Houston Com. Hosp. v. Blue Cross and Blue Shield

• Decision Date: 09 March 2007
• Docket Number: No. 05-50454.,05-50454.
• Citation: 481 F.3d 265
• Parties: HOUSTON COMMUNITY HOSPITAL, Plaintiff-Appellee, v. BLUE CROSS AND BLUE SHIELD OF TEXAS, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

481 F.3d 265

HOUSTON COMMUNITY HOSPITAL, Plaintiff-Appellee, v. BLUE CROSS AND BLUE SHIELD OF TEXAS, INC., Defendant-Appellant.

No. 05-50454.

United States Court of Appeals, Fifth Circuit.

March 9, 2007.

William Richard Thompson, II (argued), Deborah G. Hankinson, Law Offices of Deborah Hankinson, Dallas, TX, Kevin W. Boyd, Austin, TX, for Plaintiff-Appellee.

Anthony F. Shelley (argued), Miller & Chevalier, Washington, DC, Michael S. Hull, Andrew Fairles MacRae, Hull, Henricks & MacRae, Austin, TX, for Defendant-Appellant.

Appeal from the United States District Court for the Western District of Texas.

Before GARWOOD, HIGGINBOTHAM and CLEMENT, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

Houston Community Hospital admitted and treated three federal employees covered by health benefits plans administered by Blue Cross and Blue Shield of Texas Inc. under the Federal Employees Health Benefits Act. BCBST allegedly misrepresented the level of health care coverage of each patient and then refused to pay accordingly. In March 2004, Houston Community Hospital filed three separate state actions against BCBST for negligent misrepresentation and violations of the Texas Deceptive Trade Practices Act and the Texas Insurance Act. BCBST removed the cases to federal court and moved for summary judgment claiming official immunity, federal sovereign immunity, and preemption. The district court denied the motion and BCBST appealed the now consolidated cases.

I

The Federal Employees Health Benefits Act¹ ("FEHBA") charges the United States Office of Personnel Management ("OPM") with negotiating contracts with private insurance carriers to provide health benefit plans to federal employees who may enroll in a Service Benefit Plan ("the Plan") pursuant to OPM regulations.² OPM issues all enrollees a Statement of Benefits ("the Brochure"). Blue Cross and Blue Shield Association, a private insurance carrier, entered into a contract, known as CS 1039, and which incorporated the Brochure, with OPM to provide the Plan to enrollees.³ Appellant Blue Cross and Blue Shield of Texas ("BCBST") administers the Plan in Texas. As appellee Houston Community Hospital ("the Hospital") is not a party to the contract and has no contractual agreement with BCBST; it is not a participating provider. This means that under FEHBA, BCBST reimburses the Hospital up to a federal employee's coverage level, costs of medical care above that level to be paid by the employee.

According to the hospital, in 2003, three federal employees covered by a FEHBA health insurance plan issued by BCBST sought medical treatment at the Hospital. Before treating each patient, the Hospital contacted BCBST to verify the patients' coverage. On each occasion, BCBST allegedly represented to the Hospital that: (1) the patient's $300 deductible was met; (2) the patient was covered at either 70% or 100% up to an unlimited lifetime maximum amount; and (3) no preexisting conditions applied to the patient's admission. After the patients were admitted and treated, BCBST refused to pay the Hospital more than a fraction of the bill.⁴ BCBST refused requests for payment and the Hospital filed three suits against BCBST in Texas state court for damages resulting from each misrepresentation made by BCBST. In addition to negligent misrepresentation, the Hospital alleged violations of the Texas Deceptive Trade Practices Act and the Texas Insurance Code.

In May 2004, BCBST removed all three cases to federal court. Although BCBST is a private insurance carrier, BCBST asserted that in performing the contract with OPM to provide health coverage to federal employees in Texas, it is an arm of the federal government vested with governmental immunity. BCBST moved for summary judgment based on: (1) official immunity; (2) sovereign immunity of the United States; and (3) preemption of the state torts by FEHBA.

The district court denied summary judgment, and BCBST timely filed a notice of appeal. Not seeking leave from the district court to file an interlocutory appeal under 28 U.S.C. § 1292(b), BCBST maintains that we have jurisdiction under the collateral order doctrine as well as pendent appellate jurisdiction.

