Bowers v. Blue Cross Blue Shield of Georgia

• Decision Date: 28 August 1998
• Docket Number: No. Civ.A. 1:97-CV-2980-RWS.,Civ.A. 1:97-CV-2980-RWS.
• Citation: 16 F.Supp.2d 1374
• Parties: Timothy S. BOWERS, Plaintiff, v. BLUE CROSS BLUE SHIELD OF GEORGIA, Defendant.
• Court: U.S. District Court — Northern District of Georgia

16 F.Supp.2d 1374

Timothy S. BOWERS, Plaintiff, v. BLUE CROSS BLUE SHIELD OF GEORGIA, Defendant.

No. Civ.A. 1:97-CV-2980-RWS.

United States District Court, N.D. Georgia, Atlanta Division.

August 28, 1998.

COPYRIGHT MATERIAL OMITTED

Milton Dale Rowan, William Nathan Hershman, Rowan & Neis, Atlanta, GA, for Plaintiff.

Michael R. Hurst, Blue Cross Blue Shield, Atlanta, GA, for Defendant.

MEMORANDUM OPINION AND ORDER

STORY, District Judge.

Plaintiff brought this action for equitable relief pursuant to § 502 of the Employee Retirement Income Security Act, 29 U.S.C. § 1132 ["ERISA"]. This Court has jurisdiction under 28 U.S.C. § 1331. Presently pending are Plaintiff's Motion for Leave to File Brief in Excess of Page Limitation [7-1], Plaintiff's Motion for Summary Judgment [8-1], and Defendant's Motion for Summary Judgment [9-1]. Plaintiff's unopposed Motion for Leave to File Brief in Excess of Page Limitation [7-1] is GRANTED. After reviewing the entire record and considering the briefs of the parties, this Court enters the following order.

I. FACTUAL BACKGROUND

Plaintiff became totally disabled on April 24, 1994 and left work due to Acquired Immune Deficiency Syndrome ["AIDS"]. At that time, Plaintiff was employed by Confederation Life Insurance Company and was covered by a group health insurance contract through his employer. On October 24, 1994, Plaintiff elected to continue his group health insurance coverage for a 29-month period as provided under ERISA as amended by the Consolidated Omnibus Budget Reconciliation Act of 1985 ["COBRA"].¹ Plaintiff became eligible for Medicare on October 1, 1996 and started receiving Medicare benefits at that time.

Later, Plaintiff became concerned about the expiration of his COBRA coverage and inquired about an individual contract with Defendant Blue Cross Blue Shield of Georgia ["BCBS"]. When Plaintiff spoke with John Hudson, Manager of COBRA Solutions with BCBS, Plaintiff informed Hudson that Plaintiff was receiving Medicare benefits. Plaintiff also informed Hudson that he had been receiving benefits since October of 1996. Hudson advised Plaintiff to convert his continuation contract immediately because it was about to expire. Hudson testified by affidavit that he told Plaintiff receiving Medicare benefits terminated his COBRA eligibility and Plaintiff's COBRA coverage would terminate retroactively effective January 1, 1997, the date Plaintiff's employer group came to BCBS. Hudson also referred Plaintiff to the conversion department.

On February 3, 1997, Plaintiff went to the BCBS offices on Peachtree Road to apply for a conversion contract. Plaintiff completed an application and stated on the application that he was eligible for and had applied for Medicare benefits. Defendant issued Plaintiff an individual contract made effective retroactively from January 1, 1997. From February of 1997 until August of that same year, Defendant accepted premium payments and paid claims under Plaintiff's individual conversion contract.

On June 2, 1997, Plaintiff wrote a letter to Defendant to clear up a problem regarding his new account. In response, Defendant informed Plaintiff that it would credit his account and also informed Plaintiff that it was considering canceling his individual conversion contract because Plaintiff had become eligible for Medicare ten months earlier. In late August of 1997, Defendant informed Plaintiff that his individual conversion contract would definitely be canceled because of his Medicare eligibility. Defendant also informed Plaintiff that his coverage would not lapse until October 1, 1997.

Plaintiff testified by affidavit that if Defendant had informed him that he would not be able to convert his COBRA coverage into an individual policy, he would have pursued other alternatives to secure coverage, such as seeking employment, and he would have been much more careful in his spending habits over the previous year.

Kimberly Brooks, Service Leader in the area of Direct Pay Membership, testified by affidavit that BCBS made a mistake when it offered Plaintiff conversion coverage. Plaintiff's conversion contract provides,

ARTICLE 6

LIMITATIONS

6.2 Governmental Programs

If you become eligible for Medicare or any other state or local government health care programs, benefits under this Contract will be reduced equal to the amount that would be paid by the other program. You should notify the Plan if you are eligible for another program because it may affect your eligibility for coverage under this contract (See Article 11.)

