Opinion
No. 3-91-2760.
April 7, 1992
MEMORANDUM OPINION AND ORDER
Before the Court are:
(1) Motion of Blue Cross and Blue Shield of Texas, Inc. for Summary Judgment, filed January 24, 1992;
(2) Defendant's Response, filed February 14, 1992;
(3) Reply Brief of Blue Cross and Blue Shield, filed February 25, 1992;
(4) Defendant's Motion to Dismiss, or in the Alternative, Cross-Motion for Summary Judgment, filed February 14, 1992;
(5) Response of Blue Cross and Blue Shield, filed March 6, 1992; and
(6) Reply Brief of Defendant, filed March 16, 1992.
I. BACKGROUND
This suit involves a dispute between Blue Cross and Blue Shield of Texas, Inc. ("Blue Cross") and the United States Department of Health and Human Services (the "Department") over the interpretation of two statutes. The parties disagree on how certain provisions of the Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA), 29 U.S.C. § 1161, et seq., interact with certain provisions of the Medicare Act, 42 U.S.C. § 1395, et seq. Specifically, the parties disagree over what obligations the two statutes impose on administrators of group health insurance plans to provide insurance benefits for persons suffering from a condition known as end stage renal disease.
Blue Cross administers group health insurance plans for employers located in Texas and is the administrator of a group insurance plan for its own employees. Furthermore, Blue Cross has entered into a contract with the Health Care Financing Administration ("HCFA"), an agent of the Department, whereby Blue Cross administers the Medicare program in Texas, serving as an intermediary between hospitals, physicians and beneficiaries, on one hand, and HCFA, on the other hand, in processing Medicare claims.
As a group plan administrator, Blue Cross is required to follow the Employee Retirement Income Security Act of 1974 ("ERISA"). Part 6 of ERISA, generally known as COBRA, requires that, under certain conditions, coverage under certain group health plans must be continued for a specific period after coverage would otherwise have terminated under the terms of the plan. COBRA is designed to serve as a bridge for a period of time until the group plan participant can find replacement coverage. Brock v. Primedica, Inc., 904 F.2d 295, 297 (5th Cir. 1990). The group plan must continue coverage to participants who lose coverage because of "qualifying events," such as termination of employment or a reduction in employment hours. 29 U.S.C. § 1161. A group plan participant is entitled to continued coverage under COBRA only for a limited time, generally eighteen or thirty-six months. 29 U.S.C. § 1162(2)(A). Continuation coverage, however, can be cut short by the occurrence of certain events, including the individual becoming entitled to Medicare. 29 U.S.C. § 1162(2)(D).
Generally, Medicare benefits are available only for certain aged and disabled individuals. Congress, however, has made special provision for persons afflicted by end stage renal disease ("ESRD"). ESRD patients become entitled to Medicare benefits without regard to their age or disability status. 42 U.S.C. § 426-1(a).
The issue in this suit is whether a plan administrator, such as Blue Cross, may terminate continued COBRA coverage for a person who becomes entitled to Medicare benefits as a result of contracting ESRD. The Department maintains that the issue cannot be resolved without referring to a particular statute in the Medicare Act known as the Medicare Secondary Payer Statute, 42 U.S.C. § 1395y(b) (the "MSP Statute").
The MSP Statute and related provisions deal with circumstances in which Medicare is a secondary payer and a group health insurance plan is a primary payer when coverage exists under both Medicare and a group health insurance plan. The MSP statute dictates whether the plan or Medicare pays benefits first. Section 1395y(b)(1) of the MSP Statute generally requires that group health plans may not take into account the fact that beneficiaries are also entitled to Medicare benefits and prohibits the plans from differentiating between the benefits they provide to those beneficiaries and other participants covered under the plan. These provisions were designed to prevent the group health plan from providing that claims covered by Medicare would not be paid, i.e., that the plan would be the secondary payer if Medicare coverage exists. See United States v. Blue Cross and Blue Shield of Michigan, 726 F. Supp. 1517, 1519 (E.D.Mich. 1989). By its very terms, the MSP Statute applies only when dual coverage otherwise exists. It does not require a group to cover its employees, nor does it require group coverage after termination of employment.
