Radici v. Associated Ins. Co.
| Decision Date | 11 April 2000 |
| Docket Number | No. 98-17437,98-17437 |
| Citation | 217 F.3d 737 |
| Parties | (9th Cir. 2000) JOSEPH A. RADICI, THERESA A. RADICI, MICHELLE E. RADICI, Plaintiffs-Appellants, v. ASSOCIATED INSURANCE COMPANIES, BLUE CROSS BLUE SHIELD OF INDIANA, Defendants-Appellees |
| Court | U.S. Court of Appeals — Ninth Circuit |
Jeffrey Isaac Ehrlich, Arlington, Virginia, Steven J. Parsons, Parsons & Pursiano, Las Vegas, Nevada, for the plaintiffs-appellants.
Leann Sanders, Monica L. Pierce, Alverson, Taylor, Mortensen, Nelson & Sanders, Las Vegas, Nevada, for the defendants-appellees.
Appeal from the United States District Court for the District of Nevada; Lloyd D. George, Senior District Judge, Presiding. D.C. No. CV-96-00832-LDG
Before: A. Wallace Tashima and Susan P. Graber, Circuit Judges, and Robert J. Kelleher, 1 Senior District Judge.
Plaintiffs Joseph, Theresa and Michelle Radici (together, "the Radicis") brought an action against their group health insurers, Associated Insurance Companies, Inc., and Blue Cross and Blue Shield of Indiana (together, "AICI"). The Radicis' amended complaint alleged that AICI unlawfully terminated Michelle's health insurance coverage, resulting in her death. The district court dismissed all of the Radicis' state-law claims for relief, holding that state-law remedies are preempted by the continuation health care coverage provisions of the federal Public Health Services Act ("PHSA"). See 42 U.S.C. SS 300bb-1 to bb-8. The Radicis appeal. We reverse the district court's decision, holding that the continuation health care coverage provisions of the PHSA lack preemptive force.
Michelle Radici was born in 1982 with debilitating medical conditions that left her totally disabled: a brain stem anomaly, hydrocephalus, spina bifida and the congenital absence of one kidney. Since 1990, Michelle's substantial medical bills were paid by her father's health insurer, AICI.
Between 1989 and 1995, Joseph Radici worked for two school districts in Indiana, both of which provided health coverage through AICI (the "Indiana policy"). In 1992, AICI and the Radicis reached an agreement that permitted Michelle to remain at home with the care of round-the-clock skilled nursing, thereby avoiding expensive and time-consuming hospital stays.
In August 1995, the Radici family moved to Las Vegas, Nevada, where Joseph had obtained a new position with a local school district. By virtue of his new position, Joseph and his family became enrolled in the health care plan offered by the Las Vegas school district (the "Nevada policy"). The Nevada policy excluded coverage of pre-existing medical conditions (such as Michelle's) for the first year of enrollment. To preserve Michelle's skilled nursing care, Joseph exercised his PHSA and contractual rights to continue health coverage under the Indiana policy, which did provide coverage for Michelle's ailments. Joseph elected continuation coverage on Michelle's behalf on September 1, 1995.
During the first year in Nevada, Michelle received her normal course of treatment under the Indiana policy. But in late August 1996, with two days' notice, AICI informed the Radicis that Michelle's continuation coverage under the Indiana policy would be terminated on September 1, 1996. AICI apparently canceled Michelle's coverage because the Nevada policy's one-year exclusion of coverage for pre-existing conditions had lapsed. AICI contended that the lapse of that exclusion automatically terminated AICI's obligation to provide continuation coverage under the Indiana policy, because Michelle could now be covered under the Nevada policy.
After AICI canceled Michelle's continuation coverage, the Radicis struggled for several months to provide the necessary care under the Nevada policy. Although Michelle became covered under the Nevada policy, the Nevada insurer would not agree to provide round-the-clock skilled nursing care. Despite her family's efforts, Michelle Radici died on December 11, 1996.
The Radicis filed suit against AICI in the District of Nevada on September 11, 1996 -less than two weeks after AICI denied further continuation coverage to Michelle. The Radicis pursued state law claims for injunctive relief, breach of contract, breach of the duty of good faith and fair dealing, and unfair insurance practices, see Nev. Rev. Stat. S 686A.310. The Radicis also sought relief under the PHSA's continuation-coverage enforcement provision. See 42 U.S.C. S 300bb-7. After Michelle died, the Radicis amended their complaint to remove the state-law claim for injunctive relief.
