Blue Cross and Blue Shield of Alabama, Inc. v. Nielsen
| Decision Date | 10 July 1997 |
| Docket Number | No. 96-6560,96-6560 |
| Citation | 116 F.3d 1406 |
| Parties | 21 Employee Benefits Cas. 1544, 11 Fla. L. Weekly Fed. C 132 BLUE CROSS AND BLUE SHIELD OF ALABAMA, INC., Plaintiff-Counter-Defendant-Appellee, v. John O. NIELSEN, D.M.D., Individually and on behalf of all other persons who are similarly situated, Defendant-Appellant, Kenneth O. Friday, George R. Bolling, individually and on behalf of all others similarly situated, Intervenor-Defendants-Counterclaimants-Appellants, Complete Health, Inc., Samuel W. Sullivan, M.D., Movants. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
William M. Slaughter, James C. Huckaby, Jr., R. Scott Williams, haskell, Slaughter, Young & Johnston, Birmingham, Alabama, for Defendant-Appellant.
Arthur Meisel, North Brunswick, NJ, for Amicus Curiae New Jersey Dental Association.
Peter M. Sfikas, Chicago, IL, for Amicus Curiae American Dental Assn.
Cavender C. Kimble,, Leigh Anne Hodge, Balch & Bingham, Birmingham, Alabama, for Plaintiff-Counter-Defendant-Appellee.
Appeal from the United States District Court for the Northern District of Alabama.
Before CARNES, Circuit Judge, and HENDERSON and GIBSON *, Senior Circuit Judges.
This appeal concerns the proper construction and application of three Alabama acts governing the relationship between insurers and health care providers in the state. The disposition of this appeal depends upon the resolution of these issues: (1) is Blue Cross and Blue Shield of Alabama (Blue Cross) exempt from the application of the three Alabama acts by the terms of previously enacted Alabama statutes; (2) if Blue Cross is exempt from the application of the three Alabama acts due to the terms of those previously enacted statutes, are those exempting statutes violative of the Alabama Constitution; and (3) are those three acts preempted by the Employee Retirement Income Security Act (ERISA) insofar as they relate to ERISA-governed health benefit plans?
Although the third issue involves a question of federal law, its existence in and relevance to this case is entirely dependent upon the answers to the first two issues, each of which involves only questions of state law. Not only is this case fraught with unsettled issues of Alabama law, but the decision of those state law issues will affect the insurance rights of more than half of Alabama's population. For these reasons, we conclude that it is imperative for us to certify the Alabama law issues to the highest court of the state and thereby provide it with an opportunity to authoritatively decide its own state law.
Blue Cross is a not-for-profit corporation organized and existing under Alabama Code §§ 10-4-100 to -115 for the purpose of providing health care service plans to subscribers. 1 It furnishes health benefits to approximately 2.2 million people in Alabama, 2 which is more than half of the state's population. 3
In order to contain or reduce the cost of providing health care benefits to subscribers, Blue Cross enters into contracts with various health care providers. Providers that have contracts with Blue Cross are known as "network providers." Network providers usually agree to perform services for Blue Cross subscribers at discounted rates, and they agree to submit to Blue Cross' quality review, dispute resolution, and cost containment procedures.
In its health plans, Blue Cross reserves the right not to honor assignments of benefits. It also reserves the right to choose to pay either the provider or the subscriber, when a subscriber receives medical services from a non-network provider. However, if a claim is received from a network provider for services to a subscriber who has network benefits, Blue Cross will pay benefits directly to the network provider. Blue Cross guarantees that network providers will be paid for their services within a specified period of time; no such guarantee is made to other providers.
The Alabama Legislature has forbidden many of the "managed care" practices that Blue Cross employs, at least when they are utilized by other insurance companies. For instance, in 1984, the Legislature enacted the Dental Care Services Act (the Dental Act). See 1984 Ala.Acts 411. That act prohibits health plans and health insurance policies from denying any dentist's request to become a network provider so long as the dentist is practicing within the scope of his or her license. See Ala.Code § 27-19A-3(2) (Supp.1996). The Dental Act also prohibits a health plan from limiting the patient's selection of a dentist and from reviewing the necessity or quality of any service performed by a dentist. See Ala.Code § 27-19A-3(1), (3) (Supp.1996). It declares void all terms of plans inconsistent with the Act and criminalizes willful violations of it. See Ala.Code §§ 27-19A-5, -8 (Supp.1996).
