CIGNA Healthplan of Louisiana, Inc. v. STATE, EX REL. IEYOUB

• Decision Date: 17 April 1995
• Docket Number: Civ. A. No. 94-885.
• Citation: 883 F. Supp. 94
• Parties: CIGNA HEALTHPLAN OF LOUISIANA, INC. Connecticut General Life Insurance Company v. STATE of Louisiana, ex rel. Richard P. IEYOUB, Attorney General.
• Court: U.S. District Court — Middle District of Louisiana

883 F. Supp. 94

CIGNA HEALTHPLAN OF LOUISIANA, INC. Connecticut General Life Insurance Company v. STATE of Louisiana, ex rel. Richard P. IEYOUB, Attorney General.

Civ. A. No. 94-885.

United States District Court, M.D. Louisiana.

April 17, 1995.

COPYRIGHT MATERIAL OMITTED

Harry S. Hardin, III, Raymond J. Salassi, Jr., Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, LA, Robert N. Eccles, Donald T. Bliss, Karen M. Wahle, O'Melveny & Myers, Washington, DC, for CIGNA Healthplan of Louisiana, Inc., Connecticut General Life Ins. Co.

David C. Kimmel, Dept. of Justice, Baton Rouge, LA, for Richard P. Ieyoub.

Robert J. Conrad, Adams & Reese, New Orleans, LA, for amicus curiae, Louisiana State Medical Soc., Louisiana Dental Ass'n.

ORDER AND REASONS

FELDMAN, District Judge.

Two contradictory motions are before the Court: defendant's motion to dismiss and plaintiffs' motion for partial summary judgment. They explore some new issues of law. For the reasons that follow, defendant's motion is GRANTED in part and DENIED in part and plaintiffs' motion is GRANTED.

Background

Plaintiffs, CIGNA Healthplan of Louisiana, Inc. ("CIGNA") and Connecticut General Life Insurance Company ("CGLIC"), have sued Richard P. Ieyoub, in his official capacity as the Attorney General of the State of Louisiana, for a declaratory judgment concerning § 40:2202(5)(c) of the Louisiana Revised Statutes, the "Any Willing Provider Statute." In Count I, plaintiffs seek a declaratory judgment that, at least as applied to health care service plans that serve participants and beneficiaries of employee welfare benefit plans regulated by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. ("ERISA"), the Any Willing Provider Statute is preempted by ERISA and thus violates the Supremacy Clause of the United States Constitution, art. VI, cl. 2. As an alternative claim, in Count II plaintiffs seek a declaratory judgment that the statute violates the Due Process Clause of the Fourteenth Amendment of the Constitution because it interferes with the plaintiffs' freedom to contract with health care providers of their choice. Plaintiffs also seek an order enjoining the State from suing the plaintiffs for violations of the statute and from providing the statutory notification that would enable private parties to obtain treble damages in a civil suit brought under Louisiana Revised Statutes § 51:1409(A), the Unfair Trade Practices and Consumer Protection Law.

CIGNA and CGLIC offer a variety of health care coverages and administrative services to health care consumers through their managed care programs. Under the Any Willing Provider Statute, they are "group purchasers" who serve as brokers and third party administrators of such programs. CIGNA is a licensed HMO and provides prepaid health care coverage to its enrolled subscribers through a network of selectively contracted health care providers, such as physicians and hospitals. CIGNA markets its predetermined cost provider panel to health care consumers, either directly or through employers, insurance companies, or other groups, who are given economic incentives to patronize its network of preferred providers.

By contract, CGLIC markets the CIGNA network to consumers in Louisiana. CGLIC, a duly licensed health insurer, offers and administers both insured and self-funded health benefit plans to its clients, including sponsors of ERISA-regulated employee welfare benefit plans. CGLIC encourages the participants and beneficiaries of its health benefit plans to utilize the services of the CIGNA network through such incentives as co-insurance differentials. These insured and self-funded plans are "preferred provider organizations" ("PPO"s) within the meaning of Louisiana Revised Statute § 40:2202(5)(a). Among the subscribers to CIGNA's and CGLIC's programs are employee benefit plans with HMO or PPO options.

CIGNA and CGLIC compete with many other managed care firms to contract with hospitals and doctors throughout Louisiana for the delivery of health care services to its participants and beneficiaries. Those who participate in the preferred provider network are able to reduce their fees for services because the limited size of the network insures each provider a sufficient volume of patients to warrant the fee reductions. The preferred provider network also reduces costs and is said to improve services by fostering competition between providers. According to plaintiffs, this selective contracting is what enables them, as well as the employee benefit plans they serve, to control or reduce costs and assure quality.

