814 F.3d 242 (5th Cir. 2016), 15-10154, Health Care Serv. Corp. v. Methodist Hosps. of Dallas
|Citation:||814 F.3d 242|
|Opinion Judge:||WIENER, Circuit Judge:|
|Party Name:||HEALTH CARE SERVICE CORPORATION, an Illinois Mutual Legal Reserve Company, Plaintiff - Appellee v. METHODIST HOSPITALS OF DALLAS, a Texas Corporation doing business as Methodist Health System, Defendant - Appellant|
|Attorney:||For HEALTH CARE SERVICE CORPORATION, an Illlinois Mutual Legal Reserve Company, Plaintiff - Appellee: Martin J. Bishop, Thomas Charles Hardy, Meredith Shippee, Reed Smith, L.L.P., Chicago, IL; Eileen Regina Ridley, Foley & Lardner, L.L.P., San Francisco, CA; William D. Cobb Jr., Esq., Cobb Martin...|
|Judge Panel:||Before SMITH, WIENER, and GRAVES, Circuit Judges.|
|Case Date:||February 10, 2016|
|Court:||United States Courts of Appeals, Court of Appeals for the Fifth Circuit|
Chapter 1301 of the Texas Insurance Code requires healthcare insurers to make coverage determinations and pay claims made by preferred healthcare providers within a specified time or face penalties. HCSC filed suit seeking a declaratory judgment against Methodist, seeking a declaration that Chapter 1301 does not apply to HCSC as the administrator of particular health plans, and the Federal... (see full summary)
[Copyrighted Material Omitted]
Appeal from the United States District Court for the Northern District of Texas.
A Texas statute--Chapter 1301 of the Texas Insurance Code1 -- requires healthcare insurers to make coverage determinations and pay claims made by preferred healthcare providers within a specified time or face penalties. Plaintiff-Appellee Health Care Service Corporation (" HCSC" ) filed this action for a declaratory judgment against Defendant-Appellant Methodist Hospitals of Dallas (" Methodist" ), seeking inter alia a declaration that (1) Chapter 1301 does not apply to HCSC as the administrator of particular health plans, and (2) the Federal Employee Health Benefits Act of 1959 (" FEHBA" ), 5 U.S.C. § 8901, et seq., preempts application of the statute to its administration of claims under the Federal Employees Health Benefits Program (" FEHBP" ). The district court granted summary judgment in favor of HCSC, holding that Chapter 1301 does not apply to HCSC as the administrator of the plans at issue and that FEHBA preempts Chapter 1301's application to claims under FEHBP plans administered by HCSC. We affirm.
Texas Insurance Code, Chapter 1301 applies exclusively to preferred provider plans.2 It requires insurers receiving a " clean claim" to determine, within specified times, whether the claim is payable: 45 days for non-electronic claims and 30 days for electronic claims. Within these times, such insurers must either (1) pay the claim, (2) partially pay and partially deny the claim and notify the provider in writing of the reason for partial denial, or (3) deny the claim in full and notify the provider in writing of the reason for denial.3 The Texas statute imposes a range of penalties for late payments of claims determined to be payable.4
The statute's express applicability provision--section 1301.0041--states that " this chapter applies to each preferred provider benefit plan in which an insurer provides, through the insurer's health insurance policy, for the payment of a level of coverage that is different depending on whether an insured uses a preferred provider or a nonpreferred provider." 5 Separately, section 1301.109 extends the statute's coverage to administrators with whom insurers contract: " This subchapter applies to a person, including a pharmacy benefit manager, with whom an insurer contracts to: (1) process or pay claims; (2) obtain the services of physicians and health care providers to provide health care services to insureds; or (3) issue verifications or preauthorizations." 6
The statute defines " preferred provider benefit plan" as " a benefit plan in which
an insurer provides, through its health insurance policy, for the payment of a level of coverage that is different from the basic level of coverage provided by the health insurance policy if the insured person uses a preferred provider." 7 It defines " insurer" as " a life, health, and accident insurance company, health and accident insurance company, health insurance company, or other company operating under Chapter 841, 842, 884, 885, 982, or 1501, that is authorized to issue, deliver, or issue for delivery in this state health insurance policies." 8 The statute defines " health insurance policy" as " a group or individual insurance policy, certificate, or contract providing benefits for medical or surgical expenses incurred as a result of an accident or sickness." 9
HCSC is a mutual legal reserve company that operates in Texas as Blue Cross and Blue Shield of Texas (" BCBSTX" ), a division of HCSC. Methodist is a healthcare provider that has a preferred provider agreement with HCSC, according to which Methodist agrees to provide medical services to patients who have health plans either insured or administered by HCSC.