The Pharmaceutical Insurance Coverage Act (the Pharmacy Act), enacted in 1988, see 1988 Ala.Acts 379, prohibits health plans from denying a pharmacist's request to become a provider member of the health plan, so long as the pharmacist is properly licensed. See Ala.Code § 27-45-3(2) (Supp.1996). It also prohibits health plans from limiting a patient's selection of a pharmacist. See Ala.Code § 27-45-3(1) (Supp.1996).
The Assignment Act, enacted in 1994, see 1994 Ala.Acts 638, requires all entities providing health insurance or health benefit plans to reimburse, within a specified time period, all health care providers for their performance of covered services. See Ala.Code § 27-1-19(a) (Supp.1996). The Assignment Act also requires insurers or other entities providing health care plans to honor all assignments of benefits, notwithstanding any terms of the insurance or health plans to the contrary. See Ala.Code § 27-1-19(d) (Supp.1996). Health care providers, as assignees, are provided a right to sue to collect the assigned payment. See id.
We will refer to the Dental Act, the Pharmacy Act, and the Assignment Act collectively as "the Alabama Provider Acts."
Blue Cross filed this action, seeking declarations that the Assignment Act is preempted by ERISA insofar as it relates to ERISA-governed plans, and that because of Alabama Code § 10-4-115 and § 27-1-4, Blue Cross is not bound by the Assignment Act. Blue Cross also sought to permanently enjoin the enforcement of the Assignment Act against it and its employee welfare benefit plan sponsors. Blue Cross named John O. Nielsen, D.M.D., a licensed dentist practicing in Alabama, as a defendant. Blue Cross sued Nielsen both individually and as the representative of a class of all health care providers who have claimed or may claim in the future rights under the Assignment Act.
Kenneth O. Friday, a licensed Alabama dentist, and George R. Bolling, a licensed Alabama pharmacist, filed a motion to intervene in this case as defendants and as class representatives. After the district court granted that motion, Friday and Bolling counterclaimed against Blue Cross for damages arising out of Blue Cross' alleged violation of the Dental Act and the Pharmacy Act. Friday and Bolling also sought an injunction to prevent Blue Cross from excluding them from participating as network providers in Blue Cross health benefit plans.
Blue Cross filed a motion for summary judgment on its complaint and Friday and Bolling's counterclaims. The district court certified three defendant classes for the purposes of deciding Blue Cross' motion and then granted summary judgment to Blue Cross on the first two counts of its complaint and on the intervenors' complaint. The court held that ERISA preempts the Alabama Provider Acts insofar as they relate to ERISA plans. It also held that § 10-1-115 and § 27-1-4 of the Alabama Code exempt all Blue Cross plans from the applicability of the Alabama Provider Acts, anyway. Finally, the court rejected the defendants' argument that the exempting statutes violate the Alabama Constitution.
The defendants, whom we will refer to hereafter as "the providers," timely appealed the district court's grant of summary judgment in favor of Blue Cross.
We begin our discussion by describing the parties' positions on the state law issues.
First, Blue Cross contends that the Alabama Provider Acts do not apply to it, because two Alabama statutes purport to exempt Blue Cross from otherwise applicable regulation under Alabama's Insurance Code, Title 27 of the Code of Alabama. In 1939, the Alabama Legislature enacted what is now section 10-4-115 of the Alabama Code, which presently provides that:
[n]o statute of this state applying to insurance companies shall be applicable to any corporation organized under the provisions of this article [tit. 10, ch. 4, art. 6] and amendments thereto or to any contract made by such corporation unless expressly mentioned in this article and made applicable; except, that such corporation shall be subject to the provisions regarding annual premium tax to be paid by insurers on insurance premiums.
Ala.Code § 10-4-115 (1975). 4 Blue Cross is organized pursuant to Alabama Code §§ 10- 4-100 to -115. Thus, the language of § 10-4-115 appears to exempt Blue Cross from insurance regulatory laws enacted after 1939, except where the Alabama Legislature has expressly amended §§ 10-4-100 to -115 to make such laws applicable to Blue Cross.
In addition, since 1971 the Insurance Code (Title 27), which now includes the Alabama Provider Acts, has contained a provision specifying that that entire title shall not apply to:
(2) Non-profit corporations for establishment of hospitalization plan under § 10-4-100, et seq., except to the extent now or hereafter provided in such laws....
Ala.Code § 27-1-4 (1975). 5 Because Blue Cross is a § 10-4-100 corporation, the language of § 27-1-4, too, seems to preclude the Alabama Provider Acts from applying to Blue Cross unless the Legislature amends §§ 10-4-100 to -115 to...
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