The plaintiffs claim that their ability to continue to offer services through high quality and low cost HMOs and PPOs in Louisiana is threatened by the Any Willing Provider Statute. In 1984 the statute became effective; it authorizes the formation of preferred provider organizations to assist in reducing health care costs in Louisiana. § 40:2201(C). The statute states: "No licensed provider, other than a hospital, who agrees to the terms and conditions of the preferred provider contract shall be denied the right to become a preferred provider to offer health care services within the limits of his license." § 40:2202(5)(c). The plaintiffs maintain that the statute requires them, and as such, employee benefit plans that use their network, to add any health care provider who is willing and able to meet the terms and conditions of their provider contracts.

In February 1993 the Louisiana Attorney General issued Advisory Opinion Number 92-824, which stated his opinion that the violation of the Any Willing Provider Statute would be considered an unlawful trade practice giving rise to a private cause of action under the Unfair Trade Practices and Consumer Protection Law, La.Rev.Stat.Ann. § 51:1405(A) (West 1987). Subsequently, in January 1994, Dr. Ronald D. Sylvest, a health care provider on CIGNA's preferred provider panel, was notified that his services were no longer needed and that (pursuant to a termination clause) his contract with CIGNA would be terminated, effective early March 1994. Dr. Sylvest sued CIGNA, alleging that CIGNA violated the Any Willing Provider Statute by terminating his participation on the panel. A temporary restraining order was issued against CIGNA, but the suit was subsequently dismissed after a settlement was reached. CIGNA notes that at the point of settlement, it had already incurred substantial legal expenses in its defense.

In May and July 1994, Drs. Neil Smith and John Saer submitted applications for admission to CIGNA's preferred provider panel. Because CIGNA had already contracted to place a number of other doctors of Dr. Smith's and Dr. Saer's specialties on its panel, CIGNA rejected their applications. CIGNA is currently processing more applications from other doctors in Louisiana for admission to its panel. CIGNA wishes to exclude some of these applicants because enough doctors in the relevant specialties have already been signed up.

Also, in May 1994 the Attorney General mailed a "Notice of R.S. 51:1401 Complaint" to plaintiffs. The statutory notice informed them that a formal complaint had been filed with the Attorney General's office by another doctor, Dr. Stephen Anthony Scalco, charging that the plaintiffs had violated the Unfair Trade Practices and Consumer Protection Law by rejecting his panel application in violation of the Any Willing Provider Statute. The notice further warned that if the rejection was found to violate the statute and constitute an unfair trade practice under the Unfair Trade Practices and Consumer Protection Law, Dr. Scalco would be entitled to treble damages.

To engage their request for declaratory relief, plaintiffs allege that this series of events makes them vulnerable to additional or immediate suit for violation of the Any Willing Provider Statute. They note that such suits will force them to incur still more costly legal expenses as well as cause harm to their reputation among consumers. Because the Unfair Trade Practices and Consumer Protection Law may also be enforced by the Attorney General under La.Rev.Stat. Ann. § 51:1407 (West 1987), plaintiffs claim to bear a substantial risk of suit by the Attorney General to enforce the provisions of the Any Willing Provider Statute.

The State has moved for dismissal of both counts of plaintiffs' complaint, asserting a number of defenses in bar. Plaintiffs have responded with a motion for partial summary judgment as to Count I of their complaint, seeking injunctive relief and a declaratory judgment that the Any Willing Provider Statute is preempted by ERISA on the ground that the statute represents the improper extension of state law into an area exclusively regulated by ERISA.¹ The Louisiana State Medical Society and the Louisiana Dental Association have filed amici curiae papers in support of the State's position.

I. Motion to Dismiss

The Court will consider each of the State's grounds for dismissal in turn.²

A. Subject Matter Jurisdiction

1. Federal Question Jurisdiction

a. ERISA Preemption Claim

The State contends that this Court has no subject matter jurisdiction over plaintiffs' ERISA preemption claim because plaintiffs are not enumerated parties entitled to bring a civil enforcement action under ERISA. See 29 U.S.C. § 1132(a). The plaintiffs respond that the Court has federal question jurisdiction under 28 U.S.C. § 1331 because they claim that the Any Willing Provider Statute violates the Supremacy Clause of the United States Constitution by virtue of ERISA's broad preemption sweep. See 29 U.S.C. § 1144. The Court must determine whether § 1331 provides plaintiffs their ticket to a seat in federal court. The Court concludes that it does.

In Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983), plaintiffs, employers and a plan sponsor, claimed that a state law was preempted by ERISA. The Supreme...