GEISSAL v. MOORE MEDICAL CORPORATION
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) amended the Employee Retirement Income Security Act of 1974 to permit a beneficiary of an employer's group health plan to elect continuing coverage when he might otherwise lose that benefit because of a "qualifying event," such as the termination of employment. In 1993, when Moore Medical Corporation fired James Geissal, it told him that COBRA gave him the right to elect continuing coverage under Moore's health plan. Later, Moore informed Geissal that he was not entitled to COBRA benefits because he was already covered by a group plan through his wife's employer. Geissal then filed suit against Moore, alleging that Moore was violating CORBA by renouncing an obligation to provide continuing coverage. Ultimately, a Magistrate Judge concluded that an employee with coverage under another group health plan on the date he elects COBRA coverage is ineligible for COBRA coverage under 29 USC section 1162(2)(D)(i), which allows an employer to cancel such coverage as of "the date on which the qualified beneficiary first becomes, after the date of the election... covered under any other group health plan." The Court of Appeals affirmed.
Does 29 USC section 1162(2)(D)(i) allow an employer to deny Consolidated Omnibus Budget Reconciliation Act of 1985 continuation health coverage to a qualified beneficiary who is covered under another group health plan at the time he makes his COBRA election?
Legal provision: Employee Retirement Income Security
No. In a unanimous opinion delivered by Justice David H. Souter, the Court held that an employer may not deny COBRA continuation coverage under its health plan to an otherwise eligible beneficiary because he is covered under another group health plan at the time he elects COBRA coverage. "It is undisputed that both before and after James Geissal elected COBRA continuation coverage he was continuously a beneficiary of [his wife's employer's] group health plan," wrote Justice Souter, "[b]ecause he was thus covered before he made his COBRA election, and so did not 'first become' covered under the [his wife's employer's] plan after the date of election, Moore could not cut off his COBRA coverage under the plain meaning of [section 1162(2)(D)(i)]."
Argument of S. Sheldon Weinhaus
Chief Justice Rehnquist: We'll hear argument next in Number 97-689, Bonnie Geissal v. the Moore Medical Corporation.
Very well, Mr. Weinhaus.
Mr. Weinhaus: Mr. Chief Justice, and may it please the Court:
In this case, Mr. Geissal, who is now dead, was terminated from his employment by Moore Medical Corporation at a time when he had cancer and was dying of cancer.
He was offered immediately COBRA continuation and at the same time his wife had always carried health insurance coverage with her own employer which covered dependents, including Mr. Geissal.
He was allowed to continue to make COBRA payments for 6 months, when all of a sudden Moore Medical announced that it was not responsible for his health insurance coverage, they wrongly accepted COBRA payments, they would pay him back, and they would not pay any of his bills.
This case was brought, using the wording of the statute, and the wording is simple, and that's where we start with, that coverage must be offered to the individual of the same quality as given to employees, and that would be true... if employees got dual coverage, he would be entitled to dual coverage, required to offer the same policy, and it must extend for at least the period beginning on the date of the qualifying event and ending not earlier than the earliest of the following, and one of them is, when... the date on which he becomes... first becomes qualified after the date of election for further insurance.
Now, in this instance, Moore Medical Corporation took the position that he first became, after the date of election, covered by the wife's policy and therefore was not entitled to the coverage.
At that point, litigation ensued.
Unknown Speaker: Mr. Weinhaus, would you explain to me what your client stands to recover now?
Were Mr. Geissal's medical expenses actually paid by the other policy?
Mr. Weinhaus: We know some of them were paid.
We do not know whether all of them were paid.
My understanding, some were not paid, but unfortunately in this case what the magistrate judge did is, after denying our motion for summary judgment, turned around and, sua sponte, without development of anything in the record, declared summary judgment for Moore Medical Corporation, so there is no record and, while Moore Medical does continuously argue, in the absence of a record, that we lost nothing, we don't think that's true.
Unknown Speaker: Well, presumably your client ought to know whether something was lost or not.
Is there no claim?
Mr. Weinhaus: Well--
Unknown Speaker: What is the claimed injury now?
Mr. Weinhaus: --Well, the claimed injury are, amongst other things, we have at least the deductible that we have to pay for, and we have to face health care providers who may hereafter bill us.
In these cases, in the health insurance field, the health providers do not send the bill to the patient, usually, they send them to the health institution which is paying the bills.
Unknown Speaker: How long ago did this death occur?
Mr. Weinhaus: Well, it now occurred a couple of years ago, but--
Unknown Speaker: But you don't have any bills and we don't know if there's any injury.
Mr. Weinhaus: --We have not been told of any bills.
The only bills I know of in which there's likely injury is what I call the Greek trip in which he received medication in the Greek Islands, for which--
Unknown Speaker: It's just hard to picture what remains of the claim, if anything.
Mr. Weinhaus: --Well, what also remains of the claim is this.
There may be, in fact, double coverage.
I don't know here.
We have not gotten that far.
Moore says there's no double coverage, and at the same time it says there is double coverage.
We are entitled, under ERISA--
Unknown Speaker: I thought the argument was you would not be entitled to double coverage and one aspect of this that I hope you will clarify, you're talking about maybe bills coming in later, but there are insurance policies.
You have both insurance policies and were told that the only difference is in the deductible, and is there another difference?
What about the cap on total benefits?
Mr. Weinhaus: --Well, there's certainly a difference in the cap on total... well, there's no difference... there is and there isn't.
Each one has a million dollars coverage, so that in essence, had he survived, or had he lived, or had he been willing to assume financial responsibility for more than a million dollars of debt, he could have proceeded.
Unknown Speaker: Well, that's very interesting, but he didn't live.
Mr. Weinhaus: He did not live.
Unknown Speaker: He's dead now, and that's all irrelevant, isn't it, unless, indeed, the bills presented are over a million dollars, or over whatever the limit was.
Mr. Weinhaus: Yes, but the--
Unknown Speaker: And are they?
