Presley v. Blue Cross-Blue Shield of Alabama

Decision Date31 July 1990
Docket NumberNo. CV-88-N-5353-NE.,CV-88-N-5353-NE.
Citation744 F. Supp. 1051
PartiesCharlotte PRESLEY and Larry Presley, Plaintiffs, v. BLUE CROSS-BLUE SHIELD OF ALABAMA, Defendant.
CourtU.S. District Court — Northern District of Alabama

Gary W. Lackey, Scottsboro, Ala., Thomas W. Bowron, II, Polson Jones Bowron & Robbins, Birmingham, Ala., for plaintiffs.

Lawrence B. Clark, Sally S. Reilly, Timothy A. Palmer, Birmingham, Ala., for defendant.

MEMORANDUM OF OPINION

EDWIN L. NELSON, District Judge.

This is a civil action for the recovery of hospital and medical benefits alleged to be due under the terms of an "employee welfare benefit plan" and "welfare plan" under ERISA, 29 U.S.C. § 1001, et seq.1 The action was submitted for decision on stipulated facts.

I. FINDINGS OF FACTS.

1. On October 26, 1987, plaintiff, Charlotte Presley, went to work as a full-time active employee for the Benham Corporation ("Benham") in Scottsboro Alabama.

2. Prior to Mrs. Presley's employment, Benham established and maintained an employee welfare benefit plan whereby those employees who were participants in the plan could receive health and medical benefits. Blue Cross and Blue Shield of Alabama ("Blue Cross") was Claims Administrator of this plan and, as such, was a fiduciary of the plan. A true and correct copy of the plan is attached hereto as Exhibit A.2

3. Employee participation in Benham's health plan was reflected by an invoice method whereby Blue Cross forwarded to Benham a monthly listing of those employees eligible to participate in the plan. Upon receiving this invoice, Benham corrected the list of employees to accurately reflect the plan's current participants and returned the invoice to Blue Cross with payment for participating employees.

4. Enrollment and participation in Benham's health plan was monitored by Benham and communicated to Blue Cross by means of the monthly invoice. Benham added employees to the invoice by either writing an employee's name at the end of the invoice or forwarding an employee's application card to Blue Cross with the monthly invoice.

5. Benham was responsible for communicating an employee's status to Blue Cross. Employee status was communicated to Blue Cross by means of specific codes appearing on the invoice. Code "1" indicated the employee had left employment and was to be removed from the invoice. Code "2" indicated that an employee had been temporarily laid off and that no payment was included for that employee's coverage that month, but the employee was to remain on the invoice with appropriate arrears to be billed at a later date. Code "3" indicated that the employee had requested termination from the plan. Code "4" indicated that the employee was deceased.

6. Under the terms of Benham's health plan, an employee was not eligible to participate in the plan until 90 days after the employee's date of employment. The plan further provides that "before there will be any coverage for an employee or his dependents, his application must be completed, submitted and accepted, and his coverage must begin in accordance with the provisions of this section Section II." (Plan, Section II, p. 7.)

7. As a full-time employee of Benham, Mrs. Presley was eligible to participate in Benham's health plan beginning January 26, 1988 (90 days after her date of employment).

8. At the time of her hiring on October 26, 1987, Mrs. Presley filled out an application card for coverage under Benham's health plan for herself and her family members. Benham subsequently forwarded this application card to Blue Cross where it was received on January 25, 1988. The application was properly executed and filed, and Blue Cross accepted Mrs. Presley's application.

9. On January 27, 1988, Larry Presley suffered a heart attack and was admitted to Jackson County Hospital for three days for treatment of this condition.

10. On January 28, 1988, admitting personnel at Jackson County Hospital telephoned Blue Cross to confirm coverage under the plan. Blue Cross verified that Mr. Presley was eligible for coverage under the plan as a family member, effective January 26, 1988.

11. On January 28, 1988, Blue Cross mailed an identification card to Mrs. Presley with an effective date of January 26, 1988.

12. Issuance of an identification card indicates that Blue Cross had accepted Mrs. Presley's application. Under Section II of the Plan, after an application is accepted, coverage commences only "if the requisite fees for coverage of a member have been paid in advance in accordance with Section VII" of the Plan.

13. The requisite fee for coverage of Mrs. Presley and her family for the period January 26, 1988 through February 20, 1988 was $133.79. The employee's monthly contribution was $74.64.

