Blue Cross of Rhode Island v. Cannon, Civ. A. No. 83-0772 S.

• Decision Date: 22 June 1984
• Docket Number: Civ. A. No. 83-0772 S.
• Citation: 589 F. Supp. 1483
• Parties: BLUE CROSS OF RHODE ISLAND and Blue Shield of Rhode Island, Plaintiffs, v. Joseph E. CANNON, in his capacity as Director of the Department of Health for the State of Rhode Island, and William Carroll, in his capacity as Director of the Department of Business Regulation for the State of Rhode Island, Defendants, Ocean State Master Health Plan, Inc., Defendant/Intervenor.
• Court: U.S. District Court — District of Rhode Island

589 F. Supp. 1483

BLUE CROSS OF RHODE ISLAND and Blue Shield of Rhode Island, Plaintiffs, v. Joseph E. CANNON, in his capacity as Director of the Department of Health for the State of Rhode Island, and William Carroll, in his capacity as Director of the Department of Business Regulation for the State of Rhode Island, Defendants Ocean State Master Health Plan, Inc., Defendant/Intervenor.

Civ. A. No. 83-0772 S.

United States District Court, D. Rhode Island.

June 22, 1984.

Elizabeth A. Germani, Tillinghast, Collins & Graham, Edwin Hastings, Normand G. Benoit, John M. Boehnert, Providence, R.I., for plaintiffs.

Lawrence A. Iacoi, Dennis J. Roberts, II, Atty. Gen., Joseph G. Miller, Sp. Asst. Atty. Gen., Providence, R.I., for defendants.

Almonte, Lisa & Pisano, Thomas A. Lynch, Providence, R.I., Epstein, Becker, Borsody & Green, P.C., Robert J. Moses, William G. Kopit, Stephen S. Boochever, Washington, D.C., for intervenor O.S.M. H.P.

OPINION AND ORDER

SELYA, District Judge.

This is an action brought by Blue Cross of Rhode Island and Blue Shield of Rhode Island (collectively, Blue Cross) for injunctive and declaratory relief to prevent the implementation and enforcement of several portions of Rhode Island's Health Maintenance Organization Act of 1983, R.I.Gen. Laws §§ 27-41-1 et seq. (State HMO Act). The State HMO Act is a comprehensive statutory scheme which provides for the licensure and subsequent regulation of health maintenance organizations in Rhode Island. In this action, the plaintiffs challenge the validity of the so-called "dual option" provision contained in R.I.Gen. Laws § 27-41-27. Ancillary thereto, the plaintiffs contest the legality of R.I.Gen. Laws § 27-41-14(5)¹ insofar as that statute proscribes the use of the phrase "health maintenance organization" or kindred terminology to describe any entity other than one which has been licensed under the State HMO Act. Plaintiffs' eight count complaint sets forth a salmagundi of alleged violations both of federal law and of the Constitution of the United States. These protestations are grounded variously in the preemption provision of the Employee Retirement Income Security Act, 29 U.S.C. §§ 1001 et seq. (ERISA), the Supremacy, Contract and Commerce Clauses of the Constitution, and the First and Fourteenth Amendments to the Constitution.

The defendants, Joseph E. Cannon and William Carroll, respectively, are the directors of the two state agencies responsible for the enforcement of the State HMO Act, see R.I.Gen.Laws § 27-41-21, and each is sued in his representative capacity.² The defendant/intervenor, Ocean State Master Health Plan, Inc., is a duly licensed State HMO. By virtue of an order entered December 19, 1973, with the acquiescence of the parties, the status quo has been preserved pendente lite. At the same time, Ocean State was granted permission to apply for intervention. The intervenor's ensuing motion, brought in pursuance of Fed.R.Civ.P. 24, was unopposed, and was granted on January 10, 1984.

Following much procedural skirmishing and extensive discovery, and after various amendments to the December 19 order (none of which need be discussed in detail here), the matter is now before the court on cross motions for summary judgment as to count one of the plaintiffs' complaint (which avers in substance that the dual option provision, R.I.Gen.Laws § 27-41-27, is preempted by an ERISA provision, 29 U.S.C. § 1144), and upon the defendants' and defendant/intervenor's alternative motions to dismiss that claim on the grounds (i) that it is not ripe for review as required by Article III of the Constitution of the United States, (ii) that Blue Cross lacks the requisite standing to assert such a claim, and (iii) that there is no "actual controversy" within the meaning of the Declaratory Judgment Act, 28 U.S.C. § 2201. All parties filed extravagant briefs addressing both the justiciability and the merits of plaintiff's ERISA preemption claim, along with a plentitude of affidavits and related materials. Oral arguments were heard on May 10, 1984, and the matter was taken under advisement at that time.