On April 6, 1998, the district court dismissed the Radicis' three remaining state-law claims on preemption grounds. The Court explained that the PHSA preempted state law claims by analogy to the type of preemption employed in ERISA cases.
On November 23, 1998, the district court dismissed the Radici's PHSA claim, because it sought purely equitable and declaratory relief. The court concluded that the claim for equitable relief was moot because Michelle had died and restitution was unavailable. In addition, the court held that the claim for declaratory relief was likewise mooted by Michelle's death. The court then dismissed the case for lack of subject matter jurisdiction.
The district court entered judgment against the Radicis on November 24, 1998. The Radicis timely filed a notice of appeal. On appeal, the Radicis challenge only the district court's order dismissing the state-law claims on preemption grounds. They do not challenge the district court's decision to dismiss the PHSA claim.
Although the Radicis apparently based their claim of subject matter jurisdiction on diversity of citizenship, the district court had proper subject matter jurisdiction because the presence of the PHSA claim conferred federal question jurisdiction. See Andrus v. Charlestone Stone Prod. Co., Inc., 436 U.S. 604, 608 n.6 (1978) (). We have jurisdiction to hear the appeal, because the appeal arises from a final judgment of the district court. See 28 U.S.C. S 1291.
We review de novo a district court's decision preempting state law claims. See Associated Builders & Contractors, Inc. v. Local 302 Int'l Bhd. of Elec. Workers, 109 F.3d 1353, 1354-55 (9th Cir. 1997).
On April 7, 1986, Congress passed the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), Pub. L. 99-272. Some of COBRA's many provisions concern "continuation health care coverage." Continuation coverage enables employees (and their dependents) who leave their jobs to retain, for 18-36 months after their departure, the same health coverage they enjoyed while working.2 COBRA's provisions mandating that group health plans provide continuation coverage benefits were placed in both the PHSA and the Employee Retirement Income Security Act ("ERISA"). See 42 U.S.C. SS 300bb-1 to bb-8 (PHSA); 29 U.S.C. SS 1161-69 (ERISA).
COBRA amended both ERISA and the PHSA by adding essentially identical continuation coverage and notification provisions. ERISA, however, exempts any "government plan" from its employee benefit plan provisions. 29 U.S.C. S 1003(b)(1) . . . . COBRA's amendments to the PHSA therefore partly fill this gap by providing similar protection to beneficiaries losing coverage under a plan maintained by "any State that receives funds under this chapter, by any political subdivision of such a State, or by any agency or instrumentality of such a State or political subdivision." 42 U.S.C. S 300bb-1.
Williams v. New Castle County, 970 F.2d 1260, 1264 (3d Cir. 1992) (citations omitted).
The COBRA amendments to the PHSA specifically provide that
each group health plan that is maintained by any State . . . or by any agency or instrumentality of such a State or political subdivision, shall provide . . . that each qualified beneficiary who would lose coverage under the plan as a result of a qualifying event is entitled, under the plan, to elect, within the election period, continuation coverage under the plan.
42 U.S.C. S 300bb-1.
COBRA beneficiaries must be treated in the same manner as similarly situated beneficiaries for whom a qualifying event has not taken place. See id. at S 300bb-2(1). COBRA benefits may last between 18 and 36 months depending on a variety of factors, including disability status and Medicare eligibility. See id. at S 300bb-2(2). An employee must be notified of pending eligibility for COBRA benefits in timely fashion. See id. at S 300bb-6. And an employee must affirmatively elect to receive COBRA benefits -such benefits will not be conferred automatically. See id. at S 300bb-5. Finally, "[a]ny individual who is aggrieved by the failure of a State, political subdivision, or agency or instrumentality thereof, to comply with the requirements of this subchapter may bring an action for appropriate equitable relief." See id. at S 300bb-7 (the "enforcement provision").
The district court held that the COBRA amendments to the PHSA provide beneficiaries an exclusive remedy against their group health care providers, thereby preempting additional state law remedies. On appeal, the Radicis contend that the COBRA amendments lack preemptive force when analyzed according to traditional preemption doctrines. In addition, the Radicis contest the district court's conclusion that the PHSA preempts state-law claims by analogy to ERISA's preemptive power. Whether the COBRA amendments to the PHSA have preemptive force presents a question of first impression.
The Supremacy Clause of the federal Constitution provides Co...
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