Eidler v. Blue Cross & Blue Shield United of Wis.

• Decision Date: 21 October 1987
• Docket Number: No. 86-C-1073.,86-C-1073.
• Citation: 671 F. Supp. 1213
• Parties: Laura J. EIDLER, Plaintiff, v. BLUE CROSS BLUE SHIELD UNITED OF WISCONSIN, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

671 F. Supp. 1213

Laura J. EIDLER, Plaintiff, v. BLUE CROSS BLUE SHIELD UNITED OF WISCONSIN, Defendant.

No. 86-C-1073.

United States District Court, E.D. Wisconsin.

October 21, 1987.

Boyd M. McGranahan, Milwaukee, Wis., for plaintiff.

Mary Traver, Gen. Counsel, Blue Cross & Blue Shield, Milwaukee, Wis., for defendant.

DECISION AND ORDER

WARREN, Chief Judge.

Plaintiff Laura J. Eidler brought suit against defendant Blue Cross and Blue Shield of Wisconsin over defendant's denial of certain medical claims made by plaintiff. Plaintiff alleges breach of contract, misrepresentation, bad faith, tortious interference with contract, emotional distress, and violation of due process. Currently pending before the Court is defendant's motion for summary judgment, which argues (1) plaintiff's claim is not timely filed; (2) plaintiff did not exhaust administrative remedies; (3) plaintiff's state law tort claim for bad faith is preempted by federal law; and (4) defendant's denial of plaintiff's claim was not arbitrary and capricious. For the reasons set forth in the decision below, the motion for summary judgment is denied.

I. Background

The plaintiff, a federal employee, is a subscriber to the Federal Employees Health Benefits Program. The program was established by Congress in the Federal Employees Health Benefits Act ("FEHBA") to provide health benefits for federal employees. The program is administered by the United States Office of Personnel Management ("OPM").

One of the plans under the FEHBA is the Blue Cross and Blue Shield Service Benefit Plan. Wisconsin federal employees enrolled in the Service Benefit Plan have their claims administered by Blue Cross and Blue Shield of Wisconsin, a Wisconsin service insurance corporation that is the defendant in this action. Plaintiff was enrolled in the Blue Cross and Blue Shield plan.

On July 19, 1982, plaintiff suffered serious injuries in a motorcycle-car accident. Plaintiff was treated by Dr. Mysore Shivaram. Dr. Shivaram performed surgery on plaintiff in 1982, 1983, and 1984 and treated her until 1985. Plaintiff submitted claims for the services of Dr. Shivaram to the defendant, but the defendant denied portions of the claims on the basis that the doctor's charges were in excess of the usual and customary charges for those services. The balances remaining are the subject of this dispute.

Both plaintiff and her doctor wrote letters to defendant in June of 1986 seeking reconsideration of the claims. Defendant, however, stood by its decision.

Plaintiff filed this suit September 10, 1986, in state court. The suit was subsequently removed to this Court.

II. Summary Judgment Standard

Rule 56, Federal Rules of Civil Procedure, provides that summary judgment shall be granted if the record shows that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Black v. Henry Pratt Company, 778 F.2d 1278, 1281 (7th Cir.1985). The party moving for summary judgment has the burden of establishing that there is no genuine issue of material fact. Egger v. Phillips, 710 F.2d 292, 296 (7th Cir.), cert. denied, 464 U.S. 918, 104 S.Ct. 284, 78 L.Ed.2d 262 (1983). The Court must review the entire record with all reasonable inferences drawn from it taken in a light most favorable to the nonmoving party. Reardon v. Wroan, 811 F.2d 1025, 1027 (7th Cir.1987).

III. Timeliness

The agreement between Blue Cross and Blue Shield and the OPM that embodied the Service Benefit Plan is referred to as Contract No. CS 1039. It is renewed annually. The 1982, 1983, 1984, and 1985 versions were substantially the same in portions relevant to this suit. Article II(d) of the 1982 contract reads as follows:

Actions to Recover. No action at law or in equity shall be brought to recover on this contract prior to the expiration of 60 days after a claim has been filed in accordance with the requirements of this contract, nor shall such actions be brought at all unless brought within two years from the expiration of the time within which a claim must be filed as required by this contract.

Incorporated by reference into the Contract No. CS 1039 was the Blue Cross and Blue Shield Service Benefit Plan Brochure. At page 26 of the 1982 Service Benefit Plan Brochure, it states: "All claims must be submitted under the appropriate portion of Plan (Basic or Supplemental) no later than December 31 of the calendar year after the one in which the covered care or service was provided."

