Where an employer does provide insurance coverage, ERISA regulates the administration of the plan. Nazay v. Miller, 949 F.2d 1323, 1329 (3d Cir 1991). The COBRA amendments to ERISA, 29 USC §§ 1161-1168, allow a former employee to elect to continue participation in the health care plan provided by the former employer. Continuation coverage can extend a maximum of eighteen months, or until the employee obtains an alternate source of health insurance. Continuation coverage does not expire prior to the end of the eighteen-month period if a new employer's health plan does not cover preexisting conditions. 29 USC § 1162(2)(D)(i).
COBRA's "continuation coverage" provisions mandate that:
The plan sponsor of each group health plan shall provide * * * that each qualified beneficiary who would lose coverage under the plan as a result of a qualifying vent is entitled, under the plan, to elect, within the election period, continuation coverage under the plan.
29 USC § 1161(a). There is no dispute that Bonita House is a "plan sponsor," that both the CCCMHA and Kaiser plans are "group health plans," that Coble is a "qualified beneficiary," that the October 1990 lay-off was a "qualifying event," or that Coble timely "elected, within the election period." The only issue raised by Coble's motion is whether Bonita House satisfied its obligation to provide "continuation coverage under the plan" by offering to Coble the Kaiser HMO program provided to all of Bonita House's other employees and former employees, even though the Kaiser HMO program could provide no benefit whatsoever to Coble.
29 USC § 1162 defines "continuation coverage." That section requires that:
The [continuation] coverage must consist of coverage which, as of the time the coverage is being provided, is identical to the coverage provided under the plan to similarly situated beneficiaries under the plan with respect to whom a qualifying event has not occurred. If coverage is modified under the plan for any group of similarly situated beneficiaries, such coverage shall also be modified in the same manner for all individuals who are qualified beneficiaries under the plan pursuant to [the COBRA provisions].
29 USC § 1162(1).
Bonita House argues that, by offering the Kaiser program to Coble, it satisfied the plain language of the COBRA requirements by providing "coverage * * * identical to the coverage provided under the plan to similarly situated beneficiaries * * *." According to Bonita House, following the failure of CCCMHA, Bonita House properly "modified" its plan such that Kaiser became the only group health care plan available. Under this view, Coble is entitled only to an opportunity to participate in the same Kaiser plan as Bonita House's Berkeley employees.
Coble offers a different interpretation of the requirements of § 1162(1). The mandate to provide "coverage * * * identical to the coverage provided under the plan" means, according to Coble, that the COBRA beneficiary is entitled to all of the coverage, or all of the protection against the risk of individually bearing the cost of medical treatment, offered under the plan to similarly situated employees. If the employer's geographically-restrictive HMO plan cannot reach the COBRA beneficiary, it is the employer's obligation, under Coble's view, to provide identical coverage through some other means.
The statutory language is reasonably susceptible to either of the interpretations advanced by the parties, and is therefore of little help in resolving the problem at hand. Looking at the larger purposes of the enactment, Bonita House's reading of COBRA is unduly restrictive. COBRA is remedial legislation. National Companies Health Plan v. St. Joseph's Hosp., Inc., 929 F.2d 1558, 1567 (11th Cir 1991). "Congress enacted COBRA because it was concerned about the fate of individuals who, after losing coverage under their employer's ERISA plan, had no group health coverage at all. Continuation coverage [was meant to] afford these individuals group health coverage until they could secure some other coverage." Id. at 1569. ERISA reflects an underlying policy commitment to employer-based health care programs rather than some alternative which would rely on individual insurance policies or government-managed health programs.
Implicit in the Congressional emphasis on employer-based health insurance is the concept of the "least-cost provider." An employer, as an organization, seemed to Congress to be in a much better position than an individual employee to investigate and evaluate various health insurance options, and to negotiate favorable group rates from insurers. Thus, by this view, the employer is at an informational and economic advantage in obtaining health coverage for employee.
In this case, the matter to be resolved comes down to a question of which one of two innocent parties, Coble or Bonita House, should bear the cost imposed upon Coble by the insolvency of the health insurer, CCCMHA. Consistent with Congress' intent, the answer is unambiguously the employer, Bonita House. It is the employer, not the employee, who obtains information about prospective insurers, and who is therefore in the better position to manage the risk that the insurer selected becomes insolvent. This is true even in the case of a small, non-profit employer such as Bonita House, for even a small employer has a greater ability to investigate and negotiate with health care providers than does a single individual employee.
This least-cost analysis, as well as ERISA's remedial nature and Congress' intent that employers take primary responsibility for the health care of employees and recently-terminated employees, leads the court to conclude that the employer's obligation to provide "continuation coverage" must create a duty upon the employer to provide meaningful coverage to COBRA beneficiaries, identical to that provided to similarly situated employees, so long as the employer chooses to offer health care benefits to existing employees.
Bonita House argues that a general rule which entitled COBRA beneficiaries to a health care plan other than the employer's chosen geographically-restricted HMO plan would be financially ruinous. Bonita House conjures the specter of COBRA beneficiaries who move far from a former employer's HMO's service area, and then demand that the employer make special insurance provisions for their unique circumstances. That is not the situation at bar. Here, Coble has done nothing to remove herself from the coverage provided by Bonita House. By contrast, Bonita House affirmatively selected the Kaiser HMO as its only health care provider even though this action effectively denied Coble the health care benefits provided to all others dependent on Bonita House for those benefits, and Bonita House was in the better position from the start to seek to avoid the underlying problem -- the insolvency of CCCMHA. In Bonita House's hypothetical, it is the COBRA beneficiary who can best avoid the problem, by remaining within the employer's HMO's service area.
Coble's motion for partial summary judgment is GRANTED, and Bonita House's motion for partial summary judgment is DENIED, on the issue of whether COBRA's "continuation coverage" provisions creates a duty upon the former employer to provide coverage in the circumstances of this case. Of course, this order leaves unresolved the matter of the amount of damages incurred by Coble as a result of Bonita House's failure to provide adequate continuation coverage, and the related question of whether and to what extent Coble is responsible for mitigating those damages. The parties are to appear before the court for a status conference at 9:00 a.m. on April 10, 1992, and to be prepared to enter into a schedule for resolution of these and any other remaining issues in this litigation.
IT IS SO ORDERED.
DATED: March 25, 1992
VAUGHN R. WALKER
United States District Judge
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