Eddie M. Bigelow v. United Healthcare of Mississippi, Inc., F/k/a Complete Health of Mississippi, Inc., Municipal Corporation of Pass Christian

Citations: 220 F.3d 339; 2000 U.S. App. LEXIS 17362; 2000 WL 1152234Docket: 99-60568

Court: Court of Appeals for the Fifth Circuit; June 8, 2000; Federal Appellate Court

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Eddie M. Bigelow appealed a district court decision favoring United Healthcare of Mississippi, Inc. and the Municipal Corporation of Pass Christian in an insurance coverage dispute under the Employee Retirement Income Security Act of 1974 (ERISA) and the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). The court affirmed the judgment, concluding Bigelow was not entitled to equitable relief under ERISA or its close counterpart, the Public Health Services Act (PHSA). 

Bigelow, a full-time employee hired in 1990, joined a medical benefits plan underwritten by Anthem Life Insurance Company. She received a booklet outlining her COBRA rights, which specified an 18-month continuation coverage after termination. Upon resigning on March 30, 1994, Bigelow indicated her desire for continuation coverage and completed the necessary forms. However, a dispute arose regarding whether she received effective notice of her COBRA rights from Ken Saucier, the City employee handling her retirement forms. Although the forms did not mention the 18-month limit, one instructed her to read a model statement that Bigelow claimed she never received. Saucier's death precluded further testimony on the City's behalf. Ultimately, Bigelow's continuation coverage was set to last until September 1995.

The City pays monthly premiums for employee insurance, later reimbursed by employees. Bigelow was notified on September 29, 1995, about a switch to a new insurer, United Healthcare of Mississippi, Inc. (UHM), effective October 1, just before her continuation coverage under COBRA expired. Despite being in arrears for her premiums for July, August, and September, Bigelow made a substantial payment on October 6, covering her overdue amounts and future premiums. The City mistakenly continued to pay her premiums for October and November, despite her ineligibility for continuation coverage. In mid-October, UHM sent Bigelow a pamphlet detailing COBRA coverage expiration, which she did not read thoroughly. On October 31, 1995, Bigelow faced medical issues and was granted emergency clearance to see a doctor, but was not informed by UHM that her coverage was set to expire the following day. She only learned of her coverage cancellation on November 14, when a pharmacist refused her insurance card. Despite assurances from City employees that she was covered for November, she was admitted to the hospital that evening as a private pay patient due to denial of coverage, incurring medical expenses totaling $218,237.18.

In November, the City discovered that Bigelow's health insurance coverage was denied due to the expiration of her continuation coverage. The City issued a refund for her October and November premiums, which Bigelow declined, preferring to address the situation with UHM. As her December premium had not been paid, the City also refunded her partial payment for that month. In December 1995, the City reported to UHM that Bigelow's coverage had been canceled and that premiums paid were erroneous. UHM claimed this was their first notification of the cancellation, despite having denied coverage since at least November 14.

In May 1996, Bigelow filed a complaint against UHM in federal court, asserting claims based on state law and ERISA/COBRA. The court dismissed her state law claims as preempted by ERISA and her ERISA claims for failure to exhaust administrative remedies. After exhausting those remedies in 1997, Bigelow filed a new complaint, adding Pass Christian as a defendant. The case proceeded on stipulated facts and briefs, with a summary judgment motion from Bigelow accepted by the court.

The court ruled in favor of the City and UHM, stating that any failure to provide COBRA notice was harmless as Bigelow had received all entitled continuation coverage. It determined UHM had no duty to notify her of continuation rights and dismissed it from the case. Bigelow's appeal focused on alleged statutory failures under COBRA, but the court noted that ERISA and COBRA do not apply to governmental health plans, which follow the PHSA. Despite this misapplication, the court considered her claims under the PHSA, which included allegations of inadequate notice regarding her coverage rights, the belief that her coverage would continue indefinitely, and the assertion that proper notice would have led her to secure alternative insurance. Bigelow argued that the defendants should be estopped from denying coverage for medical expenses incurred since November 1995.

The PHSA allows individuals aggrieved by a state's failure to comply with its requirements to seek equitable relief, contingent upon proving a breach of duty by the defendants. Bigelow's entitlement to such relief depends on whether her employer, Pass Christian, failed to notify her of her PHSA rights at crucial times. The district court found that UHM was not Bigelow's insurance carrier at her hiring or resignation, thus had no obligations under the PHSA and was correctly dismissed as a defendant. However, Pass Christian did not provide adequate notice of Bigelow's PHSA rights upon her termination. Bigelow claimed she did not receive the necessary continuation of coverage information, and the City could not challenge her statement due to the death of the individual who would have provided evidence.

Despite acknowledging the lack of notice, the court affirmed the district court's judgment denying Bigelow equitable relief. Bigelow was instructed to request the continuation coverage model statement but failed to do so, which contributed to her misunderstanding of her coverage expiration. Additionally, she was sent a model coverage statement from UHM prior to her hospitalization, indicating her coverage expiration, which she did not heed. Therefore, her failure to secure health insurance was attributed to her own negligence rather than inadequate notice from the city. The court clarified that its ruling pertains solely to Bigelow's federal claims under the PHSA and does not address potential state law claims related to her reliance on premium payments, which were not properly raised in lower courts or in the appeal. The district court's judgment regarding Bigelow's federal claims for equitable relief was affirmed in full.

Bigelow is not entitled to relief under ERISA and COBRA as these statutes do not apply to government-sponsored health plans. Instead, relief should have been sought under the Public Health Service Act (PHSA), which mandates that government employer-sponsored health plans provide continuation health coverage to qualified employees. Despite this, both the defendants and the district court treated the case as one solely concerning ERISA and COBRA, leading to misdirected pleadings and appellate briefs. Although the case should be analyzed under the PHSA, the recounting of facts will continue to focus on ERISA and COBRA due to its procedural history. Bigelow's continuation coverage was improperly extended beyond September 1995, and there is no equivalent preemption provision in the PHSA like that in ERISA. Courts are not required to dismiss cases simply due to incorrect citation of statutes; if a valid claim exists under a different statute, the court can recognize and treat the case accordingly without necessitating re-litigation.