February 14, 2018

In the Matter of the Debt Collection Act Petition

JESSICA R. LUKAS v. U.S. DEPARTMENT OF VETERANS AFFAIRS

P.S. Docket No. VA 17-135

APPEARANCE FOR PETITIONER:
Jessica R. Lukas

APPEARANCE FOR RESPONDENT:
Kelly J. Burns, Esq.
U.S. Department of Veterans Affairs

FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982

The Department of Veterans Affairs (VA) assessed Jessica R. Lukas with a debt of $500.90 for unpaid Federal Employees Health Benefits (FEHB) premiums which the VA has already offset from her salary.  Ms. Lukas challenges this debt assessment, as well as the VA’s additional deduction of $400.72 from her paycheck for FEHB premiums.¹  In total, Ms. Lukas seeks the return of $901.62.  During the four and a half months when these FEHB premiums accrued, the VA failed to process Ms. Lukas’s health care election form.  Throughout the period, Ms. Lukas maintained her private insurance.  Based on the unique facts of this case, the Petition is dismissed in part and granted in part.  The VA may retain the $400.72.  The VA shall return the $500.90 it offset from Ms. Lukas.

FINDINGS OF FACT

1. The VA appointed Jessica R. Lukas to full-time employment effective June 26, 2016 (AE 1).²
2. As a full-time employee, Ms. Lukas was eligible to enroll in the FEHB program.  She elected to enroll in a Blue Cross Blue Shield Service Benefit Plan with a biweekly employee premium of $100.18 (AE 2; AE 3 at 1).
3. Ms. Lukas made her FEHB election using Standard Form 2809, Health Benefits Election Form (SF 2809), which she submitted on August 24, 2016.  Per the applicable regulations, her coverage should have started on September 4, 2016 (the first day of the next pay period).  (AE 2; Pet. Exh. Dec. 30, 2016 email from Sandra Smith). 
4. The VA forwarded the SF 2809 to Blue Cross Blue Shield sometime between November 18, 2016, and December 31, 2016 (Tr. 33-34; AE 4 at 2; AE 5 at 5, 8).
5. The VA began withholding $100.18 for FEHB premiums from Ms. Lukas during the pay period beginning on November 13, 2016 (Tr. 55; Pet. Exh. 1).
6. The VA (through its payroll agent the Defense Finance and Accounting Service) sent Ms. Lukas a notice dated December 6, 2016, assessing a debt of $500.90³ for FEHB premiums for September 4, 2016, through November 12, 2016.  The VA did not collect the FEHB premiums from Ms. Lukas during this time period.  (AE 5; see also Tr. 19, 20; Pet. Exh. 5).
7. Ms. Lukas filed a timely petition challenging the debt (Petition dated December 13, 2016).  Notwithstanding the timely Petition requesting a hearing, the VA subsequently collected the $500.90 (Tr. 4-5).
8. During the second week of January 2017, Blue Cross Blue Shield issued Ms. Lukas an insurance card.  The card states that her coverage was effective retroactively to September 4, 2016.  (Tr. 24, 55, 62).
9. The VA collected $400.72 from Ms. Lukas’s salary for FEHB premiums for the pay periods between November 13, 2016, and January 7, 2017.  Ms. Lukas challenged this collection of FEHB premiums in her December 13, 2016 Petition alleging that she did not have insurance from Blue Cross Blue Shield through the VA until January 2017.  (Tr. 55; Pet. Exh. 1).
10. When Ms. Lukas began her full-time employment with the VA in June 2016, she had a preexisting medical condition which required $4,645 in prescription medication each month.  Because of this expense, Ms. Lukas continued coverage under her existing private insurance plan.⁴  She paid $175.05 a month from September 2016 through January 2017 for the private insurance with Blue Cross Blue Shield (Tr. 55-56; Pet. Exh. 6⁵).
11. During the VA’s delay in processing her FEHB application, Ms. Lukas made regular inquiries to the VA’s Human Resources Office about when her coverage would be effective.  The VA’s Human Resources Office could not tell Ms. Lukas when her coverage would begin or explain the delay.  (Tr. 21-24, 55; Pet. Exhs. 2-4).
12. One VA human resources official explained to Ms. Lukas that she could take her SF 2809 to her doctor as proof of coverage.  She did so, but her doctor rejected this form as proof of insurance because Ms. Lukas could not present an FEHB insurance policy number.  (Tr. 56, 61, 63).
13. Human Resources Office representatives (both local and regional with the VA) did not believe that Ms. Lukas had usable FEHB coverage between September 2016 and January 2017.  Also, the regional Human Resources Office would not provide anything in writing for her doctor explaining that Ms. Lukas had coverage.  The regional office would not confirm in writing that she would be reimbursed by the insurance company for medicine or doctor visits after September 4, 2016.  (Tr. 22-24, 56, 57, 69). 
14. Without insurance, Ms. Lukas would incur the monthly $4,645 cost for medicine (Tr. 55-56).