Mr. Weinhaus: --Well, we don't... we have not... we did not get that far in discovery because of the way that the magistrate handled that, but presuming that they are--
Unknown Speaker: Is there a realistic possibility that they are?
Mr. Weinhaus: --There's a realistic possibility, for the Greek trip, that there are.
Unknown Speaker: But wouldn't... if he took a trip to the Greek Islands, wouldn't he know how much that cost?
Mr. Weinhaus: Yes, but... and we know that Aetna did not pay that.
Now, whether Moore--
Unknown Speaker: There's another question I had about how this works is, let's assume he's still... he's just sick, he's not dead, and he's still working, and he's got this dual coverage.
Who pays first in these dual coverage situations, his employer or the other, or is it... how is that worked out?
Mr. Weinhaus: --Ordinarily, the rule is, his employer and, as pleaded in the case, and as uncontested in the case, Moore was the primary carrier.
Moore would pay first and, in fact, even in this case, as... notwithstanding their argument, if Moore was required to pay us the benefit, which is all ERISA allows us in any event, if Moore is required to pay the benefit they have promised to us, and if Aetna's entitled to get from us, then, what Moore has paid us in reimbursement, in subrogation, Aetna would have to pay us our additional deductible.
Aetna would have to pay us whatever our premiums cost to make sure that we would not have that.
We do have a claim.
Even if it's a small claim, it still exists, and Aetna would be... would have to submit to that.
Unknown Speaker: All right.
Your claim, as I understand it, is, at a minimum, the claim for the Greek Island trip, which Aetna has not yet paid.
Mr. Weinhaus: Yes.
Unknown Speaker: And number 2, I think your answer is, assuming, though it didn't get raised explicitly by anybody, that there's nothing in the COBRA act which provides that... your answer may be assuming that there's nothing in the COBRA act that provides that COBRA coverage will be secondary coverage, necessarily.
Mr. Weinhaus: There is nothing that provides COBRA coverage will be secondary.
In fact, COBRA says it must be of the same quality as offered to regular employees, and the same quality offered to regular employees is that Moore will be primary.
Unknown Speaker: Okay.
Then I take it it's fair to say that the situation we're in on standing is this.
It may ultimately turn out that you have no recoverable claim, but at this point that is an evidentiary matter and nobody can determine that at this point.
Is that a fair statement?
Mr. Weinhaus: That's a fair statement.
Unknown Speaker: Okay.
Mr. Weinhaus: It has not been developed because of the decision of the magistrate to grant summary judgment sua sponte.
Unknown Speaker: Mr. Weinhaus--
--Well, but you claim you have a claim.
Mr. Weinhaus: We certainly claim we have a claim, and we know it's at least of the deductible amount, plus whatever premiums they say we would have had to pay.
Unknown Speaker: May I be blunt about one aspect of this.
Going in, he's still alive, and he's suing, and he could linger for a long time, and maybe he could exceed even the maximum under the policy.
Mr. Weinhaus: That was his major concern.
Unknown Speaker: But he's now dead, as Justice Scalia has pointed out.
The statute provides for attorney's fees, doesn't it?
Mr. Weinhaus: Yes, it does.
Unknown Speaker: Is that an element that stays on, that... you have the argument that the deductible, you'd have to... you're out of pocket the extra $350, but then you'd have to pay back the premiums to Moore, which amount to in excess of $2,500, so you net... you'd be a net loser, unless what you're saying is, if we prevail, then we get our attorney's fees from the beginning of this representation.
Mr. Weinhaus: Well, not only that, but I don't think... I think we're entitled to the entire benefit.
If it comes out to $120,000--
Unknown Speaker: But suppose it was nothing else, could you say, yeah, we still have a claim.
It's her claim.
It's her claim to get her counsel fees paid.
Mr. Weinhaus: --And in addition to that, though, Your... that's correct, but in addition to that, she has the right to say, I want the whole benefit, $120,000.
It's true, Aetna may say to me, give us back 80, give us back 110, or give us back everything, except we're going to pay you what you had to pay in addition.
Unknown Speaker: This was a death benefit?
Mr. Weinhaus: No.
This is health insurance benefits.
Unknown Speaker: Well, why would you be paid $120,000 in a lump sum?
Mr. Weinhaus: Well, it's my understanding... again, these are from off-the-record statements of counsel, is that they paid... that Aetna paid $120,000.
Unknown Speaker: To whom?
Mr. Weinhaus: To health care providers, to hospitals, to doctors.
Unknown Speaker: And you think you have a right to obtain that?
Mr. Weinhaus: What ERISA says is that you're not entitled to any damages.
You are only entitled to... besides fees, and there are penalties too here, that you are entitled to the benefit, and if we're entitled to 120 from Moore, we're entitled to 120 from Moore.
Now, Aetna may be in a position, again, depending upon what the law is, to say, uh-uh, we paid 120.
Now you owe that to us, less your costs and expenses.
Unknown Speaker: But you say that doesn't defeat your claim against Moore.
Mr. Weinhaus: That doesn't defeat our $120,000 claim in any way, and every other employee of Moore would have the same right to make that same claim if Moore did not pay the bills and some secondary carrier that they also had paid the bill.
We're the same as them, and that's real--
Unknown Speaker: I guess the issue on that would be whether there's standing when somebody brings a claim which is confronted with a counterclaim of a greater amount than the claim, is there still standing to be the claim.
I suppose there is.
You mentioned penalties, and are--
Mr. Weinhaus: --Well, there are also penalties, because--
Unknown Speaker: --Are those penalties that go into the pocket of the plaintiff?
Mr. Weinhaus: --Oh, yes, those are penalties that go into the pocket of... because our theory is, on that, is that if you do not give a proper notice under the statute you're... this employer is subject to a penalty of up to $100 a day for not giving a proper notice, and while--
Unknown Speaker: But I thought that was a claim that hasn't yet been adjudicated.
