Opinion
Civil No. 02-1065 (JRT/RLE)
June 28, 2002
Kevin P. Hickey, Bassford, Lockhart, Truesdell Briggs, P.A., Minneapolis, MN for plaintiff.
Andrew E. Staab, Rosene, Haugrud Staab, St. Paul, MN, for defendant.
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF'S MOTION FOR A PRELIMINARY INJUNCTION
Plaintiff Donna Swanson, who worked for thirty-one years as a hotel banquet waitress before becoming disabled due to a stroke, brings this action against the Greater Metropolitan Hotel Employers-Employees Health and Welfare Fund, alleging claims under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., the Health Insurance Portability and Accountability Act ("HIPAA"), 29 U.S.C. § 1182, equitable estoppel, and the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), 29 U.S.C. § 1161 et seq. This matter is before the Court on plaintiff's motion for a preliminary injunction to prevent defendant from terminating her health care coverage on June 30, 2002 until a final determination on the merits of her claims can be made. For the reasons that follow, the motion is granted.
BACKGROUND
Plaintiff was a dues-paying member of the Hotel Employees/Restaurant Employees Union Local 17 (the "Union") from 1965 until 1996. During that time, she worked primarily as a banquet waitress at the Thunderbird Hotel and other locations. In September 1996, plaintiff suffered a stroke which left her with partial loss of use of her right arm and leg and causes her to experience difficulties with speech and memory. She has been unable to work since the stroke and she was found to be disabled by the Social Security Administration in 1997. Her monthly income consists of her social security benefit of $1,008 a month and a $35 monthly "pension" from the Union.
After her stroke, Swanson continued to be covered under the Greater Metropolitan Hotel Employers-Employees Health and Welfare Fund (the "Fund") even though she was no longer actively employed. This included coverage for several costly medications totaling almost $600 a month. Because she was concerned about her continued coverage, plaintiff specifically asked the Fund sometime in 1997 how long her coverage would continue. On May 8, 1997, plaintiff received a letter from the Fund which informed her that her "insurance coverage can not be terminated." The specific health insurance contract in effect at the time plaintiff became disabled also provided that her coverage could not be terminated because of her disabled status. See HealthPartners Choice Group Membership Contract at 33 (providing that "[p]ursuant to the provisions of Minnesota Statute § 62A.148, the group health plan sponsor and we agree not to terminate, suspend, to otherwise restrict the participation in, or the receipt of, benefits otherwise payable hereunder, to any enrollee who becomes totally disabled while employed by the group health sponsor and covered hereunder while this Contract is in force, solely due to absence caused by such total disability."). In addition, the Fund's Trust Agreement promises that it is the intent of the Fund "that [the plan] shall be continued in operation indefinitely."
At the time, the Fund was fully insured and it purchased contracts of health insurance for Fund participants. The HealthPartners contract referred to above, along with the Fund's Trust Agreement, constituted the official plan contract and trust documents until February 1, 2001.
The Fund also periodically provided participants with Summary Plan Descriptions ("SPDs"). The last SPD that the Fund distributed while it was fully insured contains the following disclosure:
This booklet is subject to the actual provisions of the official Plan Contracts and Trust Documents and cannot modify these agreements in any way; nor shall you accrue any rights because of any statement in or omissions from this booklet. Official Plan Contracts and Trust Agreements are the final authority in all cases.
Although the trustees intend to maintain the Plan indefinitely in the future, the right has been reserved to amend the provisions of the Plan and to terminate the Plan. If any of these actions are taken, you will be notified.
Over the next several years, plaintiff paid her monthly medical insurance premium of $232 every month and continued to receive coverage through the Fund. On January 29, 2001, the Fund sent notice to all participants in the plan indicating that their health and welfare fund would become "self-insured" effective February 1, 2001. The letter assured participants, including plaintiff, that the change will cause "minimal disturbance to participants." The current "health insurance contract" between the Fund and its participants is the "Summary Plan Description and Plan Document" dated February 1, 2001. Under the Fund's Self-Insured SPD, only "employees, who are covered by a Collective Bargaining Agreement between the Unions and a Contributing Employer and on whose behalf have had sufficient contributions paid by Contributing Employers, are eligible for the benefits described in this booklet."
The eligibility requirements provide as follows:
HOW ELIGIBILITY IS DETERMINED
Eligibility is attained by completing the prescribed number of hours as identified in the following:
QUALIFYING SCHEDULE
All employees whose employment is the subject of a Collective Bargaining Agreement by and between the Employers and the Union and who are classified as follows: All eligible employees working 225 hours or more in a three month or less time period. Additionally, all other eligible employees working a regular five day work week, and who have completed ninety (90) days of employment in the industry.