DECISION

Jurisdiction--$400.72
The VA moved to dismiss part of this case for lack of jurisdiction because Ms. Lukas authorized the VA’s deductions of $100.18 per pay period when she submitted the SF 2809.  The Debt Collection Act provides that an employee has “an opportunity for a hearing on the determination of the agency concerning the existence or the amount of the debt.”  5 U.S.C. § 5514(a)(2)(D).  In this context, a debt is “an amount of money . . . due the United States from any person . . . .”  Federal Claims Collection Standards, 31 C.F.R. § 900.2.  Because the VA collected the $400.72 from Ms. Lukas (pursuant to her authorization), it is not a debt that she owes the VA, but rather one that she alleges the VA owes her.  Accordingly, the motion is granted as to the $400.72.
Discussion--$500.90
In a Debt Collection Act case, the VA bears the burden of proving that a debt exists for FEHB premiums owed by Ms. Lukas.  See Ruan v. United States Postal Service, DCA 15-42, 2015 WL 13647646 (August 13, 2015), recon. den., 2015 WL 13647647 (September 16, 2015); see also Dept. of Veterans Affairs, Financial Policy, vol. XII, Debt Management, Chapter 1F, Administrative Wage Garnishment (July 29, 2016) (“[i]f the debtor challenges the existence, enforceability, or the amount of the debt, [the] VA has the initial burden to prove the existence or amount of the debt.”).⁶
Part of an employee’s health benefits is paid for by the VA while the remainder is paid by the employee through payroll deductions.  5 U.S.C. §§ 8905-06.  “An employee . . . incurs a debt to the United States in the amount of the proper employee . . . withholding required for each pay period during which they are enrolled if the appropriate health benefits withholdings . . . are not made.”  5 C.F.R. § 890.502(a)(1); Ramos v. United States Postal Service, DCA 16-84, 2016 WL 10572248 (July 14, 2016).
In short, to collect under the Debt Collection Act, the VA must show:  (1) it did not collect the FEHB premiums from an employee during the relevant time period; (2) the employee had FEHB insurance during that time period; and, (3) it later forwarded payment of the FEHB premiums on behalf of the employee.  See Willis v. United States Postal Service, DCA 16-258, 2017 WL 5516578 (July 18, 2017), recon. den., 2017 WL 5516579 (August 17, 2017).
With regard to the first element, failure to collect FEHB premiums, the VA proved that it did not collect FEHB premiums from Ms. Lukas from September 4, 2016, to November 12, 2016 (Findings 4, 5, 6).
To establish the second element, the VA argues that Ms. Lukas submitted her SF 2809 on August 24, 2016, resulting in a September 4, 2016 effective date of coverage.  See 5 C.F.R. § 890.301(b)(“an enrollment or change of enrollment takes effect on the first day of the first pay period that begins after the date the employing office receives an appropriate request to enroll . . . .”).  Consistent with this regulation, we have held that the effective date of enrollment is the first day of the first pay period after the employee submits a benefits election form even when there is an error in processing the form.  See, e.g., Ramos, DCA 16-84; see also 5 C.F.R. § 890.103(a)(“The employing office may make retroactive corrections of administrative errors that occur . . . .”); 5 C.F.R. § 890.103(e)(“[r]etroactive corrections are subject to withholdings and contributions . . . .”).  Accordingly, the VA proved the second element.
With regard to the third element, we presume that the agency will forward the correct total (the agency portion and the employee portion) to the Office of Personnel Management (OPM) which is then forwarded to the insurance company.  See 5 C.F.R. § 890.502(c)(1)(“[a]n agency that withholds less than the amount due for health benefits contributions from an individual’s pay . . . must submit an amount equal to the uncollected employee contributions and any applicable agency contributions to OPM for deposit in the Employees Health Benefits Fund.”); see also Phillips v. United States Postal Service, DCA 15-142, 2015 WL 13647640 (November 18, 2015)(a rebuttable presumption exists that the agency will follow the regulations and deposit the total amount with the Office of Personnel Management, which will then forward the total amount to the insurance company).  Nothing in the record rebuts the presumption.