Mr. Weinhaus: --Because this claim has not been adjudicated, but on the adjudication of the claim, if we are correct that they should have continued the policy, at that point in time we are entitled to a penalty of up to $100 a day being assessed, and that goes to the plaintiff, and at the time they announced this, Mr. Geissal was very much alive and very much concerned about having the wherewithal to survive, if he could.
Unknown Speaker: Are you going to get to the merits, do you think?
Mr. Weinhaus: Well, the merits of it are, of course, in the plain meaning of the statute itself, Your Honor, because he was covered already under the wife's policy, the TWA health insurance plan at the time.
Now, we are told by the Eighth Circuit that that plan did not become effective until after his election.
Now, that is not correct at all, because under ERISA a plan becomes effective when you're covered.
Under ERISA, as he would be a beneficiary in the wife's plan, he would be entitled to sue immediately for any plan violation.
He would have a right under ERISA, section 502(a)(1), to sue to clarify his rights to future benefits.
He would have a right immediately to ask for a copy of the summary plan description and ask for plan information.
That right does not start with his termination by Moore, or, worse yet, with the date of his election.
Unknown Speaker: Why don't you focus on the exact statutory language that you're relying on, Mr. Weinhaus.
Mr. Weinhaus: Yes.
The exact statutory language is... appears on page 23 of our brief.
It's... basically says the coverage must extend for at least the period beginning on the date of the qualifying event... now, that is the date of termination... and ending not earlier than the earliest of the following, the date on which the qualified beneficiary first becomes after the date of election.
Now, he... therefore, under this statute he is immediately covered... as long as he chooses to elect, he is immediately covered from the date of his termination.
Under COBRA, the employer must give you a notice of election, right to elect, within 45 days of the qualifying event.
The employer must give the individual 60 days to make the election, and then the individual has yet another 90 days to pay the premium.
And, incidentally, COBRA's not a free gift.
Under the statute it's 102 percent of the employer's cost and as a result, upon his death he immediately becomes covered if he ultimately elects, and none of these cases go into the fact that in fact this coverage continues until at least the date of the election, because it says, it does not end... end is Congress' words... not earlier than the date of the following, the date he first becomes, after the date of election, covered.
So their... under their--
Unknown Speaker: And you say he never first became covered after the date of election here.
Mr. Weinhaus: --He never became covered, first became covered after the date of--
Unknown Speaker: Or he never--
Mr. Weinhaus: --He was already covered.
Unknown Speaker: --He never became covered.
He was covered, period.
Mr. Weinhaus: He was already... there was nothing new.
First becomes means there must be some change in status, some change in position, and that did not occur here.
I'd like to reserve the rest of my time for rebuttal if I may, Your Honor.
Unknown Speaker: Very well, Mr. Weinhaus.
Mr. Feldman, the Government asserts as the rationality of the position that you're supporting here that it retains the status quo, but it really doesn't always retain the status quo, because it could be that the additional coverage was acquired after the termination event, but during the period before the election, and then the first becomes would still not apply, isn't that right?
Argument of James A. Feldman
Mr. Feldman: Yes, that's correct.
Unknown Speaker: So you're not really preserving the status quo that existed at the time of the person's employment.
Mr. Feldman: I think the general idea is to preserve the status quo, and especially in a case like this it would affect the--
Unknown Speaker: And you explain this as a glitch.
They just didn't do it quite right.
Mr. Feldman: --I wouldn't say it's a glitch.
I would say that that was a consequence, a necessary consequence, and one that Congress would have wanted, of their decision to hinge everything from the date of election and not from the date of the termination.
The date of termination only sets the notice requirements going in.
It's the date of election that determines... that you're supposed to look at to determine when coverage... when you can terminate coverage.
Having done that, they can't... there's no way to be sure that somebody in the position of the decedent here at the date that... let's say... let's take someone who loses their job on day 1.
On day 2, they go get another job.
The employer says, do you want health insurance, I don't have much of a policy but we have something to offer you, and the employee says, sure.
On... 30 days later the employee gets a notice that you're entitled to COBRA coverage, and you have 60 days to elect, blah, blah, blah.
Well, in that case, under respondent's view, because the employee has already accepted coverage under the new job, before he knew the consequences of doing that, he can't get COBRA coverage or at least it would have to terminate right at the day of election.
Now, I think that that's a consequence that Congress didn't want.
In other words, the only way Congress--
Unknown Speaker: But Mr. Feldman, don't they have the gap exception to take care of that?
Mr. Feldman: --Well--
Unknown Speaker: You posed the case where there was significantly less insurance under the new policy.
Mr. Feldman: --Let me... that is a view... the significant gap explanation is one that's been adopted by the courts of appeals that have agreed with respondent in the courts below.
And they've done that because they realize that Congress generally didn't intend the harsh consequences of someone who was, let's say relying on their own insurance and let's say a family may have been relying very heavily on the employee's insurance and had a supplemental policy also that the spouse had, and those courts have felt, well, Congress couldn't have intended that they lose their primary health coverage just because... when they terminate their job just because they have some very inadequate coverage under the spouse's policy, so they look at whether there's a significant gap.
Under our view, that significant gap inquiry, which isn't triggered by any text in the statute--
Unknown Speaker: I'm just saying that it's ameliorated.
It's not quite as stark as you say, because they do concede that if there's a significant gap then you retain the--
Mr. Feldman: --That would only be the case if you adopt... if it were true that there is a significant gap inquiry that's required under the statute.
Under our view, that doesn't fit into the statutory language, and the way--
Unknown Speaker: --Because it continues anyway.
Because it continues anyway--
Mr. Feldman: --Yes.
The way that the problem is resolved--
Unknown Speaker: --if it was not first... right.
Mr. Feldman: --That's right.
The way that the problem is resolved is by giving the employee the opportunity to elect.
If the employee believes that the other policy is inadequate, the employee will probably elect COBRA coverage and the employee is entitled to get it.