Defendant argues that claims for covered services for 1982 were required to be submitted for payment no later than December 31, 1983. Thus a lawsuit on those claims was required to be brought by December 31, 1985. Since this lawsuit was filed on September 10, 1986, the 1982 claim portion should be barred. Plaintiff counters that this case does not provide a single instance of claim denial, but a continuing denial of multiple claims. As long as any portion of the claims fall within the period of limitations, the entire claim should be allowed.

In LaBelle v. Blue Cross & Blue Shield United, 548 F.Supp. 251 (W.D.Wis.1982), Judge Shabaz interpreted the exact same provisions to impose a two-year time limit that preempted the six-year Wisconsin Statute of Limitations.

Plaintiff attempts to distinguish this case from LaBelle. In LaBelle, the claim was for hospital expenses incurred in a single year, not for continuing treatment over a number of years.

The Court is not persuaded by this argument. Despite the continuing nature of the treatment, the claims necessarily relate to specific yearly contracts. Each yearly contract imposes a time limit for filing suit over a denial of claim relating to that individual contract. The 1985 contract does not purport to extend the time limit for claims under the 1982 contract simply because treatment is of a continuing nature. Furthermore, plaintiffs reliance on Wisconsin law is misplaced. Congress clearly intended to preempt state law in the FEHBA, 5 U.S.C. § 8902(m)(1):

The provisions of any contract under this chapter which relate to the nature or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any State or local law, or any regulation issued thereunder, which relates to health insurance or plans to the extent that such law or regulation is inconsistent with such contractual provisions.

Still, the Court has grave doubts regarding the practical application of such law. In essence, Congress has allowed an insurance company to establish by contract a new federal Statute of Limitations. Whether this was an unconstitutional delegation of authority was not discussed by the parties.

Therefore, while it would seem appropriate to dismiss as untimely the claim for covered services for 1982, the Court declines to do so at this time and invites further discussion on the issue.

IV. Exhaustion of Remedies

Further provisions of the contract provide for review of a claim denial. If a claim is denied, the Blue Cross and Blue Shield Plan that denied the claim will reconsider its denial upon a written request within one year of the denial. 1985 Brochure, at page 2. The 1984 Brochure contained essentially the same language, but added:

If the Plan affirms its denial or fails to respond to a written request, you may ask the Office of Personnel Management to determine if the denial complies with the provisions of the brochure ... This written request must be made within 90 days after the Plan has affirmed its denial. Include with your request a copy of your letter to the Plan and copies of any correspondence from the Plan regarding its denial. The Office of Personnel Management will notify you and the Plan of its decision within 30 days after it receives all the evidence it needs to complete the review.

1984 Brochure at page 2. The 1983 Brochure stated that if the Blue Cross and Blue Shield Plan affirmed a claim denial, "the Plan will advise you of further review procedures." 1983 Brochure at page 2. Under the FEHBA, the Blue Cross and Blue Shield Association must agree to pay for those claims that the OPM finds were inappropriately denied. 5 U.S.C. § 8902(j). The legislative history of the FEHBA states that Congress intended that the OPM's administrative review process would provide an "adequate administrative remedy" for federal employees and would spare them from being "forced into courts" to recover benefits due them. H.R.Rep. No. 459, 93rd Cong., 1st sess. 2, 7 (1983). The OPM has established by regulation the administrative mechanism for an individual subscriber to challenge a claim denial. 5 C.F.R. § 890.105.

Defendant points to these legislative and contractual provisions as support for the proposition that plaintiff must exhaust her administrative remedies before seeking judicial review of a claim denial. Since she did not present her claims to the OPM for review, the claims should be barred. Plaintiff argues that the word "may" means OPM review is not mandatory.

Case law on this point is split. Defendant's position is supported by Bateman v. Blue Cross-Blue Shield of Alabama, 579 F.Supp. 265 (M.D.Ala.1984) (holding the word "may" means simply that claimant may seek review or may accept carrier's decision). Plaintiff's position is supported by Skoller v. Blue Cross-Blue Shield of Greater New York, 584 F.Supp. 288 (S.D. N.Y.1984) (applicable laws do not require primary jurisdiction in OPM).

The Court finds that plaintiff was not required to exhaust the available administrative remedy. First, the provision that binds Blue Cross and Blue Shield to the OPM decision is an explicit congressional enactment. Yet the language that supposedly binds plaintiff to the same administrative process comes from a brochure incorporated into Contract No. CS 1039. That brochure language varied in each of the three years applicable to this suit. In 1983, it said the Plan will advise the claimant of further...