Mullenix v. Aetna Life and Cas. Ins. Co.

• Decision Date: 26 September 1990
• Docket Number: No. 89-7733,89-7733
• Citation: 912 F.2d 1406
• Parties: , 12 Employee Benefits Ca 2698 Roy A. MULLENIX, Arletta Howerton, Tom Willey and Mary Willey, Plaintiffs-Appellants, v. AETNA LIFE AND CASUALTY INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1406

912 F.2d 1406

59 USLW 2300, 12 Employee Benefits Ca 2698

Roy A. MULLENIX, Arletta Howerton, Tom Willey and Mary Willey, Plaintiffs-Appellants, v. AETNA LIFE AND CASUALTY INSURANCE COMPANY, Defendant-Appellee.

No. 89-7733.

United States Court of Appeals Eleventh Circuit.

Sept. 26, 1990.

Harry M. Renfroe, Jr., Mountain & Mountain, Tuscaloosa, Ala., for plaintiffs-appellants.

James R. Shaw, Leah F. Scalise, Huie, Fernambucq & Stewart, Birmingham, Ala., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Alabama.

Before JOHNSON and CLARK, Circuit Judges, and BROWN ^*, Senior District Judge.

WESLEY E. BROWN, Senior District Judge:

This is an appeal from an order of the district court sustaining defendant's motion for summary judgment. The facts are not in dispute, we have jurisdiction, and an appeal from a grant of summary judgment is subject to plenary review. Brown v. Blue Cross & Blue Shield of Alabama, 898 F.2d 1556, 1559 (11th Cir.1990). We affirm the order of the district court granting defendant's motion for summary judgment.

Plaintiffs are employees, or dependents of employees, of a company known as Jim Walter Resources, Inc. (Mining Division). All plaintiffs were beneficiaries of an employee health benefit plan--the "Employee Benefit Plan of Jim Walter Resources, Inc., Mining Division," hereafter referred to as the "Plan." The Plan was a negotiated benefit in a wage agreement between the United Mine Workers of America and plaintiffs' employer, Jim Walter Resources, Inc.

The Plan in question is subject to all of the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C.A. Sec. 1001, et seq.

The Plan involved in this action is self-funded, not funded by insurance. There is no insurance policy. The defendant, Aetna Life and Casualty Insurance Company, is merely a third-party administrator of the Plan. All benefits are paid by the employer, Jim Walter Resources, Inc.

In 1988, plaintiffs obtained medical services from licensed chiropractors in Tuscaloosa County, Alabama, and filed claims for benefits with the defendant, Aetna. All claims were denied upon the ground that the Plan did not cover such services since the providers, who were chiropractors, were not recognized under the Plan's definition of "physician."

Chiropractic services are specifically excluded under the Plan, and any claims which were approved by Aetna in the past were erroneously approved for payment. ¹

The laws of the state of Alabama require insurers to cover chiropractic services. Alabama Code Sec. 27-1-10 (1975) provides as follows:

Sec. 27-1-10. Payment for health services of chiropractor: insured to have exclusive right to select practitioner of healing arts. Any contract or policy of insurance or any plan or agreement for health services providing for reimbursement or payment for health services performed by a medical doctor or physician or upon the certification of a medical doctor, surgeon, osteopath or physician, shall also reimburse or pay for such health services performed by a doctor of chiropractic or upon his certificate; provided, that the health services performed by the doctor of chiropractic are within the scope of his license and he is duly licensed by the state of Alabama.

The insured or such other person entitled to benefits under such contract or policy of insurance or plan or agreement for health services shall have the exclusive right to choose or select any practitioner or member of the healing arts of Alabama to perform such services, notwithstanding any provisions of such contract or policy of insurance or plan or agreement for health services to the contrary. (Acts 1975, No. 1101, p. 2172, Sec. 1)

As noted, defendant Aetna is the administrator of the Plan. It processes claims filed by beneficiaries of the Plan in accordance with the terms of a contract with the employer. The Plan includes a provision for an ERISA appeal, and the wage agreement includes a provision for binding arbitration concerning benefit disputes. When their claims were turned down by Aetna, plaintiffs did not seek to appeal under the terms of the agreement. ² Instead, they filed a suit in state court for compensatory and punitive damages, alleging that the failure of Aetna to pay plaintiffs' medical benefits for chiropractic services was a breach of contract and a "bad faith" denial of claims in violation of the provisions of Alabama law, Code Sec. 27-1-10.