If the employee believes that the other coverage is fully adequate, then the employee certainly will not elect COBRA coverage because it's expensive.
Unknown Speaker: But the point is, he is in a position to assess whether there's a gap or not.
Mr. Feldman: Right, and he's also in... I might add that if you look at the significant gap inquiry, it's very hard to work, because the plan administrator has to make the determination sometime after the date of election of comparing the provisions of the two policies.
The plan administrator has to know the provisions of the other policy, which the plan administrator may well not have, has to know the medical condition of the decedent to determine whether, in light of that... not of the decedent, of the employee in most cases, to determine whether, in light of that, the gap is significant.
That's an inquiry that's very difficult to make.
Under our view, Congress left... the statute works quite well where those decisions are left up to the employee.
In our view also the plain language of the statute is sufficient to resolve the case.
The statute says that the employer may terminate coverage on the date on which the qualified beneficiary first becomes, after the date of election, covered under any other plan.
Unknown Speaker: Would your argument be the same... it wouldn't be as good, but would you take the same position if it said, first is covered?
Mr. Feldman: I think argument would be the same, but I do think that becomes is the word that really makes it unambiguous.
Or, put it the other way, I think becomes is probably stronger than first, but I think when operating together they plainly convey the meaning that Congress intended here.
If you... if a plan administrator asks, on the date after the date of election says, has this employee today first become covered under any other plan, I think the only possible answer is no.
He hasn't first become covered because he was covered all along.
Unknown Speaker: First is really a redundant or emphatic word.
You can't second become.
You either become or you don't become, right?
Mr. Feldman: Right.
I... generally, yes.
I mean, there are cases--
Unknown Speaker: You either become or you already were, one or the other.
Mr. Feldman: --That's correct.
But the... that's correct.
It's the becomes is... carries the major part of the weight, and I do think first adds to it.
But in any event, because on the date after the date of election it cannot be said that the employee has first become covered under the other plan, and that won't be true at any other future date if there's continuous coverage, the employer cannot terminate COBRA coverage on... just right after the date of election on the basis that the employee has first become covered by a plan that he had, in fact, all along.
In our view, that fits well within the purposes of the statute because, as I said, it provides... it enables employees who are relying on that coverage and who may have had wholly inadequate second coverage to make the decision of what kind of coverage is adequate for them, and to have that for this temporary period of time for up to 18 months in a case like this, while they make whatever other plans they wanted.
In response... I just want to add, because I do think that the hardest case for us is the case where the employee... the case that Justice Scalia raised, which is where the employee gets the coverage during the election period, that really it's necessary to allow that to happen, because that is the only... the only way that Congress could ensure itself that an employee, when it made an election with respect to the new policy, when it decided it wanted the coverage... when he decided he wanted coverage under the new policy, it was the only way that Congress could be sure that that was an informed choice.
And it's also clear from the general structure of the statute that Congress wanted those... the employee to have that choice.
For example, when a... let's take on the 65th day, or the 70th day, long after the date of election, and an employee who is covered under COBRA gets a new job, well, at that point, when the new employer says, do you want health insurance under this job, or health coverage, the employee is not... just because he's offered the health insurance, COBRA coverage doesn't terminate.
The statute says it's when he becomes covered under the new plan, not when he becomes eligible under the new plan, and that shows that Congress wanted people to have the opportunity to make the choice as to whether they wanted the COBRA coverage or whether they wanted the new coverage.
If you adopt the view of respondent and the court of appeals, the employees wouldn't have that choice very frequently.
I think our view is also supported by related provisions of COBRA which provide, for example, that the coverage that's provided under COBRA has to be identical to the coverage that the employee had while working for the former employer, and it's consistent with that purpose to permit employees who had dual coverage, who felt it was necessary because of extraordinary medical needs, because of the inadequacy of a spouse's plan, or perhaps just because of their own very strong desire to have security with respect to their medical costs, to permit employees who are in that situation who had dual coverage before for sometime, to be able to also continue the dual coverage during the temporary COBRA period so long as they're willing to pay for it.
Unknown Speaker: The temporary period in this case would be 18 months?
Mr. Feldman: It would be 18 months unless some other qualifying event occurs... unless some other terminating event occurs, of which there are several others, in addition to the one that's at issue in this case.
Unknown Speaker: Mr. Feldman, because it is jurisdictional, can you explain why the Eighth Circuit thought the 54(b) issue... they said it was... they considered it a close question, and then didn't expand on it, whether there was an immediately appealable judgment, final judgment--
Mr. Feldman: I don't understand why they said that, because in looking at it myself I didn't see why it was a close question, so in my view it was a valid 54(b) certification and therefore it was validly before the court of appeals.
Unknown Speaker: --I note that Count IV is discrete.
That was for the information reporting.
But Court III, maybe that had something to do with why this wasn't finished.
Mr. Feldman: Perhaps it did, but I didn't... it seemed to me that the issues that were before the court, which were I and II, I was the basic COBRA coverage count, and II... wait a minute, I'm forgetting here exactly what II was.
In any event, I thought that those counts were plainly separate counts that could be resolved on a strictly legal basis that this was, and that they were therefore suitable for a resolution under... for partial summary judgment under section 50... Rule 54(b).
If there's no other further questions, that concludes my argument.
Unknown Speaker: Thank you, Mr. Feldman.
Argument of Bradley J. Washburn
Mr. Washburn: Mr. Chief Justice, and may it please the Court:
I believe that the petitioner's argument in this case is very disingenuous in a couple of respects.
One, of course, has already been addressed by the Court's questions, concerning the blatant attempt at double recovery of insurance benefits.
This was never an evil that COBRA was trying to remedy when it was passed to protect people without insurance--
Unknown Speaker: Well, why is that relevant?
I mean, if he gets $120,000 from you, and if Aetna wants their money back, they'll get their money back.
What's the problem?
I mean, what's the problem insofar as it concerns us in this case?