CONTINUED ELIGIBILITY
1. You will remain eligible for coverage as long as contribution are received on your behalf that total 225 hours per qualifying period.
2. If you fail to acquire the prescribed number of hours to continue eligibility, but have worked in covered employment during the qualifying period, you will be allowed to self-pay for the difference between the hours worked and hours required. That self-payment will be counted toward six monthly, consecutive partial self-payments allowable under the Plan. Twelve additional monthly full self-pays are available; the trustees set the premium for this coverage and this coverage is only available to individuals that are working in covered employment.
3. Self-payment will be allowed only for Covered Employment working or available for work under covered employment.
TERMINATION OF ELIGIBILITY
Coverage will terminate when you no longer maintain eligibility as described in the Initial Eligibility and Continuing Eligibility sections or when your Contributing Employer no longer contributes to the Fund.
Despite the change, plaintiff continued to receive coverage under the plan and continued to pay her monthly premiums under the new plan. However, on September 15, 2001, after obtaining eight months of coverage under the "new" plan, plaintiff received a letter informing her that her coverage would terminate effective June 2002. Plaintiff appealed this decision. On May 14, 2002, the Fund denied her appeal, explaining that "the basis of the denial is that you do not satisfy the Rules of Eligibility of the Fund's Summary Plan Description, effective February 1, 2001. To be eligible, you must be `covered by a Collective Bargaining Agreement between the Union and a Contributing employer,' and your Employer must submit sufficient contributions on your behalf. This does not apply in your situation."
Following this decision, plaintiff commenced this action and now brings this motion for a preliminary injunction to prohibit the Fund from terminating her coverage on June 30, 2002. Specifically, plaintiff contends that termination of her coverage will have devastating consequences for her. Absent an injunction, her prescription medication costs alone, not to mention her Medicare costs, co-pays and other medical expenses, will take up more than half her modest monthly income, thus leaving virtually nothing for food, clothing, transportation and other basic needs. Plaintiff further contends that the other factors necessary for the issuance of an injunction-the balance of harms, likelihood of success on the merits and the public interest-weigh strongly in her favor.
ANALYSIS I. Preliminary Injunction A. Standard of Review
In the Eighth Circuit, a preliminary injunction may be granted if the moving party can demonstrate: "(1) the threat of irreparable harm to the movant; (2) the state of the balance between this harm and the injury that granting the injunction will inflict on other parties litigant; 3) the probability that movant will succeed on the merits; and (4) the public interest." Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109, 113 (8th Cir. 1981). "No single factor in itself is dispositive; in each case all the factors must be considered to determine whether on balance they weigh towards granting an injunction." Dataphase, 640 F.2d at 113. However, a court may not issue a preliminary injunction without finding that some possibility of irreparable harm to the movant exists. Id. at 114 n. 9.
1. Irreparable Harm
Plaintiff has made a compelling showing of irreparable harm. Plaintiff's only income is a monthly Social Security disability benefit of $1,008 and a $35 monthly "pension" through the Union. Yet, the cost of plaintiff's prescription medication as a result of the stroke and other medical problems is nearly $600 a month. Up until now, this monthly expense has been paid through coverage provided by the Fund. However, if coverage is allowed to terminate, plaintiff's prescription drug costs alone-a cost not covered by Medicare-will deplete more than half her monthly income. With expenses on her home totaling over $300 a month, plaintiff will have virtually nothing left for food, clothing and other basic needs. Termination of her benefits thus leaves plaintiff with the uncompromising choice of foregoing either essential items of daily living or necessary medication. This harm is undeniable, and it is the type of harm that cannot be remedied through money damages. Indeed, courts have held on repeated occasions that actions which jeopardize an individual's ability to obtain such basic needs as food, clothing, shelter, or medical care, is clearly irreparable injury. Moore v. Miller, 579 F. Supp. 1188, 1191-92 (N.D.Ill. 1983); Massachusetts Assoc. of Older Americans v. Sharp, 700 F.2d 749, 753 (1st Cir. 1983) ("Termination of benefits that causes individuals to forego such necessary medical care is clearly irreparable injury"); Nelson v. Likins, 389 F. Supp. 1234, 1237 (D.Minn. 1974), aff'd, 510 F.2d 414 (8th Cir. 1975); Westenfelder v. Ferguson, 998 F. Supp. 146, 157-58 (D.R.I. 1998). On these facts, the Court concludes that plaintiff has made a convincing showing that, absent an injunction maintaining the status quo, the potential for irreparable harm clearly exists.
The Court also notes that plaintiff seeks equitable, not monetary, relief in this case.
