation.7 The amendment does not speak of “inferi- or” or “non-comparable” coverage, and therefore does not authorize courts to make such comparisons and determinations. Only by ignoring the language of the amendment and finding its “true import” to be a guarantee of “comparable coverage” can the dissent avoid the admittedly draconian situation — that inferior pre-existing insurance would disqualify one from receiving COBRA coverage — that results when the dissent disregards the plain language of the statute itself. The alternative is to honor the plain language of both the statute and the amendment and let the terminated employee — who bears the risk and pays the premium — rather than a court determine what is or is not comparable coverage. If instead we accept the position of the National court and the dissent, we are left with the question of how a court determines what is a significant gap in coverage. The National court found no gap in coverage even though the individuals involved were personally responsible for $6,700 in medical expenses because they were not able to continue their dual coverage. National, 929 F.2d 1558. In McGee v. Funderburg, 17 F.3d 1122 (8th Cir.1994), the Eighth Circuit found personal liability of over $7,500 to be a significant gap and thus allowed COBRA continuation coverage without reaching the issue whether preexisting double coverage was disqualifying. Does the magnitude of personal liability sufficient to constitute a gap depend on the ability of the individual to pay or on the overall scale of their medical expenses?8 These questions are ones which courts should not ask or answer without congressional authorization or direction. The only gap that should be relevant and judicially cognizable is that perceived by the insured individual who chooses to pay the COBRA premiums to continue her additional coverage. In the present case the district court compared the Teamsters and Associated plans and determined that there was no “significant” gap, despite the fact that under the Teamsters plan the Isch family may be personally liable for $35,000. 845 F.Supp. at 1288. The court determined that the Isches’ actual personal liability was an illegitimate post hoc consideration. Id. [I]t would not be a proper function of the court to look with hindsight at the bills actually incurred in a given illness/accident so as to determine a beneficiary’s personal exposure under each policy, and from that — 1315 — determine whether a violation of COBRA has occurred. Id. at 1289. Instead, the district court attempted to put itself in the position of the employer at the time of the qualifying event: So, the Court should view these policies as if a choice had to be made in June 1991, knowing full-well that the Patient has Guil-lane-Barré Syndrome, but not knowing her future medical costs or their duration. Id. From this ill-defined and artificial vantage point the court concluded that there was no significant gap between the Teamsters plan, which had a $250,000 yearly maximum but no lifetime limit, and the Associated plan which had no yearly limit but a $1 million lifetime limit. We agree that a post hoc determination of personal liability is an inappropriate way to determine preexisting legal duties. But the fictional ex ante approach taken by the district court is no more appropriate and completely unworkable. How much information about the patient’s physical and financial condition is the court to presume of the employer in making this after-the-fact comparison? Is the court to apply an objective or subjective standard, i.e., is it what the employer knew or what a reasonable employer should have known? How does an employer calculate the gap based on whatever information he is presumed to have? Must an employer utilize an actuary and medical expert to determine the likely effect of policy differences given the patient’s physical condition at the time of the qualifying event? This whole morass can be avoided by honoring the language of the statute and the decision of the insured as to how much coverage is adequate for her own situation. Under a proper application of the statute, the employee obtains no windfall. She is only allowed to preserve the level of coverage she determined was appropriate before her termination and was willing to pay to continue afterward. Conclusion Mary Isch is not disqualified from obtaining COBRA coverage because of her preexisting coverage under her husband’s Teamsters’ plan. .The district court’s grant of summary judgment against Teamsters is reversed and the case is remanded to the district court for further proceedings consistent with this opinion. In addition, the district court’s grant of summary judgment in favor of Associated and its denial of appellants’ motion for summary judgment against Associated are reversed. Footnotes [1] Mary Isch was stricken with Guillane Barré Syndrome, an acute, rapidly progressive neurological disorder, and was subsequently forced onto life supports. 845 F.Supp. 1275, 1288. [2] On January 5, 1995, upon stipulation of counsel, the appeal was dismissed as to defendant Business Men’s Assurance Company of America. [3] We agree with the district court’s finding that Mary Isch lost her coverage due to a qualifying event, and thus affirm the court’s rejection of Associated's argument that the loss of coverage was due to a change in insurance carriers. 845 F.Supp. at 1284. [4] In all three cases the amended 1986 version of § 1162(2)(D)(i) was in effect. That version of the statute did not contain the "which does not contain any exclusion or limitation with regard to any pre-existing condition" language found in the 1989 version of the statute applicable to the present case. [5] We disagree with the suggestion of the dissent that Congress’ use of the word "any" in the above-quoted language is somehow dispositive of the issue in this case. A snippet of legislative histoiy does not normally Urump the plain language of a statute which, as we have noted, places no such limitation on COBRA coverage. To the contrary, “the plain language of a statute is 'the most reliable indicator of congressional intent.’ ” Castellon-Contreras v. INS, 45 F.3d 149, 152 (7th Cir.1995), quoting Central States, et al. v. Cullum Companies, 973 F.2d 1333, 1339 (7th Cir.1992). Even if it accurately reflects the Congressional motivation for the enactment of COBRA, the quoted histoiy is not inconsistent with the proper reading of the statute. The fact that Congress may have been motivated by the plight of a smaller sub-class — people without any health insurance — does not mean that in remedying the situation they necessarily limited relief to that sub-class rather than the larger group, including Mary Isch, who lose jobs and all or part of their insurance. [6] Courts including the Eleventh Circuit have relied on these proposed regulations in determining Congressional intent with respect to other aspects of COBRA. See Branch v. G. Bernd Co., 955 F.2d 1574, 1581 (11th Cir.1992). [7] Mary Isch does not have a pre-existing condition — she has pre-existing coverage. Her condition developed during the time she was covered under both policies. Therefore, this case is unaffected by the 1989 amendment. [8] The National court determined that no gap existed because the insured would have been liable for the $6,700 under either the preexisting or the COBRA plans by themselves. The National court thus determined that since the personal liability under either plan was roughly the same there was no "significant gap.” The court did not explain why this was the appropriate gap to consider rather than the difference in personal liability between the double coverage and the single pre-existing plan. The court essentially supplanted its own view of what is adequate insurance coverage for that of the employee and his family who had determined that neither plan was adequate and thus opted for coverage under both and was willing to pay the premiums to keep it.