Mr. Washburn: --Well, it concerns us, of course is, is that we don't want to pay Aetna.
Unknown Speaker: I know it concerns you, but our basic problem is to decide this particular case.
Mr. Washburn: Right.
Unknown Speaker: And how is it relevant to our problem?
Mr. Washburn: Well, I think that you have to look at the statute, and the statute as a whole, and we have to... based upon a holistic look at the statute, have to determine the intent of Congress, and I don't believe that Congress was trying to protect people and allow them to, in essence, win a medical lottery.
If they're entitled to a double recovery, everybody who is sick, or even people who aren't sick really would... should elect COBRA--
Unknown Speaker: I don't quite see that, because I thought most insurance policies have in them clauses so that you can't get a double recovery, and one way is, they may have to pay the money back.
Another way is, insurance company 2 sues insurance company 1.
I thought the insurance industry is filled with devices in contracts that prevent that.
Mr. Washburn: --That is correct, Justice Breyer.
Unknown Speaker: All right.
So is that really a prob... a--
Mr. Washburn: We don't intend to pay twice.
That's certainly... but it is certainly a problem with this.
The other matter that's so disingenuous to my way of thinking is, is complaints about the status of the record.
Unknown Speaker: --Well, I mean, if you start out saying, this is disingenuous, they don't want double recovery, and then you tell us there's not going to be double recovery, it seems to me that your opening salvo is rather ineffective.
Mr. Washburn: I'm sorry, Justice.
I think that it is important that they don't be... that they're not entitled to double recovery, and I'm wanting to make sure that they're not entitled to double recovery, because we certainly don't want to have to end up paying twice.
Unknown Speaker: But what do they call the insurance clauses that prevent... accommodation clauses, is--
Mr. Washburn: Coordination--
Unknown Speaker: --Coordination--
Mr. Washburn: --clauses, Justice.
The other issue is, is the complaints about the status of the record.
The petitioner made the record.
They're the ones that took the interlocutory appeal.
They were the ones that prepared the affidavit.
The affidavit was prepared some, almost 2 years after the date of the qualifying--
Unknown Speaker: --Well, they took an interlocutory appeal because they were thrown out as a matter of law on the meaning of this statute, isn't that right?
Mr. Washburn: --That is correct, Justice, but what... it's my position--
Unknown Speaker: And nothing to do... if the statute means what you say it means, then I don't see how any of the rest of this is relevant, because you're not entitled to more than one policy, as you read it.
Mr. Washburn: --That's correct, Justice.
Unknown Speaker: You say this statute just protects the person against the loss of any insurance, and that... so you present a stark question of statutory interpretation on which you divide... you prevailed on your reading, and the rest of it seems to me, as Justice Breyer suggested, not relevant to the question before us, which is what does this provision mean.
Mr. Washburn: Okay.
I'll address that, Justice.
The... what the provision means, and to look at it and also... I'd like to point to the Court on pages 1 and 2 of the reply brief of the respondent, they sat there and said that my analysis of the COBRA statute as a whole was seriously flawed, and therefore my analysis of what the plain meaning of 1162(d)(2) is was therefore wrong.
COBRA works this way, and if you look at section... and it's at 10a of the appendix of the Government's brief.
COBRA, your insurance from your group health plan ceases at the qualifying event, and some companies may obviously have a situation where they let you keep it to the end of the month, or whatever, and that is set forth clearly at 1165 (1)(A).
Coverage stops at that point in time.
What happens is, is then there's this election period where there's a period of time after the qualifying event that the employer has to give notice, and then within 60 days after the notice, the beneficiary, or beneficiaries, as the case may be, have to elect to have coverage, and then within 45 days later they have to pay the premium.
Assuming there's notice, assuming there's election, and assuming there's payment of premiums, what happens is, then the policy, and only then, does the policy become effective as of the qualifying date.
It's like any other claims-made insurance policy that has a retroactive date.
Even though it's paid, purchased on one date, paid for on another date, it can still relate back to a much farther date, and that's what happens here.
There is no COBRA coverage until there is an election, and I believe that both the petitioner and the Government seem... the Government to a lesser extent, they both seem to be making this fallacious understanding of the statute, and--
Unknown Speaker: Why did Congress use the word, continuation coverage?
It didn't say, renewal, or... it says continuation.
Mr. Washburn: --I'm sorry, Justice Ginsburg, where--
Unknown Speaker: I thought that the statute uses the words, continuation coverage.
Mr. Washburn: --It does at times, yes.
Unknown Speaker: --section 1162.
Mr. Washburn: Right, and 1161, also.
Unknown Speaker: That... at least that caption seems to run counter to what you're describing, which is a termination and then a revival.
Mr. Washburn: Well, it's new coverage, but it's coverage that relates back to the qualifying event.
Somebody, just because they quit working for a company, or are terminated from their company on January 1, doesn't have free right and free mandatory insurance from January 1 through, say, 60 days, through February 28, or--
Unknown Speaker: You get it retroactively when you pay the premium.
Mr. Washburn: --You get it ret--
Unknown Speaker: I don't see how that affects the issue that's before us here.
Mr. Washburn: --How it affects the issue before us, Justice Scalia is, is what we have to do is, is to interpret the plain meaning of the statute is, is I believe we have to focus on that clause, after the date of election, set forth in 1162, and that extremely dangling prepositional clause is set off, and it's an independent prepositional clause, and what it... the whole statute is talking about is, is--
Unknown Speaker: Where do we find this independent clause in the brief?
Mr. Washburn: --In the... I'm using the Government's brief.
Unknown Speaker: Yes.
Mr. Washburn: It's at... at page 5a.
Unknown Speaker: And whereabouts on the page?
Mr. Washburn: On the very first paragraph.
Unknown Speaker: Thank you.
Will you deal with, before you get to the after, first become?
Mr. Washburn: The Government's position is, is that becomes is an extremely strong word.
I take extreme exception with that position, that becomes is a strong word.