2. Balance of Harms
The balance of harms also weigh in plaintiff's favor. Clearly, the injury plaintiff would suffer in having to pay more than twice the amount of her monthly premium to cover the cost of her prescription medication at the risk of potentially sacrificing such basic needs as food and clothing is far outweighed by the burden on defendant to continue providing coverage to plaintiff until a final determination on the merits can be made.
3. Likelihood of Success on the Merits
The Eighth Circuit has emphasized that "[t]he very nature of the inquiry on petition for preliminary relief militates against a wooden application of the probability test." Dataphase, 640 F.2d at 113. Indeed, the circuit has expressly rejected the argument that in every case, "the party seeking preliminary relief prove a greater than fifty percent likelihood that he will prevail on the merits." Id. Rather, "the equitable nature of the proceeding mandates that the court's approach be flexible enough to encompass the particular circumstances of each case." Id. "[W]here the movant has raised a substantial question and the equities are otherwise strongly in [her] favor, the showing of success on the merits can be less." Id. at 113; see also Walker v. Lockhart, 678 F.2d 68, 71 (8th Cir. 1982); N.I.S. Corp. v. Swindle, 724 F.2d 707 (8th Cir. 1984); Lynch Corp. v. Omaha Nat'l Bank, 666 F.2d 1208, 1212 (8th Cir. 1981). Stated another way, "where the balance of other factors tips decidedly toward plaintiff, a preliminary injunction may issue if movant has raised questions so serious and difficult as to call for more deliberate investigation." Id.
The Court finds that plaintiff has satisfied the above standard, particularly as to plaintiff's claim to vested medical benefits and her claim under 29 U.S.C. § 1182(a)(1). One of the core issues in this case is whether plaintiff's medical benefits were vested at the time she became disabled in 1996. Although ERISA mandates that employee pension benefits satisfy minimum vesting requirements, employee welfare plans, such as the one at issue here, are not subject to such standards. Barker v. Ceridian Corp., 122 F.3d 628, 632-33 (8th Cir. 1997); Jenson v. Sipco, Inc., 38 F.3d 945, 949 (8th Cir. 1994).
Accordingly, "employers generally are free to amend or terminate these plans unilaterally." Barker, 122 F.3d at 633; Curtiss-Wright Corp. v. Shoonejongen, 514 U.S. 73, 78 (1995). Nonetheless, an employee may claim the right to vested medical benefits if the ERISA plan at issue provides such a promise. Barker, 122 F.3d at 633. "Any promise to provide vested benefits must be `incorporated, in some fashion, into the formal written ERISA plan.'" Id. "Summary plan descriptions are considered part of ERISA plan documents." Id. Plaintiff carries the burden of proof on this issue. Id.
In this case, plaintiff argues that the plan documents in effect at the time she became disabled as well as the Fund's conduct and representations made in communications with plaintiff promised her a vested right to medical benefits. Plaintiff's claim is not without documentary support: 1) the HealthPartners contract expressly promises "not to terminate, suspend or otherwise restrict the participation in, or the receipt of, benefits otherwise payable hereunder, to any enrollee who becomes totally disabled while employed by the group health sponsor and covered while this Contract is in force, solely due to absence caused by such total disability;" 2) the Trust agreement states that "the plan has been established by the Trustees, Union and Association with the bona fide intention that [the plan] be continued in operation indefinitely;" 3) the May 8, 1997 letter informed plaintiff that her "insurance coverage can not be terminated"; 4) the January 29, 2001 letter assured plaintiff that the Fund's change to a self-insured plan will cause "minimal disturbance to participants"; and 5) the Fund continued to cover plaintiff's health care eight months after the "new plan" went into effect. Plaintiff acknowledges that the relevant plan documents and SPD contain reservation of rights clauses, but argues that such clauses make the plan documents ambiguous, thus requiring the Court to consider extrinsic evidence to determine the settlor's intent to provide vested benefits.
Defendant rebuts plaintiff's claim by pointing to allegedly unambiguous reservation of rights clauses in the Trust Agreement, the fully-insured SPD, and the May 14, 1997 letter. Defendant further argues that it cannot be bound to continue plaintiff's coverage just because it continued to accept premium payments and extend coverage to plaintiff eight months into the new plan. According to defendant, plaintiff's extended participation after February 1, 2001, was a result of an "administrative oversight," namely, that the Fund misclassified her as a COBRA participant under the plan.
At this stage of the proceedings, the Court believes the statements made in the relevant plan documents are sufficiently ambiguous as to require consideration of extrinsic evidence. In two cases relied on by plaintiff, Jenson v. Sipco, Inc., 38 F.3d 945, 949 (8th Cir. 1994) and Barker v. Ceridian Corp., 122 F.3d 628, 632-33 (8th Cir. 1997), the employer included a reservation of rights clause in the same official plan or SPD that plaintiffs claimed created a vested right to medical benefits. In both cases, the courts concluded that the reservation clauses were not sufficiently clear. Applying principles of trust law, the courts looked to extrinsic evidence and, upon doing so, concluded that the evidence supported plaintiff's claim that the defendant intended to provide vested health care benefits. Jenson, 38 F.3d at 951-52; Barker v. Ceridian Corp., 193 F.3d 976 (8th Cir. 1999).