14. Benham withheld $17.23, a weekly employee contribution, from Mrs. Presley's paycheck for medical insurance premiums for the week ending January 30, 1988. This amount was the only deduction ever withheld from Mrs. Presley's paycheck for medical premiums, and Benham did not forward any portion of this amount to Blue Cross for payment of Mrs. Presley's coverage.

15. On February 1, 1988, all employees of Benham were laid off for an indefinite period of time, and Benham subsequently became delinquent in its premium payments to Blue Cross beginning with payments for January 15, 1988. Blue Cross notified Benham of the delinquency. Mrs. Betty Dudley, personnel manager for Benham, contacted Blue Cross and was informed of Blue Cross' practice whereby Benham could code a laid-off employee a "2" for a period of two months and be billed in arrears for this coverage. If during the third month payment was made in full, then coverage could be maintained; otherwise the employee was to be coded a "1," and coverage would be canceled effective the date of last payment.

16. Mrs. Dudley understood it was Benham's responsibility to notify its employees of this practice and not the responsibility of Blue Cross. Mrs. Dudley attempted to contact Mrs. Presley by telephone on three or four occasions to inform her of the arrangement for premium payment with Blue Cross. However, Mrs. Dudley did not contact Mrs. Presley during these attempts. In March 1988, Mrs. Dudley obtained a check from Benham reimbursing Mrs. Presley for the $17.23 payroll deduction made during the week ending January 30, 1988. Mrs. Dudley also intended to inform Mrs. Presley of this reimbursement check when she attempted to contact Mrs. Presley about the premium payment arrangement.

17. Attached hereto as Exhibit B is the invoice for Benham's health plan dated January 15, 1988. This is the first invoice on which Charlotte Presley is listed because she was not eligible to participate in the plan until January 26, 1988. Benham coded Charlotte Presley a "2" on this invoice and did not remit any payment for her coverage.

18. Attached as Exhibit C is the invoice for Benham's health plan dated February 15, 1988. Benham coded Charlotte Presley a "2" on this invoice and did not remit any payment for her coverage.

19. Attached as Exhibit D is the invoice for Benham's health plan dated March 15, 1988. Benham crossed Charlotte Presley's name from this invoice, coded her a "1," and did not remit any payment for her coverage. At no time did Blue Cross ever receive any payment whatsoever from Benham or any other party for coverage of Charlotte Presley under Benham's health plan.

20. Between the dates of January 15 and May 30, 1988, Benham collected full premium payments from certain employees and submitted them to Blue Cross in one check as a group premium. Those individuals were provided uninterrupted coverage. Blue Cross does not concede that it ever understood or agreed that individuals could pay individual premiums without contribution by Benham.

21. Blue Cross never made any effort, whether orally or in writing, to give Mrs. Presley or any other group member personal notice of the following:

a. Her employer was delinquent in premium contributions.
b. She could pay the total premium herself to Benham's personnel manager to be forwarded to Blue Cross and obtain coverage subject to the limitations of the plan under Benham's health plan.
c. Her coverage was never in effect under Benham's health plan with Blue Cross.
d. Her right, if any, to convert to an individual policy or any other rights, if any, she was entitled to under COBRA.
e. Payments of past due premiums would provide retroactive coverage subject to the limitations of the plan beginning January 26, 1988.

In stipulating it did not give plaintiffs personal notice of the foregoing items, Blue Cross does not stipulate or concede it was under any duty to give such notice.

22. Under the terms of Benham's health plan, Benham acted as Remitting Agent for the employees, and not Blue Cross, to collect and remit the fees payable under the Plan and for receipt from Blue Cross of all identification cards, certificates or summaries of coverage, changes in the contract or employees' coverage, and notices under the contract. (Plan, Section I, 26., p. 4-5.)

23. The total hospital bills for treatment of Larry Presley's heart attack were as follows:

                    a. Jackson Hospital:        $3,614.91
                    b. S. Taprice, M.D.:        $  403.00
                    c. Thomas Gibson, M.D.:     $   41.00
                    d. V. Reddy, M.D.:          $   24.00
                    ______________________________________
                                TOTAL:          $4,082.91
                

24. These bills were submitted to Blue Cross for payment.

25. On May 5, 1988, Blue Cross paid $22 to William Coleman, M.D. for services rendered to B.C. Presley on February 15, 1988. Mrs. Presley subsequently received a copy of the claim report of this payment.

26. All other claims at issue in this case were denied by Blue Cross. Charlotte Presley received a claims report dated May 12, 1988, which notified her that these claims had been denied because "this service was provided after the patient's contract coverage was discontinued." Mrs. Presley was asked to...

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