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COBLE v. BONITA HOUSE

March 25, 1992

ISIS COBLE, Plaintiff,
v.
BONITA HOUSE, INC., and DOES I THROUGH XX, inclusive, Defendants.



The opinion of the court was delivered by: VAUGHN R. WALKER

ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT.

 On February 28, 1992, the court ruled from the bench that defendant Bonita House owed a duty to provide COBRA continuation benefits to Isis Coble under the circumstances described below. This written order is intended to explain the court's analysis of this novel ERISA issue.

 I. BACKGROUND FACTS.

 The facts involved in resolving plaintiff's motion are not in dispute. Plaintiff Isis Coble was employed at Bonita House, a non-profit mental health residential care program. At all times when Coble was an employee, Bonita House operated two facilities, one in Berkeley, California and the other in Ukiah, California. Coble was employed at the Ukiah facility, and resides in the Ukiah area.

 Bonita House provided two health care plans for its employees. One was Kaiser, an HMO program which services the Bay Area. Because the state of California limits HMO's to geographic "service areas," Cal Health & Safety Code § 1340, et seq., the Kaiser plan was available only to Bonita House's Berkeley employees. The second plan was a program provided by the California Council of Community Mental Health Agencies Employee Health Benefit Trust ("CCCMHA"), a self-insured, multi-employer trust fund. Ukiah employees, such as Coble, could only obtain benefits through CCCMHA; Berkeley employees had a choice of CCCMHA or Kaiser.

 In October 1990, Bonita House closed the Ukiah facility due to a lack of funds, and laid off all of its Ukiah employees, including Coble. Coble soon obtained new employment. The new employer's health care plan, however, would not provide coverage for a "preexisting condition" during the first few months of employment; in Coble's case, until July 1, 1991. Coble did have a preexisting condition and, therefore, in November 1990, timely elected to purchase "continuation coverage" through CCCMHA and Bonita House, pursuant to the COBRA amendments to ERISA, 29 USC §§ 1161-1168.

 Unfortunately, on April 1, 1991, CCCMHA became insolvent. Bonita House determined that it would not replace the CCCMHA plan in its employee health benefit package, but would provide only the Kaiser plan to its employees. This change appeared reasonable to Bonita House because, at the time, all of Bonita House's remaining employees worked in Berkeley and resided in Kaiser's service area. Similarly, two of the three former Bonita House employees who had elected COBRA continuation coverage were residents of the Kaiser service area, and used Kaiser for their continuation coverage. Of all of the individuals connected to Bonita House, only Coble lost health insurance due to the insolvency of CCCMHA.

 Bonita House sought to have Coble covered by Kaiser, but Kaiser declined to extend coverage to an individual outside of its service area, citing both Kaiser policy and California law. There is no evidence that either Coble or Bonita House considered obtaining alternative health insurance to cover Coble during this period. In treating the preexisting condition not covered by her new employer's plan, Coble incurred a large, but as yet undetermined, amount of non-reimbursed medical expenses between April 1, 1991 and July 1, 1991.

 As these facts are not in dispute, both parties move for summary judgment on the issue of Bonita House's legal duty to provide continuation coverage.

 II. DISCUSSION.

 Under ERISA, 29 USC §§ 1001, et seq., the decision whether to provide health insurance coverage to employees, and the scope of that coverage, is entirely at the discretion of the employer. Musto v. American General Corp., 861 F.2d 897, 911 (6th Cir 1988). ERISA does not mandate the provision of health insurance coverage by employers, any particular type of coverage that must be provided, or any changes in the scope of coverage.

 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 ...


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