In this case, plaintiff has pointed to favorable vesting language contained in the HealthPartners contract, which promises not to terminate plaintiff's coverage because of her disability. It is undisputed that plaintiff became disabled while that contract was in force. Although the Fund included reservation of rights clauses in several of these documents, the Court cannot say that the language of these clauses are so unambiguous as to make unnecessary any reference to extrinsic evidence. For instance, the reservation of rights clause contained in the Trust Agreement permits the Fund to terminate the plan entirely or as to one or more classes of employees. It is not clear whether the clause would apply to the termination of an individual participant. Additionally, "`the power to modify [a trust] may be relinquished by the settlor,'" which requires examination of extrinsic evidence. Jenson, 38 F.3d at 950 (quoting Bogert, The Law of Trusts and Trustees, § 993 at 232). Upon review of the extrinsic evidence submitted, plaintiff has raised a substantially serious question whether the Fund intended to provide plaintiff with continued coverage.
Plaintiff also raises a claim under the anti-discrimination clause of the Health Insurance Portability Accountability Act ("HIPAA"). In Count 3 of her complaint, plaintiff alleges that her health care coverage was terminated on the basis of her disability in direct violation of 29 U.S.C. § 1182(a)(1). This provision makes it unlawful for "a group health plan . . . to establish rules for eligibility (including continued eligibility) of any individual to enroll under the terms of the plan based on any of the following health status-related factors in relation to the individual or a dependent of the individual: (A) Health status; (B) Medical Condition (including both physical and mental illnesses); . . . or (H) Disability." In this case, plaintiff alleges that the Fund terminated her coverage because of her disability, as evidenced by statements made in the September 25, 2001 letter she received from the Fund. Defendant claims that plaintiff was terminated because she failed to satisfy the continuing eligibility requirements for coverage under the plan.
Although there is currently no caselaw interpreting this statute, the Court proceeds on the basis that the familiar burden-shifting standards set forth in McDonnell Douglas Corp. v. Green, 411 U.S. 782 (1973) and its progeny is an appropriate framework upon which to analyze plaintiff's claim. At this point, there is a sufficient question requiring more deliberate investigation whether the Fund made an eligibility decision based on plaintiff's disability status. The Fund asserts that its termination of plaintiff's coverage is based on its current plan eligibility requirements. However, those same requirements necessarily exclude a disabled participant, like plaintiff, from satisfying these requirements once they become disabled. Accordingly, there is evidence to at least raise an inference that the Fund imposed a disability-based standard for continued eligibility under the Plan. While factual issues clearly remain to be resolved and additional discovery will be necessary as to this claim, in the Court's view, plaintiff has made a sufficient showing under this count of her complaint.
Again, the Court is mindful of the equitable nature of this type of motion and the constant need to balance the equities. In this case, where the balance of other factors — particularly the showing of irreparable harm — decidedly weigh in plaintiff's favor, a showing on the merits can be less. Walker v. Lockhart, 678 F.2d 68, 71 (8th Cir. 1982) (declining to engage in a detailed analysis of the movant's probability of success on the merits where other factors in the Dataphase analysis weigh decidedly in favor of an injunction); N.I.S. Corp. v. Swindle, 724 F.2d 707 (8th Cir. 1984); Lynch Corp. v. Omaha Nat'l Bank, 666 F.2d 1208, 1212 (8th Cir. 1981).
4. Public Interest
Finally, an injunction preventing defendant from terminating plaintiff's health coverage pending final resolution of this case will not adversely affect the public interest. In fact, the issuance of an injunction will further the public policy in protecting the basic needs of our citizenry.
CONCLUSION
In conclusion, the Court is of the view that the equities of this case require the Court to intervene to preserve the status quo pending the outcome of this case. Thus, for all the foregoing reasons, the motion is granted.
ORDER
Based on the files, records, and proceedings herein, IT IS HEREBY ORDERED that:
1. Plaintiff's motion for a preliminary injunction [Docket No. 3] is GRANTED.
2. Defendant is enjoined until further notice from terminating plaintiff's health care coverage. Defendant shall continue to provide coverage under the same terms and conditions until further order of this Court; and
3. In accordance with Rule 65(c) of the Federal Rules of Civil Procedure, the preliminary injunction shall become effective upon plaintiff posing a bond with the Clerk in the amount of five hundred dollars ($500.00).