Section 1395y(b)(1)(C) of the MSP Statute provides that a group health plan "may not take into account" that an individual is entitled to Medicare benefits by virtue of having contracted ESRD and "may not differentiate" in the benefits it provides to those with ESRD and other group plan participants. The Department interprets this provision as modifying 29 U.S.C. § 1162(2)(D)(ii) of COBRA. Under the Department's interpretation, COBRA coverage must continue for beneficiaries with end stage renal disease even though the beneficiaries are entitled to Medicare payments. The Department maintains that the nondiscrimination clause of the MSP statute mandates that employer coverage continue for individuals with ESRD for as long as coverage is provided for individuals who do not have ESRD. Blue Cross, on the other hand, argues that individuals with ESRD, like other COBRA participants, lose coverage when they become entitled to Medicare.
Blue Cross asserts that the confusion arising from differing interpretations of the relevant statutes has caused Blue Cross to pay on claims for which they are not responsible. Blue Cross further asserts that its dispute with the Department has resulted in lost business and damaged reputation. To substantiate these claims, Blue Cross states that the Department has notified beneficiaries under group health policies issued by Blue Cross that Blue Cross has illegally terminated their insurance coverage and suggested to the beneficiaries that they have a right to collect double damages against Blue Cross. The Department is also accused of having threatened to refer the matter to the IRS so that the IRS might investigate and impose penalty taxes on Blue Cross for alleged violations of the MSP statute. Blue Cross further accuses the Department of contacting employers to whom Blue Cross provides group health insurance coverage and advised them that they and Blue Cross states that the Department has threatened suit against it because Blue Cross has not paid health care claims associated with ESRD that were incurred after group health plan continuing coverage had been terminated pursuant to COBRA.
For all of the Department's alleged sins, Blue Cross requests this Court to (1) declare that COBRA coverage terminates when a person with end stage renal disease becomes entitled to Medicare benefits and (2) issue appropriate ancillary injunctive relief. The Department, in response, moves to dismiss the action under Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction, claiming that Blue Cross lacks standing and that the controversy is not yet ripe. Alternatively, the Department seeks summary judgment on each of Blue Cross's claims.
II. THE DEPARTMENT'S MOTION TO DISMISS
A. Blue Cross's Standing to Sue
To establish standing for purposes of the constitutional "case or controversy" requirement, Blue Cross must show that it has suffered some actual or threatened injury as a result of the putatively illegal conduct of the Department. Heckler v. Mathews, 465 U.S. 728, 738 (1984); Allen v. Wright, 468 U.S. 737, 751-752 (1984). The Department maintains that Blue Cross has not suffered an injury sufficient to confer standing. The Department contends that the HCFA has merely adopted a "legal position," which does not yet equate to any concrete harm to Blue Cross.
The Court disagrees. The Department has decided that Blue Cross must pay the medical claims for persons with ESRD who have COBRA coverage. The effects of that decision are not abstract or speculative, as the Department argues, but create great financial risk for Blue Cross. The parties agree that the financial burden of medical services for those with ESRD is substantial. The Department notes, for instance, that while less than one percent of Medicare beneficiaries have ESRD, these individuals account for more than 24% of all Medicare benefits. The threatened injury to Blue Cross, therefore, is real and substantial. Additionally, Blue Cross has paid over $100,000 in a case where COBRA coverage terminated because the participant became entitled to Medicare benefits; the Department has prevented Blue Cross from obtaining a refund of those funds pending the decision in this case. Blue Cross has met the injury requirement for standing.
B. Ripeness
The Department also maintains that the claims raised by Blue Cross are not yet ripe. In Abbott Laboratories v. Gardner, 387 U.S. 136 (1967), the Supreme Court stated that the ripeness doctrine is designed to "prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements over administrative policies, and also to protect the agencies from judicial interference until an administrative decision has been formalized and its effects felt in a concrete way by the challenging parties." Id. at 148.
In Abbott, the Court used a two factor test for determining ripeness. The first factor is "the fitness of the issues for judicial decision." Id. The issue presented in this case is fit for judicial decision because it is purely legal in nature and requires no further factual development. Id. at 149; Thomas v. Union Carbide Agricultural Products Co., 473 U.S. 568, 581 (1985). The second factor is the "hardship to the parties of withholding court consideration." Abbott, 387 U.S. at 149. Given the large expense involved in ESRD treatment, withholding court consideration could expose Blue Cross to significant financial risk. To require Blue Cross to challenge the Department's position "only as a defense to an action brought by the Government might harm [it] severely and unnecessarily." Id. at 153. The threatened harm to Blue Cross is "sufficiently direct and immediate as to render the issue appropriate for judicial review at this stage." Id. at 152. The Department's Motion to Dismiss is, therefore, denied.