Plaintiffs' complaint erroneously alleged that defendant had issued policies of health and major medical insurance which were in full force and effect covering the plaintiffs at the time each cause of action accrued.

By answer, Aetna averred the self-insured status of the Plan, and alleged that plaintiffs' claims were preempted by the provisions of ERISA, 29 U.S.C. Sec. 1001, et seq. Defendant then removed the case to the federal district court and moved for summary judgment on the grounds that the contract providing for health care specifically excluded coverage for chiropractic services, and that all of plaintiffs' claims in this action are barred by provisions of ERISA.

In sustaining defendant's motion for summary judgment, the district court found that ERISA preempts all state laws that "relate to" an employee benefit plan, 29 U.S.C. Sec. 1144(a), except those that regulate the insurance industry, 29 U.S.C. Sec. 1144(b)(2)(A). The court further found that while the Alabama statute relating to chiropractic services is a statute regulating the insurance industry, and would not normally be preempted, the ERISA "deemer clause" applied so that state law was preempted in this case. 29 U.S.C. Sec. 1144(b)(2)(B). The district court further noted that since the Plan at issue in this case was fully funded by the Walter Company, and was not an insured plan, it was not subject to state regulation, citing Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985).

The question thus presented for our review is whether the "deemer clause" of ERISA operates to preempt a non-ERISA cause of action based upon an Alabama statute which regulates insurance when the employee benefit plan at issue is self-insured. ³

In order to determine ERISA's preemptive effect upon state law, we must consult the provisions of the Act as well as the diverse opinions which seek to give guidance not only to the litigants but to states which seek to regulate the social problems of their citizens. No one questions that as a general rule the "general preemption clause" of ERISA, 29 U.S.C Sec. 1144(a), preempts all state laws which relate to any employee benefit plan. This simple statement ceases to be simple or clear when we get to the exception, and the exception to the exception, codified and now known as the "savings clause," 29 U.S.C. Sec. 1144(b)(2)(A), and the "deemer clause," 29 U.S.C. Sec. 1144(b)(2)(B).

The statutory treatment provides the following guidelines:

Sec. 1144. Other laws

(a) Supersedure; effective date

Except as provided in subsection (b) of this section, the provisions of this subchapter ... shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title ...

* * * * * *

(b) Construction and application

(2)(A) Except as provided in subparagraph (B), nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities. (Emphasis supplied)

(B) Neither an employee benefit plan described in section 1003(a) of this title ... nor any trust established under such a plan, shall be deemed to be an insurance company or other insurer, bank, trust company, or investment company or to be engaged in the business of insurance or banking for purposes of any law of any State purporting to regulate insurance companies, insurance contracts, banks, trust companies, or investment companies.

In Metropolitan Life Insurance v. Massachusetts, supra, the Supreme Court made a distinction between insured and uninsured benefit plans when it came to the question of state regulation. It there held that a state law which required that specified minimum mental health care benefits be provided to all insureds was not preempted by ERISA. In so doing, the court held that the state law clearly regulated insurance and was thus within the "insurance" exception of the Act, provided by Sec. 1144(b)(2)(A). In so doing, the court noted that uninsured, or self-funded benefit plans were not subject to state regulation:

We are aware that our decision results in a distinction between insured and uninsured plans, leaving the former open to indirect regulation while the latter are not. By so doing we merely give life to a distinction created by Congress in the "deemer clause," a distinction Congress is aware of and one it has chosen not to alter.

(471 U.S. at 747, 105 S.Ct. at 2393, 85 L.Ed.2d at 745).

By a footnote to the foregoing observation, the court commented that a 1977 Report of the House Committee on Education and Labor had recognized the difference in treatment between insured and noninsured plans, but that a bill to amend the saving clause to specify that mandated-benefit laws are preempted by ERISA was not acted upon. 471 U.S., n. 25, at 747, 105 S.Ct., n. 25, at 2393, 85 L.Ed.2d, n. 25, at 745.

In a very recent case, the Fifth Circuit had occasion to rule that uninsured, or self-insured ERISA plans are not subject to state insurance regulation, either directly or indirectly. Gonzales v. Prudential Ins. Co. of America, 901 F.2d 446 (5th Cir.1990). There, plaintiff sought to recover disability benefits under his employment benefit plan and also to collect penalties for an alleged wrongful refusal to pay benefits under state law. Plaintiff also claimed that Louisiana law supplanted the language of his plan,...