Texas Medical Ass'n v. Aetna Life Ins. Co.

Decision Date11 April 1996
Docket NumberNo. 94-20690,94-20690
Citation80 F.3d 153
PartiesTEXAS MEDICAL ASSOCIATION, et al., Plaintiffs-Appellants, v. AETNA LIFE INSURANCE COMPANY, et al., Defendants-Appellees.
CourtU.S. Court of Appeals — Fifth Circuit

Paul J. Van Osselaer, Linda J. Burgess, Hugues & Luce, Austin, TX, Donald P. Wilcox, Texas Medical Assoc., for appellants.

Jack R. Bierig, Sidley & Austin, Chicago, IL, for amicus American Medical Assn.

Kelly A. McDonald, Davis & Wilkerson, Austin, TX, for amicus Texas Org. of Rural & Community Hospitals.

John Bruce Shely, Andrews & Kurth, Houston, TX, for appellees.

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

Before KING, DAVIS and SMITH, Circuit Judges.

KING, Circuit Judge:

The Texas Medical Association, the Harris County Medical Society, and five individual doctors brought suit against Aetna Life Insurance Co. and other affiliated companies challenging the doctors' deselection from Aetna's preferred provider organization. The district court granted summary judgment in favor of Aetna on the grounds that Texas law does not provide a private cause of action to enforce Texas administrative regulations governing preferred provider health insurance plans. We affirm.

I. BACKGROUND
A. FACTS

On November 24, 1993, the Texas Medical Association ("TMA"), the Harris County Medical Society ("HCMS"), and Drs. Peter Benjamin, Robert Maidenberg, Reginald T. Chelvam, Harold J. Fields, and Jesus R. Portela (the "doctors") (collectively, the "appellants") sued Aetna Life Insurance Co. ("Aetna Life Insurance"), Aetna Health Plans of Texas, Inc. d/b/a Partners National Health Plan ("Aetna Health Plans"), and Aetna Health Management. The suit arose out of the following facts:

The appellants are five physicians who practice medicine in Houston, Texas--Benjamin, Maidenberg, Chelvam, Fields, and Portela--and two physicians' associations--TMA and HCMS. 1 Aetna Life Insurance is a commercial insurance carrier that sells, among other insurance products, preferred provider plans--group health insurance policies that provide a higher level of insurance coverage to the insured if the insured obtains health care services from a preferred provider. Policyholders in preferred provider plans are free to choose doctors who are not preferred providers, but they will receive a lower level of benefits if they do so. To establish a network of preferred providers, commercial insurers such as Aetna contract with selected physicians, hospitals, and other providers, creating a preferred provider organization ("PPO"). Aetna Health Management provides services to Aetna Life Insurance's Houston area PPO. The doctors were members of Aetna's PPO.

On September 1, 1993, Aetna notified each of the doctors in writing that his participation in the PPO would be terminated in ninety days, effective December 31, 1993. The preferred provider contracts between the doctors and Aetna provided that, upon ninety days' written notice, either party could terminate the agreement at any time without cause (the "termination without cause" provision). In November 1993, Aetna provided additional information to the doctors by letter regarding the criteria used in the evaluation and the reasons for their deselection.

Aetna further advised the doctors in the November letters that, upon their request, they would be entitled to review of the deselection decision. Aetna provides deselected doctors with two levels of review as a matter of corporate policy. First, a doctor complaining about deselection can meet with the network manager and medical director. If the problem is not resolved at this meeting, the doctor can have his deselection reviewed by the chief executive officer of the PPO, who relies on advice from an advisory panel of doctors.

Of the five doctors bringing this action, only Dr. Benjamin participated in the first level of Aetna's offered review process. Aetna decided to uphold Dr. Benjamin's deselection. Following this first level review, Aetna advised all five doctors that an advisory panel review was scheduled for November 30, 1993. The doctors refused to participate in the advisory panel review because Aetna would only allow them to present written information to the advisory panel, and would not allow them to appear personally or through counsel before the panel.

The doctors, along with TMA and HCMS, filed suit on November 24, 1993, claiming that their deselection from Aetna's PPO and the "termination without cause" provisions of their preferred provider contracts violate Texas administrative regulations governing preferred provider plans. After suit was filed, Aetna postponed the November 30 advisory panel review at the doctors' request, to allow the doctors sufficient time to prepare and participate in the review process.