BCBSTX acts in various roles, two of which are relevant in this case: (1) It administers some plans that expressly assume the risk of medical costs and establish their own benefit plans, and (2) it services benefit plans for federal employees in Texas, pursuant to the FEHBP, under the Blue Cross and Blue Shield Service Benefit Plan, known as the Federal Employee Program. (BCBSTX also operates as a direct insurer, selling fully insured plans and assuming the risk of medical costs. None of the claims at issue here, however, implicate the fully insured plans offered by BCBSTX.)
In the first category, BCBSTX acts as the administrator for (1) employer self-funded plans, (2) state government plans, and (3) claims arising under the BlueCard program. When BCBSTX administers self-funded plans and state government plans, it enters into administrator agreements with such plans to perform administrative services only. Those services include processing claims, providing customer service, linking beneficiaries to providers, and making medical-necessity determinations. The plans, not BCBSTX, must bear the risk of medical costs.10
As for BlueCard claims administered by BCBSTX, the BlueCard program allows beneficiaries covered by out-of-state Blue Cross and Blue Shield plans to access their coverage when receiving medical services in a state other than the one in which their plans are based. If, for example, an out-of-state Blue Cross beneficiary receives medical care in Texas, the medical provider submits a claim to BCBSTX, which forwards the claim to the beneficiary's out-of-state Blue Cross plan. That out-of-state Blue Cross plan makes a coverage determination, then returns the claim to BCBSTX to pay the claim if there is coverage.
Finally, the out-of-state plan reimburses BCBSTX for any payments made on its behalf.
In the second category, BCBSTX's only obligation is to service FEHBP plans. FEHBA provides health benefits for federal employees.11 Under FEHBA, the federal Office of Personnel Management (" OPM" ) negotiates plans with various insurers. Relevant here, the OPM12 and the Blue Cross and Blue Shield Association contracted to form the Federal Employee Program to provide health benefits plans for federal employees. Local affiliates of Blue Cross administer the plans within such affiliates' states. In Texas, BCBSTX, as a licensee of the Blue Cross and Blue Shield Association, processes claims and provides customer service for members of the Federal Employee Program. Under this scheme, the federal government pays about 75% of the premiums and the enrollees pay the remainder.13 These premiums are paid into the U.S. Treasury Employees Health Benefits Fund.14 BCBSTX draws from this fund to pay for both covered benefits and administrative costs.15
Anticipating that Methodist would seek relief under Chapter 1301 for the late payments of its claims, HCSC filed this action for, relevantly, a declaration that (1) Chapter 1301 of the Texas Insurance Code does not apply to HCSC's administration of self-funded plans, state government plans, or claims under the BlueCard program, (2) the Employee Retirement Income Security Act of 1974 (" ERISA" ), 29 U.S.C. § 1001, et seq., preempts Chapter 1301's application to claims arising under self-funded ERISA plans, and (3) FEHBA preempts Chapter 1301's application to claims arising from FEHBP plans. Methodist asserted a counterclaim for over $31 million in penalties, interest, and attorneys fees under Chapter 1301 attributable to BCBSTX's alleged late payment of approved claims.
HCSC moved for summary judgment on all claims and counterclaims. In granting HCSC's motion, the district court held that (1) Chapter 1301 does not apply to BCBSTX's administration of the plans at issue, and (2) FEHBA preempts...
To continue readingFREE SIGN UP