II

The collateral order doctrine is a "practical construction" of the final judgment rule of 28 U.S.C. § 1291.⁵ This narrow doctrine permits a federal appellate court to review the "small category of decisions that, although they do not end the litigation, must nonetheless be considered `final.'"⁶ That small category "includes only decisions that are conclusive, that resolve important questions separate from the merits, and that are effectively unreviewable on appeal from the final judgment in the underlying action."⁷

Of course we have jurisdiction to determine our jurisdiction,⁸ and we must, then, first determine whether BCBST's claims of either official or sovereign immunity are sources of jurisdiction. BCBST asks for even more. It urges that having asserted a substantial claim of immunity, it is entitled to invoke our pendent appellate jurisdiction over its preemption claim. Whatever the merits of this hook-and-ladder approach, it fails at the outset: we find no substantial claim of immunity, and we dismiss for lack of jurisdiction.

A. Official Immunity⁹

While a denial of official immunity is an appealable order,¹⁰ the claim of immunity must be "substantial" to justify an appellate court's collateral order review.¹¹

Federal officials long enjoyed immunity from suit based on state-law torts when their conduct was "within the scope of their official duties and . . . discretionary in nature."¹² The application of this Westfall test to federal officials was superseded by Congress's passage in 1988 of the Federal Employees Liability Reform and Tort Compensation Act, also known as the Westfall Act, which eliminated the requirement that the acts be discretionary.¹³ The Westfall test, with the stricture of discretionary acts, remains the framework for determining when non-governmental persons or entities are entitled to the same immunity.¹⁴ The Hospital contends that BCBST, as a private insurance carrier, has no substantial defense of official immunity. We agree.

The Hospital first argues that BCBST was not here performing an official government function.¹⁵ The district court agreed, first acknowledging that "a number of courts have held private contractors may enjoy official immunity when performing official functions,"¹⁶ but then explaining that no controlling authority provides blanket immunity for actions taken in the course of performing government contracts,¹⁷ and finally rejecting BCBST's argument to extend immunity here, ruling that BCBST is not entitled to official immunity because "carriers do not perform `official functions' in administering FEHBA benefits." The District court concluded that OPM's duties comprised "the approval of and contracting for benefits plans," not the actual administration of the Plan and that FEHBA carriers were not exercising any governmental function because "it is not apparent that they themselves perform any functions the OPM is itself charged with performing."

BCBST acknowledges that we have previously granted immunity to private entities and, in so doing, emphasized the entity's "quasi-governmental" capacity.¹⁸ BCBST contends that FEHBA carriers exercise just such a "governmental function" for the purpose of official immunity. We are not persuaded.

Our extension of official immunity to contractors and other private parties is an application of the presumption that "immunity attaches to particular official functions, not to particular offices."¹⁹ We recognize that "[i]f absolute immunity protects a particular governmental function, no matter how many times or to what level that function is delegated, it is a small step to protect that function when delegated to private contractors, particularly in light of the government's unquestioned need to delegate governmental functions," and that those functions are "no `less important simply because they are exercised by officers of lower rank in the executive hierarchy.'"²⁰

BCBST contends that the issue is not whether it performs functions that Congress delegated to OPM, but whether "the functions which the private parties performed pursuant to contract are functions which governmental employees would perform had the government not contracted them out."²¹ In support, BCBST points to FEHBA's legislative history, which shows that Congress's purpose was "to establish a health benefits program for Federal employees," so as to compete for the best talent with private companies.²² To achieve that end, Congress sought to set up a partnership between OPM and private carriers. OPM is "responsible for the overall administration of the program while sharing the day-to-day operating responsibilities with the employing agencies and the insurance carriers."²³ In Doe v. Devine, then-Judge Ginsburg examined Congress's choice to use government contractors, rather than the government itself, to provide FEHBA health benefits and determined that Congress designed the program as it did in order to "ensure maximum health benefits for employees `at the lowest possible cost to themselves and to the Government.'"²⁴ With a number of options offered by different carriers, rather than one plan administered solely by the government, Congress created a "system in which insurers compete vigorously for employees' subscription dollars."²⁵ Thus, Congress intended for there to be a national health benefits program to serve the public interest of attracting the best possible workforce. BCBST argues that carriers have an official role in the government program because Congress thought that delegating responsibility to carriers was the most efficient means to achieve the necessary ends. Furthermore, BCBST notes that had it been more efficient to provide the benefits directly, Congress would have employed the federal workforce...