It's an extremely passive word, in fact, and it's a very amorphous term.
We're not really sure what becomes is.
If they use a strong active verb like, it only originates at that point in time, I can understand that, but if you look at the dictionary definitions set forth by the petitioner at paragraph 24, and the Government's position wasn't anything much different than that, it defines become to pass from one state to another, to enter into some... assuming or receiving new properties or qualities, additional matter, or a new character.
Well, it's our contention that the... in this case the Aetna plan, the preexisting spousal insurance plan, took on an extremely new character.
It became the primary insurance, and so there was coverage.
Unknown Speaker: This first becomes coverage--
Mr. Washburn: Yes.
Unknown Speaker: --I mean, I'd like to get your answer to Justice Scalia's question.
I mean, you had a point, which was quite right, that if on... he's fired on, say, January 1, or leaves the job.
He gets his notice, let's say on February 1.
He has until April 1 to elect.
Now, if he elects on, let's say, March 15, he's covered back to January 1.
What's the relevance of that point?
That was what I think Justice Scalia asked, and--
Mr. Washburn: Well, first of all the relevance is, is that the petitioner--
Unknown Speaker: --Throughout this whole period, of course, he's covered by the Aetna policy.
Mr. Washburn: --Right.
Unknown Speaker: So... it has to do with what happened to the Aetna policy.
He didn't first become covered by the Aetna policy after the election period.
He was covered by the election policy forever.
I mean, long before... by the Aetna policy.
Mr. Washburn: I appreciate that position.
Unknown Speaker: But what's your answer?
I mean, that... go back to Justice Scalia's question.
What is the... what is the point?
Mr. Washburn: My answer to it is this... as the Eleventh and the Eighth Circuit in this case found out is, is that the... this statute talks about the suspension of coverage, when coverage may end, and its... is... coverage may end only after the date of election.
That is the first time that the employer has the right to suspend the coverage.
We... it's axiomatic, as an employer, we don't have the right to suspend something that's never been elected.
We can't suspend it.
I mean, it's that--
Unknown Speaker: So--
Mr. Washburn: --So what the point becomes is, is that the exact date of the obtention of this preexisting policy really doesn't have a whole lot to do with it, and let me give you a hypothetical that may somewhat clear it up.
Let's change the facts of this situation only slightly.
Mr. Geissal was working for Moore Medical.
His wife, instead of being a long-term employee of TWA, became an employee of TWA only 6 months before Mr. Geissal was terminated, and the TWA plan has a 1-year preexisting condition clause.
Unknown Speaker: --Your point basically is, don't pay that much attention to the words become after the date of election and first, for the reason that, until the election, there was nothing in effect, so it's natural for Congress to have used those words, since the election created a nothing into a something.
Mr. Washburn: That's correct.
Unknown Speaker: It really has nothing to do with the issue before us.
Mr. Washburn: That's absolutely correct.
Unknown Speaker: That's your argument.
If I understand that, then, let's go to the question of why Congress might have wanted it, and I take it that the reason they might have wanted this interpretation that the petitioners have is because they figure all of us... you know, many people in this room, hundreds of people have coverage through their employer, their spouse works, he or she has coverage as well, so everybody has two policies, basically, the potential for two.
Not everybody in the world, but huge numbers.
And what Congress is interested in, after all, is that when you lose... when one spouse loses one job, they want a conscious choice, or otherwise you're covered for 18 months.
So during the 18 months period, if you don't make a conscious choice to go choose something else, you're still covered by your employer.
If you make a conscious choice, the employer should be off the hook.
Now, I mean, that's an obvious reading, I guess, of the purpose.
That seems to be what I got out of the other side's briefs.
What's your response?
Mr. Washburn: That basically gets back to the preservation of the status quo argument.
First of all, if Congress were so concerned about the preservation of the status quo, their... the provisions also in the same sub-sub-subsection of this act, also (ii), deals with medicare, and medicare is a mandatory event that causes termination.
It talks about eligibility for medicare being a terminating event, and medicare has... is substantially different in the character of the policies between the normal group health plan and this group health plan.
For one thing is, is almost all group health plans have prescription medication health.
Whether it's... there's a co-pay, or whether they pay all of it, or whatever, there's something in there.
Medicare certainly doesn't have that type of provision.
So there's two points is, is one is there's no issue here, and there's nothing that can be gleaned from the face of the act that shows that Congress was concerned about the preservation of... an identical preservation of the status quo, and there's--
Unknown Speaker: So that's your point on this one, I take it, is look, all Congress wanted is to give you the 18 months if there's no other coverage in the family.
Mr. Washburn: --Right, without the free--
Unknown Speaker: That's... all right.
And if there is... now, that... if we bought that argument, I mean, I think that would work a major change in COBRA, wouldn't it?
Mr. Washburn: --No, I don't believe that it would.
Unknown Speaker: Now, aren't lots of people covered with two policies because the spouses both work, or not?
Mr. Washburn: I have--
Unknown Speaker: What do you... you're in this... I mean, just speaking out of your experience, this is your... basically I gather you're represented a lot of these cases.
Are most... I just... on the basis of acquaintanceship, it seems to me a lot of people have both spouses working and they each have a policy at their place of employment, so on the basis of that, wouldn't you say this would suddenly make this 18-month business pretty meaningless, if we accept your interpretation?
Mr. Washburn: --Justice Breyer, I do assume that there's probably a lot of people who do have this situation, that there are a lot of people with preexisting spousal insurance.
To the extent that it does cause those people to not be able to have double coverage, yes, it--
Unknown Speaker: All right.
If Congress really intended so to limit the 18-months--you know, this looks like... I would think that this extra 18-month safety valve that they build in would in vast numbers of cases become meaningless, and wouldn't we expect to find something in the legislative history, or some place, that would suggest that this limitation, so major a limitation was intended?
Mr. Washburn: --I don't know the... I certainly don't know the answer to that.