III. CROSS-MOTIONS FOR SUMMARY JUDGMENT: THE MERITS
As noted above, COBRA provides that continuation coverage terminates once a participant becomes entitled to Medicare. 29 U.S.C. § 1162(2)(D)(ii). This provision is consistent with the goal of COBRA, which is to provide continuation coverage until group plan participants are able to obtain other coverage. See National Cos. Health Ben. Plan v. St. Joseph's Hosp., Inc., 929 F.2d 1558, 1569-70 (11th Cir. 1991). The Department has adopted a position that conflicts with the express language and legislative objectives of COBRA. The Department argues that the MSP Statute requires group health plans to continue COBRA coverage for persons with ESRD despite their entitlement to Medicare. The Department's position is insupportable.
The Department has stretched the MSP Statute beyond its natural purpose. That purpose is to provide for the order of payments of benefits when dual coverage exists under Medicare and some other insurance. The MSP Statute presupposes the existence of both group health plan coverage and Medicare coverage. Nothing in the MSP Statute itself, or its legislative history, suggests that it was designed to extend coverage or require coverage that does not exist.
The Department's position makes sense only if the MSP Statute was intended to amend COBRA and make special provision for persons with ESRD. There is no evidence, however, of such Congressional intent. Congress, in fact, did provide an exception to the mandate that COBRA coverage terminate when a person becomes entitled to Medicare benefits. Section 1162(2)(D)(ii) of COBRA provides that entitlement to Medicare benefits does not terminate COBRA coverage for a narrowly defined class of retirees and other plan beneficiaries. Persons with ESRD are not included within that special exception. Had Congress intended to create an exception for persons with ESRD, it almost certainly would have done so through the same manner established for other special classes. Because Congress was careful to set out certain exceptions to the general rule, additional exceptions should not be implied. See, e.g., Andrus v. Glover Constr. Co., 446 U.S. 608, 616-17 (1980). Amendments or repealers by implication are, of course, disfavored. A court should not conclude that one act implicitly repeals or amends another one unless Congress clearly intended such result. See, e.g., Patel v. Quality Inn South, 846 F.2d 700, 704 (11th Cir. 1988).
Furthermore, the Department fails to explain adequately why the nondiscrimination provision relating to persons with ESRD should be given different effect from the nondiscrimination provisions addressing other categories of persons entitled to Medicare benefits. Section 1395y(b)(1)(A) of the MSP Statute provides that a group health plan "May not take into account" that an individual sixty-five years or older is entitled to Medicare. Section 1395(b)(1)(B) provides similar language for persons entitled to Medicare as a result of a disability. If the Department is to be consistent, then COBRA coverage must continue for those categories of persons as well. Such an interpretation, however, would render Section 1162(2)(D)(ii) of COBRA largely meaningless. If the nondiscrimination provisions of the MSP Statute mean that a group plan administrator cannot terminate COBRA coverage for persons entitled to Medicare, then what is the purpose of the COBRA provision that expressly allows termination upon entitlement to Medicare?
Finally, the Court notes that the Department's position conflicts with the policies of the MSP Statute itself. The MSP Statute prohibits a group plan from differentiating in the benefits it provides to individuals with ESRD and other individuals covered by the plan. The Department's interpretation of the statute, however, would require discrimination in favor of those with ESRD. Those with ESRD would receive continuation benefits under COBRA despite their entitlement to Medicare, while plan participants without the disease who were entitled to Medicare would not.
IV. CONCLUSION
For the foregoing reasons, the Court concludes that COBRA coverage terminates when a person with end stage renal disease becomes entitled to Medicare benefits. Accordingly, Plaintiff's Motion for Summary Judgment is GRANTED, and Defendant's Motion for Summary Judgment is DENIED. Plaintiff is DIRECTED to provide the Court with a proposed Final Judgment by noon, April 14, 1992.
SO ORDERED.