I.

The plaintiffs are non-business corporations organized under the laws of Rhode Island as a hospital service corporation and a medical service corporation, respectively. In those capacities, Blue Cross contracts (1) with subscribers to provide defined health care benefits or coverage on the basis of payment of periodic premiums, (2) with hospitals with respect to reimbursement for institutional services rendered by the contracting hospitals to Blue Cross subscribers, (3) with doctors and allied health care professionals regarding reimbursement for medical services rendered by participating physicians to such subscribers, and (4) with various employers to provide group coverage for employees qua subscribers.

The plaintiffs currently employ approximately one thousand individuals within Rhode Island, and sponsor an employee welfare benefit plan (BCEWBP) for Blue Cross personnel. That plan provides for certain health care and kindred benefits and other emoluments, and is subject to the sweeping regulatory mosaic postulated by ERISA.³ In addition to its role as the patron of the BCEWBP, Blue Cross acts as the plan's fiduciary, and is responsible for the control, management, and administration of the BCEWBP.

As noted previously, Ocean State is licensed under the State HMO Act and is engaged in the furnishing of health care services to Rhode Islanders. There are, of course, a myriad of modes in which the delivery of such services may be accomplished. And, health maintenance organizations may fit within the integument of the system in a number of ways. Ocean State functions as an open panel independent practice association (IPA). Translated from insider jargon, this means, in essence, that Ocean State contracts with physicians in private practice to furnish medical services to Ocean State assentators.⁴ Ocean State is presently the only HMO licensed under the newly-enacted State HMO Act.⁵ It competes with Blue Cross, RIGHA, and others in a health insurance market in which Blue Cross, historically, has been (and remains) far and away the dominant force.

Under the terms of the BCEWBP, Blue Cross currently offers its employees the option of obtaining Blue Cross or RIGHA coverage, but does not offer the option of membership in Ocean State or any other plans. Blue Cross (which, obviously, has its own scalpel to grind) is adamant in its opposition to offering any such alternatives. The intervenor has never requested that Ocean State enrollment become a permitted alternate form of coverage for BCEWBP purposes, and it has in these proceedings repeatedly professed that it has no intention to promulgate such a request in the future.

The dual option provision which plaintiffs challenge in count one of the complaint pronounces that:

Offer of health maintenance organization alternative to employees. — (a) Each employer shall include in any health benefits plan offered to its employees the option of membership in licensed health maintenance organizations which are qualified under the provision of § 42-62-9 and which are engaged in the provision of health services in the areas in which such employees reside; Provided however That the annual per-employee absolute dollar contribution by the employer for such alternative HMO coverage shall in no event be required by this section to exceed the employer's per-employee absolute dollar contribution to any other health benefits plans offered by such employer.

(b) If there is more than one licensed and qualified health maintenance organization which is engaged in the provision of health services in the area in which the employees of an employer reside and if —

(1) one or more of such organizations provides health services through professionals who are employed members of the staff of the organization or through an organized medical group (or groups) on a contractual basis, and

(2) one or more of such organizations provides such services through an individual practice association (or associations), then of the licensed and qualified health maintenance organizations included in a health benefits plan of such an employer pursuant to subsection (a) at least one shall be an organization which provides health services as described in (b)(1) and at least one shall be an organization which provides health services as described in (b)(2) directly above.

(c) An employer shall offer the option of membership in additional licensed and qualified health maintenance organizations if the additional licensed and qualified health maintenance organizations demonstrate that their service areas include the residence areas of employees (1) who do not reside in the service area of licensed health maintenance organizations already included in the employer's health benefits plans, or (2) to whom membership in licensed and qualified health maintenance organizations already included in the health benefits plans is not available because such organizations have closed their enrollment of eligible employees of such employer.

(d) An employer is not required to include in the health benefits plan offered to eligible employees the option of membership in the specific licensed and qualified health maintenance organization which initiated the request for inclusion in the health benefits plan: Provided, That the employer selects, in a manner consistent with this section, one or more other licensed and qualified health maintenance organizations that may not have made a request but are willing to be included: Provided further, That these latter health maintenance organizations are of the same type (i.e., the type described in paragraph (b)(1) of this section or the type described in (b)(2) of this section) and serve, or will serve at a minimum, the same area (in which the employer's or public entity's employees reside) individually or collectively as the

...