This... as cited by the petitioner, there is a law review article that said this was a midnight passage and that there really isn't a lot of legislative history on this.
The act was passed primarily... it was a budget act.
It was a comprehensive budget act, and it was passed in response to staggering budget deficits, and one of the concerns was, was that the Government not have to be the health insurance of last... health insurer of last resort, and to save the Government money.
That was really probably what--
Unknown Speaker: Well, Mr. Washburn, under the COBRA scheme, I take it that your client, the insurance company, is paid a premium for the COBRA coverage.
It isn't as though it's free.
Mr. Washburn: --That's correct, we are paid a premium, but the practical matter is, is the cost of providing benefits to COBRA are always substantially... or not always, but they as a rule are substantially greater than the premiums that are received, because people--
Unknown Speaker: How is that?
Mr. Washburn: --Well, because people--
Unknown Speaker: I assume you make that back from the employer when you sell the employer the whole package.
I mean, you've got to get it from somewhere.
Mr. Washburn: --Justice Scalia... I'm sorry.
This is not an insurance plan.
We're a self-funded group health plan.
Unknown Speaker: No, but I mean, if you're losing money on the premiums that you get from the retired employees, or the terminated employees--
Mr. Washburn: Mm-hmm.
Unknown Speaker: --of this employer, you would not sell insurance to this employer unless, when you sell insurance to the employer, you get enough premiums from his current employees, contributed to by the employer or not, to make up for that loss.
Mr. Washburn: That is correct.
Unknown Speaker: So, you know, you're happy.
It works out okay.
Mr. Washburn: Well, the insurance company may be happy, but the employer and the existing employees may not be happy, because of... particularly with small groups, COBRA--
Unknown Speaker: It comes out of their pockets.
Mr. Washburn: --It comes out of their pockets and, in fact, what it may have the long-term effect of doing is, is causing a lot of particularly smaller plans to just cancel the group health insurance leaving everybody bare, the COBRA people plus all of the employees.
If I may, I'd like to finish my... the hypothetical I was creating on the situation where we just changed the facts, where... that Mrs. Geissal only went to work for TWA 6 months before the date of the election and it had a 12-month exclusion, so if you take even the petitioner's position is, he was terminated and 6 months later he first became covered by another plan without a preexisting condition clause, because 6 months after the qualifying event there is now no longer a preexisting limitation in the Aetna or TWA plan.
So now, even using his analogy, he obviously first becomes covered by another group health plan that does not contain a preexisting condition, exclusion, or limitation, so obviously, if you even take that, you can see that there is nothing about having preexisting spousal insurance coverage that caused... that was bothering Congress, that there's an obvious situation--
Unknown Speaker: Well, it may have been bothering Congress, but if I understand what you're saying, it... you're saying it shouldn't bother us because that's not the case here.
Mr. Washburn: --It's not the case--
Unknown Speaker: I think you're saying there's another ground upon which you ought to win this case.
Mr. Washburn: --Right.
Unknown Speaker: And it's not a ground that was passed upon, as I understand it, in the summary judgment that was entered.
Mr. Washburn: Justice Souter, I believe that the plain language of the statute dictates--
Unknown Speaker: No, the plain language of the statute may dictate it, but the... as I understand it, the summary judgment was not entered on the assumption that the policy coverage to which the statute applies is as you have just described it.
If you are correct, perhaps there is another basis upon which you should win this case, but I didn't understand that to be the basis upon which summary judgment was granted here.
Mr. Washburn: --Summary judgment was granted here is, is because the trial judge determined that... he went along with what the Eleventh Circuit and national companies and now the Eighth Circuit ruled.
Unknown Speaker: Okay, and that's a different issue.
That's an issue of law.
Mr. Washburn: Right.
Unknown Speaker: And now, if I understand what you're saying, you're raising an issue of fact under the policy to be applied to that law, but that was a stage to which the lower courts never progressed, isn't that the case, or am I misunderstanding you?
Mr. Washburn: Maybe I'm not making myself perfectly clear, Justice.
I was trying to make a hypothetical to show--
Unknown Speaker: You're not suggesting those hypothetical facts are the facts of this case.
Mr. Washburn: --No, they're not the facts of this case.
Unknown Speaker: Okay.
Mr. Washburn: There was... as I understand it, Mrs. Geissal had been covered for years by the TWA plan.
Unknown Speaker: You're just basically saying there are situations in which there could be a preexisting policy but yet it still... that policy wouldn't amount... would not first become applicable, and so forth.
Mr. Washburn: Right, and all I'm just showing is, is that--
Unknown Speaker: Yes.
Mr. Washburn: --a supercilious approach to looking at just the date of obtention of the spousal policy really isn't in keeping with the act, and I'm just showing that the pure position of, say, all pre-existing spousal coverage is exempt from COBRA makes no sense because of this hypothetical situation.
Unknown Speaker: Yes, with the hypothetical... I mean, that's clever.
I mean, it's a very... it's... I take it your hypothetical argument is that there will be a bunch of COBRA policies that will coexist with a spouse's pre... you know, preexisting policy, and now when COBRA ends the spousal's policy kicks in only because the COBRA has ended, because under the rules, COBRA would have been the first payor.
And so you're saying at least in that situation the spouse's policy became... what's the word, became--
Mr. Washburn: Became primary.
Unknown Speaker: --Became primary, and you say therefore it became... first became coverage.
That's your argument.
Is that right?
Mr. Washburn: It's one of my arguments, yes.
Unknown Speaker: All right.
But I mean, that's the hypothetical argument.
All right... which I thought was a very interesting argument, and my concern with that argument is simply that that would turn the statute on a real patchwork, since sometimes the COBRA policy is the first payor, sometimes, I would guess, the COBRA policy is the second payor, and you couldn't make it, and sometimes there would be policies in respect to portions of which the COBRA would be the first and portions of which the COBRA would be the second.
So if we accepted that argument, what we had read... read into this statute would be a hodge-podge, and nobody would probably know who was covered under what.