On December 14, 1993, Aetna provided the doctors with additional information regarding their deselection, including the procedure for the panel review, summary matrices containing the information upon which the deselection was based, a description of the deselection criteria, and an explanation of the methodology used in making deselection decisions. On January 12, 1994, Aetna informed the doctors that the advisory panel reviews were scheduled for January 17 or 18, 1994. On January 17, 1994, the doctors informed Aetna that they were declining to attend the advisory panel reviews. Aetna then informed the doctors that the advisory panel would nonetheless convene on January 18, 1994, and again invited their participation.

The January 18, 1994 advisory panel met and recommended the reinstatement of Dr. Portela and the conditional reinstatement of Dr. Benjamin, dependant upon his response to a patient complaint. The advisory panel did not recommend that Drs. Fields, Maidenberg, and Chelvam be reinstated. Aetna accepted all of the non-binding recommendations of the advisory panel and notified the doctors of its reinstatement decisions by letter dated January 31, 1994.

B. PROCEDURE

On November 24, 1993, the appellants filed suit against the three Aetna defendants in the 165th District Court of Harris County, Texas. They sought to enjoin Aetna from terminating the doctors' preferred provider contracts and sought a declaratory judgment that the "termination without cause" provisions in their contracts were void and unenforceable because these provisions violated Texas regulations governing the operation of PPOs, 28 Tex.Admin.Code §§ 3.3701-3.3705 (the "PPO rules"). The appellants also alleged that the doctors' terminations violated the PPO rules because they were not accompanied by reasonable due process.

On January 26, 1994, the appellants voluntarily dismissed their suit against Aetna Health Plans. Subsequently, the remaining defendants, Aetna Life Insurance and Aetna Health Management (collectively, "Aetna"), removed the case to the United States District Court for the Southern District of Texas pursuant to 28 U.S.C. § 1441(b), based on diversity of citizenship. On February 4, 1994, the district court denied the appellants' motion for a temporary injunction of the doctors' deselection from the PPO. Aetna then filed a motion for summary judgment. On May 31, 1994, a magistrate judge entered a memorandum opinion recommending that the district court grant the summary judgment motion, which the district court adopted. On August 18, 1994, the district court entered final judgment in favor of Aetna. TMA, HCMS, and the doctors filed a timely notice of appeal.

C. THE DISTRICT COURT'S DECISION

The district court granted summary judgment for Aetna on the ground that Texas law does not provide a private cause of action to enforce the PPO rules. The district court reasoned that "if any of the provisions of 28 Tex.Admin.Code § 3.3703 is violated, 28 Tex.Admin.Code § 3.3703(4) provides that enforcement shall be pursued in accordance with Article 21.21-2 of the Texas Insurance Code." Article 21.21-2 gives the Texas Board of Insurance authority to investigate alleged violations of the Insurance Code and determine appropriate sanctions and penalties. Tex.Ins.Code Ann. art. 21.21-2 § 6 (Vernon Supp.1996). The court found that "both 28 Tex.Admin.Code § 3.3703 and Article 21.21-2 of the Insurance Code clearly indicate that the Texas Board of Insurance is the only party responsible for assuring that insurers comply with 28 Tex.Admin.Code § 3.3703." Additionally, the court rejected the argument that the doctors could pursue their claims of violations of the PPO rules under Tex.Ins.Code Ann. art. 21.21 §§ 4(7)(b) and 16, reasoning that 28 Tex.Admin.Code § 3.3703(4) explicitly sets forth the method whereby its provisions may be enforced, and that sections 4(7)(b) and 16 are not applicable to the doctors' complaints that they have been unfairly terminated under the provisions of their preferred provider contracts. The court concluded that Aetna's motion for summary judgment should be granted because Texas law provides no private cause of action for the conduct alleged by TMA, HCMS, and the doctors.

II. STANDARD OF REVIEW

We review the grant of a summary judgment de novo, applying the same criteria used by the district court in the first instance. Norman v. Apache Corp., 19 F.3d 1017, 1021 (5th Cir.1994); Conkling v. Turner, 18 F.3d 1285, 1295 (5th Cir.1994). Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Whether Texas law provides appellants with a private cause of action to enforce the PPO rules is a pure question of law, for which summary judgment is proper. Sheline v. Dun & Bradstreet Corp., 948 F.2d 174, 176 (5th Cir.1991).

III. DISCUSSION

The appellants argue that the district court erred in granting summary judgment in favor of Aetna on the...

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