206 F.R.D. 96 (E.D.Pa. 2002), 00-CV-3860, Brooks v. Educators Mut. Life Ins. Co.

Docket Nº:00-CV-3860.
Citation:206 F.R.D. 96
Opinion Judge:ANITA B. BRODY, District Judge.
Party Name:Charles E. BROOKS, III et al., v. EDUCATORS MUTUAL LIFE INSURANCE COMPANY.
Attorney:Joseph F. Roda, Michele S. Eagan, Roda & Nast P.C., Lancaster, PA, for Plaintiffs. George C. Werner, Jr., Matthew H. Haverstick, Barley, Snyder, Senft & Cohen, Lancaster, PA, for Defendant.
Case Date:February 13, 2002
Court:United States District Courts, 3th Circuit, Eastern District of Pennsylvania

Page 96

206 F.R.D. 96 (E.D.Pa. 2002)

Charles E. BROOKS, III et al.,

v.

EDUCATORS MUTUAL LIFE INSURANCE COMPANY.

No. 00-CV-3860.

United States District Court, E.D. Pennsylvania.

February 13, 2002

Page 97

Insureds brought action alleging that group health insurer's failure to pay for anesthesia services in accordance with its medical insurance contracts violated Employee Retirement Income Security Act (ERISA). On insureds' motion to certify class, the District Court, Anita B. Brody, J., held that: (1) insureds satisfied commonality requirement; (2) insureds satisfied typicality requirement; and (3) common questions predominated.

Motion granted.

Page 98

Joseph F. Roda, Michele S. Eagan, Roda & Nast P.C., Lancaster, PA, for Plaintiffs.

George C. Werner, Jr., Matthew H. Haverstick, Barley, Snyder, Senft & Cohen, Lancaster, PA, for Defendant.

MEMORANDUM AND ORDER

ANITA B. BRODY, District Judge.

Plaintiffs Charles Brooks and Victoria Coniglio instituted this action on behalf of themselves and others similarly situated against Educators Mutual Life Insurance Co. (" Educators" ) for failing to pay for anesthesia services in accordance with its medical insurance contracts in violation of the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. (" ERISA" ). Plaintiffs move for class certification pursuant to Federal Rule of Civil Procedure 23 and appointment as class representatives. Additionally, they seek appointment of their attorneys as counsel for the class. I will grant the motion to certify.

I. Background

This matter arises out of Educators' methods of paying for anesthesia services received by persons insured under its employee group health insurance policies. Based in Lancaster County, Pennsylvania, Educators sells group health insurance policies to businesses located primarily in Pennsylvania, Maryland, Virginia, and West Virginia. The group insurance policies it sells are one of two types: preferred provider organization (" PPO" ) policies or indemnity policies. Presently, roughly 80% of Educators' group policies are PPO policies, while the remaining 20% are indemnity policies.

Under its indemnity and PPO policies, Educators is obligated to pay the " qualifying expense" for medically necessary services and procedures. Educators' indemnity policies define " qualifying expense" as " the lesser of the actual charge or the reasonable and customary charge as determined by us." Educators' PPO policies define " qualifying expense" differently depending upon whether a PPO insured uses an " in-panel" provider or " non-panel" provider. 1 When an in-panel provider is used, Educators' PPO policies require it to pay the " qualifying expense" which is defined as the " network's allowed charge." This charge is determined according to an existing contract between Educators and the PPO. However, when a PPO insured uses a non-panel provider, Educators' PPO policies define " qualifying expense" precisely as it is defined in Educators' indemnity policies: as " the lesser of the actual charge or the reasonable and customary charge as determined by us." 2 Both its indemnity and PPO policies further define the " reasonable and customary charge" as " a charge that is not higher than the usual charge for medically necessary treatment and supplies provided in the same geographical area."

Page 99

In this action, plaintiffs Brooks and Coniglio allege that Educators failed to pay the " reasonable and customary charge" for anesthesia services rendered to persons insured under its indemnity policies and PPO policies who used non-panel providers in accordance with the language set forth in these policies. They move to certify a class defined as:

All persons whose anesthesia bills were paid in part by Educators at any time since September 1, 1998 under policies of insurance that: a) obligate Educators to pay " reasonable and customary" charges for anesthesia services; and b) define " reasonable and customary" as " [a] charge that is not higher than the usual charge for medically necessary treatment and supplies provided in the same geographical area." Excluded from the class are insureds of PPO policies whose anesthesia services were provided by an in-panel provider.

