MEMORANDUM
DATED: 9/7/94
TO: Marsha Wylog
CC: Kathy Kovarick
FROM: Dean Blake, Compliance Specialist
Reinsurance Management, Inc.
REPLY REQUIRED? Yes
RE: COBRA application for Xxxxxxxxxxx Xxxxxxxx from Arizona Physician's Center, SS# xxx xx xxxx, plan no. ####-####
FACTS:
Employee was apparently a covered insured from two different sources; an employee under a self-funded plan administered by RMI and as a dependent insured of her husband with MET Life. Last day worked was January 4, 1995. Employer plan gave 90 days disability continuance followed by termination for being not actively-at-work.
Employee works for a physician firm and was being treated for "arthritis" when she was given a blood test and determined to have advanced myiloma.
Claims have been paid subsequent to 90 days disability by medical plan by reason of an in-house 24 week disability plan.
The employer collected the COBRA premium from applicant which submitted a combined group premium check.
CHRONOLOGY:
August 5, 1994 the COBRA application is received by company, dated August 1st in a different hand writing.
August 9 - premiums were received, applicant listed as an insured.
September 8th - premiums were received, billing was 'corrected' pursuant to COBRA application to show her as a COBRA coverage billing.
September 9 - PPO notifies of a potentially large claim, senior personnel review the claim file and discover the facts of ineligibility for reason of duplicate coverage.
QUESTIONS:
1. Is this person eligible for COBRA coverage under the present state of COBRA law?
2. Under the plan document language, is she eligible for COBRA coverage?
2. What is the effect of the case of Oakley v. City of Longmont?
4. If payable, is the claim payable as a secondary carrier?
REPLIES:
1. COBRA is not available under the self-funded plan to persons with primary coverage elsewhere under the official government Proposed Rules. Dependent coverage group medical coverage under another plan would disqualify this applicant for COBRA, no double coverage is intended under the law.<.p>
The plan document language on page 29, "Ineligibility" paragraph 4 second clause states that:
"Persons who have elected or receive this Continuation of Coverage become ineligible under the following conditions: . . . 4. . . . covered under any other group health plan that does not include a pre-existing condition exclusion clause that applies to an employee or to a covered dependent."
2. Oakley v. City of Longmont is a 10th Circuit Court decision and this group is located in the 9th Circuit, hence that case is not governing in a different jurisdiction, though it might influence a court's decision. Check the 9th Circuit for any more recent cases because once coverage is implemented the court will not be willing to rescind a contract once entered in to, even when entered in to by mistake, even with coverage elsewhere.
3. If it is determined that COBRA is available for some reason, and the other plan under which she is covered is an insurance plan,, then the plan COB provisions are in conflict because the self-funded plan does not adopt the Arizona COB rules. Arizona has adopted a version of the NAIC rules as described in the Price Waterhouse Handbook. Administrative Code R4-14-217 D(1)(b) states in pertinent part:
Excess and Other Nonconforming Provisions.
(1)(b) If the complying plan is the secondary plan, it shall, nevertheless, pay or provide its benefits first, as the secondary plan. In such a situation, such payment shall be the limit of the complying plan's liability, except as provided in subparagraph (d).
. . .
(d). If the nonconforming plan pays benefits so that the claimant received less in benefits than he or she would have received had the noncomplying plan paid or provided its benefits as the primary plan then the complying plan shall advance to or on behalf of the claimant the amount equal to such difference which advance shall not include a right to reimbursement from the claimant.
This means that the self-funded plan is secondary and that the insured plan must pay primary - part (b). The insured plan must advance any dollar difference between what its plan pays and the maximum payable by reason of double coverage immediately - part (d) and resolve its differences with the self-funded plan, but not seek recoupement from the insured.
I have asked Susan Dxxx to confirm that the other plan is an insurance plan. If the other plan is not an insured plan, we will need to review their COB provisions.
CONCLUSION:
RECOMMENDATION:
I suggest that [outside law firm] be consulted on recent 9th Circuit cases to determine if coverage is validly in effect or if it can be rescinded.
[signed]
Dean Blake
Compliance Specialist
cc: file