his employment period, the portion of the cost of the SS White Plan allocated to employees was deducted from Mr. Hay's salary.
9. On or about October 15, 1986, a representative of SS White told Mr. Hay that his coverage under the SS White Plan would continue only until January 31, 1987.
10. SS White continued Mr. Hay's group coverage under its health plan until January 31, 1987.
11. Mr. Hay was not given specific notification at the time of his termination of employment with SS White or at the time of the termination of his coverage under the SS White Plan regarding any rights under the Plan (if any) to convert his group coverage to individual coverage.
12. Mr. Hay had been diagnosed as having renal (kidney) failure by Dr. Serota on March 4, 1986. Mr. Hay was hospitalized at Abington Memorial Hospital for kidney failure from March 10, 1986 to March 14, 1986. Thereafter, Mr. Hay was diagnosed as having kidney failure and treated on a monthly basis from March, 1986 to January, 1987, when he was again hospitalized for kidney failure. Mr. Hay was hospitalized for kidney failure again in February, 1987 and then received medical advice and treatment for kidney problems on a monthly basis until the present time.
13. From January 31, 1987 through January 31, 1988, Mr. Hay was treated for a punctured lung and for kidney failure, and medical expenses were incurred as a result of such treatments. Medicare, Drexelbrook, and/or Drexelbrook's insurer, Mutual of New York reimbursed Mr. Hay for all of these expenses.
14. On January 1, 1987, Mr. Hay became covered by the group health plan of Keystone, which was insured at that time by Provident Life and Accident Insurance Company.
15. Mr. Hay was not shown the Keystone Summary Plan Description by Keystone until after January 1, 1987. He first saw the Plan around March, 1987 and had the opportunity to read it. He "paged through it."
16. From 1986 to the present, Mr. Hay has been covered as a dependent under the group health plan of his wife's employer, Drexelbrook Engineering Company.
17. Since April 1, 1987, Mr. Hay has also been covered by Medicare for a portion of the expenses related to kidney failure.
18. The SS White group policy covering Mr. Hay provided that insurance under the SS White Plan would terminate when the employee's employment terminated (p. 27).
19. The SS White group policy covering Mr. Hay provided for extended benefits after the termination of insurance (p. 31).
20. The Summary Plan Description of the SS White Plan, provided to Mr. Hay in 1984, contained a description of the conversion privilege under Group Policies G 665624 and GA 665624.
21. Mr. Hay never attempted to exercise the health conversion privilege, if any, provided under the SS White group policies. At his deposition, Mr. Hay stated that he had never read the page of the Summary Plan Description which describes the conversion privilege.
22. The Provident Life and Accident Insurance Company policy, which covered Mr. Hay as a Keystone employee after January 1, 1987, contained an exclusion as set forth on page 22 of Defendants' Exhibit 2.
23. The Travelers denied reimbursement for Mr. Hay's medical expenses incurred after January 31, 1987 on the ground that his coverage under the group policies of the SS White Company had expired by reason of the termination of coverage on January 31, 1987.
24. Provident refused to reimburse Mr. Hay or his health care providers for medical expenses related to kidney failure, except for $ 1,000, during the calendar year 1987, on the ground that these expenses were incurred for treatment of pre-existing conditions, which were excluded under the policy. Provident did, however, pay $ 1,000 during 1987 and also paid all covered medical expenses related to the hernia.
25. On January 28, 1988, Mr. Hay assigned to Drexelbrook Engineering Company all of his rights, title, and interest in all claims and causes of action against the SS White Company, the Travelers Insurance Company, the Travelers Indemnity Company, Keystone X-Ray, Inc., and Provident Life and Accident Insurance Company for reimbursement of medical expenses incurred from January 31, 1987 to January 31, 1988.
DISCUSSION AND CONCLUSIONS OF LAW
As outlined in the findings of fact, this is a case in which one Robert E. Hay was employed by a company ("SS White") which in 1986 was purchased by another company ("Keystone"). While he was working for SS White, Mr. Hay was covered by a group health insurance plan administered by SS White. Shortly after Keystone took over, SS White told Mr. Hay that his existing group health insurance plan would terminate on January 31, 1987, but they did not tell him that he could convert the White group plan to individual coverage. On January 1, 1987, the new group health insurance of Keystone started covering Mr. Hay.
A physician diagnosed Mr. Hay as having kidney failure approximately six months before the Keystone takeover and treated him on a continuing basis. Keystone did not show Mr. Hay a written description of the Keystone Group Health Insurance Plan until after January 31, 1987, and only later he learned that the Keystone plan excluded pre-existing medical conditions. The insurance carrier
for SS White, the Travelers Insurance Company, has denied coverage of medical expenses incurred after January 31, 1987, and the insurance carrier which underwrote the Keystone plan, Provident Life and Accident Insurance Company, has denied coverage because of the pre-existing coverage exclusion. Fortunately, Mr. Hay was covered as a dependent under his wife's health plan with Drexelbrook. Drexelbrook paid his medical expenses and took an assignment of whatever rights Mr. Hay had against both insurance companies.
After the trial, but before we issued this decision, Provident and Drexelbrook resolved their dispute and entered into a formal settlement agreement. Thus, we need not address the issues raised by that controversy.
Drexelbrook argues that Travelers did not comply with state insurance law notice requirements contained in 40 Pa. Cons. Ann. § 756.2 (Purdon Supp. 1988)
because it did not notify Robert Hay in writing of his conversion rights. Travelers responds, inter alia, that ERISA preempts the above state statutes and that it fully complied with the federal requirements.
The ERISA preemption provision provides as follows:
Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.
29 U.S.C. § 1144(a) (1982). The Supreme Court reads this as a broad preemption statute, Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41, 45-46, 95 L. Ed. 2d 39, 107 S. Ct. 1549 (1987), preempting any state law that does not fall within the savings clause of ERISA. Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 85 L. Ed. 2d 728, 105 S. Ct. 2380 (1985). In subsection (b), the savings clause provides as follows:
Except as provided in subparagraph (B) [the deemer clause], nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance. . . .