The proposed class, then, includes persons (1) insured under Educators' indemnity policies and Educators' PPO policies who used a non-panel provider, and (2) whose anesthesia bills were not paid in full by Educators, thus leaving them responsible for the remaining unpaid balance on the bill.

Additionally, plaintiffs propose that the class be divided into the following subclasses:

(1) all person whose anesthesia bills were partially paid by Educators between September 1, 1998 and late February/early March 1999; and

(2) all persons whose anesthesia bills were partially paid by Educators after late February/early March 1999.

This proposed division in the class tracks a change in the method employed by Educators in determining and paying the reasonable and customary charge for anesthesia services. According to plaintiffs, from September 1, 1998 to early March 1999, instead of making a determination as to the usual charge of anesthesiologists in a specific geographical area, Educators paid for anesthesia services under its group health policies by first determining the amount that the surgeon would be paid for the procedure that required the administration of anesthesia, and then paying the anesthesia provider 20% of that amount. If this amount was less than the anesthesia provider's charge, an insured was generally billed for any remaining balance by the medical provider (referred to by plaintiffs as " balance-billing" ). Educators paid for the anesthesia services received by proposed lead plaintiff Brooks in this manner, and Brooks was balance-billed by his anesthesia provider for the remaining unpaid balance. Plaintiffs contend that Educators' payment of the reasonable and customary charge for anesthesia services at a flat rate of 20% violated its contractual obligations because under this method, the reasonable and customary charge was not based on the usual charge for such services in a given geographical area.

Beginning in March 1999, Educators adopted a new method of using a computer software program provided by Medicode (" Medicode program" ) to determine the amount it would pay for anesthesia bills for persons insured under its group plans. Educators used the Medicode program in paying the anesthesia bill of proposed lead plaintiff Coniglio. Like Brooks, Coniglio was balance-billed by her anesthesia provider for the difference between the total charge for the anesthesia services she received and the amount Educators paid. Sometime in or near June 2000, Educators switched from using the Medicode program to the Medicare program, a software program which apparently calculates the amount to be paid for anesthesia services in a manner similar to the Medicode program. 3 According to plaintiffs, Educators' use of these software programs violates its contractual obligation because the programs (1) do not specify from which geographical area their data are drawn, and (2) take into account the amount that anesthesia providers ultimately have accepted in the past as payment as opposed to what they have charged, a factor not provided for in Educators' group health policies.

Page 100

Thus, according to plaintiffs, use of the Medicode and Medicare programs also violates Educators' contractual obligations because the programs do not calculate the amount to be paid by determining " the usual charge" for anesthesia services in a given geographical area.

II. Federal Rule of Civil Procedure 23

To obtain certification, a class must satisfy the requirements of Federal Rule of Civil Procedure 23(a) and 23(b). Rule 23(a) sets forth four prerequisites to class certification:

(1) the class is so numerous that joinder is impracticable;

(2) there are questions of law or fact common to the class;

(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and

(4) the representative parties will fairly and adequately protect the interests of the class.

Fed.R.Civ.P. 23(a).

If these four prerequisites, commonly referred to as numerosity, commonality, typicality, and adequacy of representation, are satisfied, plaintiffs also must show that the action is maintainable under one of the three provisions of Federal Rule of Civil Procedure 23(b). In this case, plaintiffs move for class certification on behalf of the class under both Rule 23(b)(2) and (b)(3), which provide for certification when:

(b)(2) [T]he party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole; or

(3) the court finds that the questions of law or fact common to members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.4

Fed.R.Civ.P. 23(b)(2), (3).

A court's consideration of whether class certification is appropriate under Rule 23 is not intended to be an inquiry into the merits of plaintiffs' claims. See Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 166-67 (3d Cir.2001) (discussing Supreme Court cases). Where plaintiffs' claims involve complex questions of fact and law, however, it may be necessary for a court to " ‘ delve beyond the pleadings to determine whether the requirements for class certification are satisfied.’ " Id. at 167 (quoting 5 Moore's Federal Practice § 23.61[5] ).

III....

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