The VA thus has met its initial burden of proof.  Under normal circumstances, even though an employee may not have coverage during the period of delay, any claim he or she previously submitted that was denied would be paid by the insurer after resubmission.  See Willis, DCA 16-258.  Establishing a retroactive effective date usually works to ensure that the employee receives the benefit of insurance he or she paid for.  See, e.g., Ramos, DCA 16-84.
This case, however, is unique because of Ms. Lukas’s preexisting medical condition and the likelihood of catastrophic financial costs resulting from procuring medicine without insurance.  Ms. Lukas uses these facts to make two arguments which focus on the second element of the test.
First, Ms. Lukas argues that she did not have insurance.  Even though Ms. Lukas submitted the SF 2809, it was not timely processed by the VA.  This failure resulted in Ms. Lukas not being able to use FEHB insurance to see her doctor or receive FEHB covered prescriptions.  Unique to this case, the regional Human Resources Office would not provide written assurances that Ms. Lukas had coverage, even retroactively.  Ms. Lukas’s doctor would not accept the SF 2809 as proof of coverage.  Thus, Ms. Lukas was left in the real-world position of having to either pay $4,645 a month out of pocket for prescription medicine (more than her gross monthly salary)⁷ or pay $175 a month to maintain her private insurance policy.
In summary, Ms. Lukas did not believe that she had FEHB coverage; her doctor did not believe that she had coverage; the local VA Human Resources Office did not believe that she had FEHB coverage; the regional VA Human Resources Office did not believe that she had FEHB coverage; and, without insurance she would be personally liable for her medicine.  She did not have coverage, and under these facts, backdating the effective date would not confer the benefit of usable insurance.⁸ See Willis, DCA 16-258 (“backdating the period of coverage . . . was not effective[;]” therefore, the employee was not liable for the FEHB premiums).  Because of the preexisting medical condition and the catastrophic personal cost, backdating the effective date would not provide insurance.  I am persuaded by Ms. Lukas’s first argument.
Second, Ms. Lukas argues that she should not have to pay for insurance twice.  We have regularly held that an overpayment may be reduced by an underpayment when they are so closely related so as to constitute a single debt.  See, e.g., Ashley A. Nokes, DCA 14-149, 2014 WL 12767839 (July 16, 2014).  In this case, Ms. Lukas essentially argues that no reasonable person with her preexisting health condition would be without insurance coverage.  Under these circumstances, the VA should not have forwarded the entire employee FEHB premium in 2017 because she did not receive FEHB coverage from Blue Cross Blue Shield until January 2017.  The payments for this private insurance are sufficiently related to the premiums sought by the VA to serve as an offset.  As the debt and the payments all relate to the VA’s failure to process Ms. Lukas’s insurance coverage, I find that I may consider Ms. Lukas’s claim for offset.  Ms. Lukas paid $525 for Blue Cross Blue Shield coverage procured by a means other than FEHB (i.e., $175.05 a month for the months of September, October, and November 2016).  This amount is more than to what the VA seeks to collect.  The coverage was provided by the same insurance company for roughly the same period of time.  Because the amounts are closely related and were paid directly to Blue Cross Blue Shield, I am persuaded by Ms. Lukas’s second argument and conclude that offset is appropriate here.

ORDER

The Petition is dismissed in part and granted in part.  The Petition is dismissed as to the $400.72.  The Petition is granted as to the $500.90.  The VA shall return $500.90 to Ms. Lukas.

Peter F. Pontzer
Administrative Judge