6.3 Excess Coverage Provision

This coverage pays for eligible expenses after any group health plans have paid. In no case shall the total payment of this health care coverage and other coverage exceed 100% of the eligible charges. Eligible expenses which are reimbursed by any group health care plan are not covered by this Contract.

...

ARTICLE 11

TERMINATION OF COVERAGE AND CONVERSION PRIVILEGES

11.1 Termination of Coverage

4. Should a Member become eligible for any type of group health insurance this conversion contract will be terminated with 30 days notice. You must contact Blue Cross Blue Shield if you become eligible for any type of group coverage, including governmental programs (Medicare and Medicaid) and employer sponsored programs. Any benefits payable during the 30 day period will be paid based on the provisions set forth in Articles 6.2 and 6.3

On October 2, 1997 the parties entered a consent order in which Defendant agreed to allow Plaintiff's individual conversion contract to remain in full force and effect pending final resolution of this case on the merits.

II. LEGAL ANALYSIS

A. Summary Judgment Standard

Federal Rule of Civil Procedure 56(c) provides that a district court shall grant summary judgment if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is (1) no genuine issue as to any material fact and that (2) the moving party is entitled to judgment as a matter of law." The applicable substantive law identifies which facts are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). An issue is genuine when the evidence is such that a reasonable jury could return a verdict for the nonmovant. Anderson, 477 U.S. at 249-50, 106 S.Ct. at 2510-11.

When the nonmovant has the burden of proof at trial, the movant may carry its burden at summary judgment by demonstrating the absence of an essential element of the nonmovant's claim. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.E.2d 265 (1986). For issues which the movant has the burden of proof at trial, the movant must make an affirmative showing that on all essential elements of the case no reasonable jury could find for the nonmovant. Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir.1993).

In determining whether the movant has met its burden, the district court must view the evidence and all factual inferences in the light most favorable to the nonmovant. Anderson, 477 U.S. at 255, 106 S.Ct. at 2513-14. If the movant meets its burden, the nonmovant then has the burden of showing that summary judgment is not appropriate by setting forth "specific facts showing that there is a genuine issue for trial." Fed. R.Civ.P. 56(e).

B. Plaintiff's Motion for Summary Judgment

ERISA governs the terms of the contract at issue in the case at bar. Plaintiff exercised his option to obtain continuation coverage under 29 U.S.C. § 1162. This same provision requires each ERISA group health plan to provide the option of converting COBRA continuation coverage into an individual health insurance plan. 29 U.S.C. § 1162(5). Consequently, because the right to a COBRA conversion policy arises from the existence of an ERISA plan, the terms of the contract at issue are governed by ERISA. See Beal v. Jefferson-Pilot Life Ins. Co., 798 F.Supp. 673, 675 (S.D.Ala.1992); but see Glass v. United of Omaha Life Ins. Co., 33 F.3d 1341, 1345-47 (11th Cir.1994) (where Court declined to decide whether conversion of policy might defeat ERISA coverage); see also, Mimbs v. Commercial Life Ins. Co., 818 F.Supp. 1556, 1560 (S.D.Ga.1993) (where court drew a distinction between claims arising from the right to convert to an individual policy and claims arising from the conversion policy itself).

In a civil enforcement action brought pursuant to 29 U.S.C. § 1132(A)(1)(B), the plaintiff has the burden of establishing his entitlement to benefits under the plan. Horton v. Reliance Standard Life Ins. Co., 141 F.3d 1038, 1040 (11th Cir.1998). As in the case at bar, where the plan administrator does not reserve the discretionary authority to interpret provisions of the plan, the district court should apply a de novo standard in reviewing a decision regarding benefit eligibility. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989); Marecek v. BellSouth Telecommunications, Inc., 49 F.3d 702, 705 (11th Cir.1995).

Plaintiff contends under the federal common law Defendant waived any right to cancel Plaintiff's contract and is barred from canceling Plaintiff's contract under the doctrine of equitable estoppel. Application of the federal common law of ERISA must be consistent with the plain language of the statute and the policies behind the federal statutory scheme. Nachwalter v. Christie, 805 F.2d 956, 960 (11th Cir.1986).² "ERISA has two central goals: (1) to protect the interests of employees and their beneficiaries in employee benefit plans and (2) uniformity in the administration of employee benefit plans." Horton, 141 F.3d at 1041 (11th Cir. 1998) (citing Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90 103 S.Ct. 2890, 2896, 77 L.Ed.2d 490 (1983), Smith v. Jefferson Pilot Life Ins. Co., 14 F.3d 562, 570-71 (11th Cir. 1994)).

1. Waiver

In Glass v. United of Omaha Life Ins. Co., supra, the Eleventh Circuit...