Mr. Washburn: Justice, if I may, I--
Unknown Speaker: Yes.
Is that... yes.
Mr. Washburn: --get into that.
This is basically a coordination of benefit rules.
The National Association of Insurance Commissioners has model 120, that talks about the coordination of benefits if there's COBRA, and 38 States, including Missouri and Connecticut, which are the only two States that have any nexus whatsoever to this case, have adopted the model code from the NAIC.
What it does--
Unknown Speaker: This is not a coordination of benefits provision, and this is probably your... your hypothetical is probably why Congress did not key this to primary coverage.
It just said coverage, and the question of primary coverage, secondary coverage, is something to be thrashed out later on.
Isn't... in this and in every case.
Isn't that true?
Mr. Washburn: --Well, I don't know that primary and secondary coverage should be thrashed out in every single case.
There aren't a lot of cases out there holding what primary and secondary coverage is.
Unknown Speaker: But could you explain to me, in the context of this case, he gets sick.
He's covered under your company's insurance and his wife's policy.
There must be something in your policy and their policy about coordination of benefits.
Mr. Washburn: Our policy, our plans... our plan, ERISA plan, sits there and says that Aetna would pay, that they're primary, and that is also in accordance with the NAIC model code that COBRA--
Unknown Speaker: That any other insurance... you have the, I would think that you insure your own and the spouses would be secondary, but you say no, that... if you employ someone, any other insurance that that person has would be primary and not yours?
Mr. Washburn: --No.
While Mr. Geissal was working for us, under the coordination of benefit rules we were his primary insurer.
Under our plan, and also under the model rules of the NAIC as adopted by 38 States, we became secondary immediately upon... assuming that we were... assuming we gave him COBRA, or this Court were to order us to give him COBRA continuation insurance, under the model code we would be secondarily liable to anything that just wasn't... an allowable expense that wasn't paid by Aetna.
Unknown Speaker: What body of law determines whether you shift from being primarily liable as the employer to secondarily liable?
You said something about a model code, but a model code is not law unless somebody enacts it.
Mr. Washburn: Well, in my brief I did cite that Missouri and Connecticut have adopted the model code, Justice.
Unknown Speaker: And is that a matter determined by State law rather than ERISA law?
Mr. Washburn: Yes, it is, and it's definitely within the exception for matters of insurance.
It's not a matter of Federal preemption, something that... certainly far afield from what we're arguing about here.
Unknown Speaker: Because there, there is a difference between the two of you on what the law is, I thought.
Maybe I misunderstood Mr. Weinhaus, but I thought he said that the employer, even with COBRA coverage, would remain the primary insurer and Aetna would remain the secondary, just as it was before.
Mr. Washburn: That is what they pled in the lower... in the trial court.
I think it was paragraph 15 of Count I. They said that Moore Medical plan would be primary.
We disputed that.
We've denied it all along, and we believe the law is substantially in our favor on who would be primary and who would be secondary, assuming that there even were COBRA.
Unknown Speaker: Mr. Washburn, can I ask you just to comment on one thing that the other side raised, the significant gap argument, that they say under your view you have a significant gap problem.
Under their view the injured... the ill person makes the decision right away and there isn't a significant gap problem.
Mr. Washburn: Okay.
I could talk... I don't have a whole lot of time to talk on that, and I could talk for a long time on that, but assuming it's the individual, the ill person who has the right to make that election, essentially that just reads away the sub-subsection that we've been talking about.
It makes it a nullity.
It takes away the employer's expansive rights and liberal rights to terminate COBRA coverage.
It's now totally in the hands of the ill person, and it's not... they can make the election, and it's not that situation.
The gap has to do with whether there's a gap between the policies.
Obviously, you know, there's always going to be a gap when you have to drop one policy.
Unknown Speaker: But if there is a significant gap, in your view, what happens?
Mr. Washburn: Well, under the status of the law basically in the Eighth Circuit if there is a substantial... if there were a substantial gap, then COBRA continuation insurance coverage would have to be offered, and obviously the... two courts have now held in this case that there was no significant gap, and there is no significant gap in this case.
If there are no more questions--
Unknown Speaker: Thank you, Mr. Washburn.
Mr. Weinhaus, you have 4 minutes remaining.
Rebuttal of S. Sheldon Weinhaus
Mr. Weinhaus: I only have one answer, Justice Ginsburg, to your question as to what law prevails here in terms of how that... how the coverage should be read, and that's a decision of this Court some years ago, FMC v. Halliday Corporation, in which you held self-insured funds are not subject to State insurance regulations at all.
Unknown Speaker: Mr. Weinhaus, could you... I meant to ask this of Mr. Feldman, too, but maybe you can satisfy me.
I... you and he have given some reasons why this... it makes sense to read first becomes as you do with regard to (i), but the first becomes clause also applies to (ii), first becomes after the date of the election in the case of a qualified beneficiary other than a qualified beneficiary described in section 11... of this title, entitled to benefits under medicare.
Why does it make any sense to say, well, we're... the... we're going to allow medicare benefits to eliminate your... the employer's continuing obligation to give you this coverage, but only if those medicare benefits first become available after the election?
What's the reason for that?
Mr. Weinhaus: I do know... of course, I can't speak to what Congress intended as to medicare, but I do know in the early history, when COBRA was being discussed, that in fact Congress really carved out... they said first becomes for other insurance, and they left out the first becomes for medicare, so I tend to believe that Congress always believed there was some slight difference between the two and the way it was going to treat it, but I can't--
Unknown Speaker: But they end up treating the two of them the same, and I must say, it doesn't make any sense to me with respect to medicare, since that's mandatory.
I mean, it's not something you have the option of taking on or not.
Mr. Weinhaus: --If there are no other questions, Justice, we would rest.
Chief Justice Rehnquist: Thank you, Mr. Weinhaus.
The case is submitted.
Unknown Speaker: The honorable court is now adjourned until Monday next at ten o'clock.