Everson v. Blue Cross and Blue Shield of Ohio

• Citation: 898 F. Supp. 532
• Decision Date: 15 June 1994
• Docket Number: No. 93CV7534.,93CV7534.
• Court: U.S. District Court — Northern District of West Virginia
• Parties: Fred W. EVERSON, Plaintiff, v. BLUE CROSS AND BLUE SHIELD OF OHIO et al., Defendants.

898 F. Supp. 532

Fred W. EVERSON, Plaintiff, v. BLUE CROSS AND BLUE SHIELD OF OHIO et al., Defendants.

No. 93CV7534.

United States District Court, N.D. Ohio, Western Division.

June 15, 1994.

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COPYRIGHT MATERIAL OMITTED

Dennis E. Murray, Sr., Kirk J. Delli Bovi, Murray & Murray, Sandusky, OH, for Fred W. Everson, Joseph F. Kreidler.

Marvin L. Karp, Ulmer & Berne, Cleveland, OH, for Jeffrey McConocha, Lawrence C. Engel, ISDN Technologies, Inc., Mathews Ford Sandusky, Inc.

Paul S. Lefkowitz, Climaco, Climaco, Seminatore, Lefkowitz & Garofoli, Cleveland, OH, Fritz Byers, Troy L. Moore, Scott, Ballinger & Moore, Toledo, OH, for Blue Cross & Blue Shield of Ohio.

MEMORANDUM & ORDER

CARR, District Judge.

This action is before the court on defendant Blue Cross and Blue Shield of Ohio's (BCBSO) motion to dismiss the amended complaint, plaintiffs' opposition, defendant's reply, and plaintiffs' response. Also before the Court is defendant's motion for oral argument and plaintiffs opposition. Jurisdiction is based on 29 U.S.C. § 1132(e) and (f).

This action is brought under the Employee Retirement Income Security Act of 1974 as amended (ERISA) and 18 U.S.C. § 1962. Plaintiffs' complaint includes a claim for benefits pursuant to 29 U.S.C. § 1132(a)(1)(B), allegations of a breach of fiduciary duty pursuant to 29 U.S.C. §§ 1109(a) and 1106(b), and allegations of a violation of the Racketeer Influenced Corrupt Organizations Act (RICO). These claims are based on defendant's alleged practice of negotiating discounts with health care providers and failing to pass such discounts on to group health care plan participants. As a result, participants are allegedly obligated to make copayments in excess of that stated in the insurance contract.

Defendant has moved to dismiss this action pursuant to Fed.R.Civ.P. 12(b)(6). In Allard v. Weitzman, 991 F.2d 1236 (6th Cir.1993), the Sixth Circuit sets forth the standard for considering a Rule 12(b)(6) motion:

The Court must construe the complaint in the light most favorable to the plaintiff, accept all factual allegations as true, and determine whether the plaintiff undoubtedly can prove no set of facts in support of his claims that would entitle him to relief. Meador v. Cabinet for Human Resources, 902 F.2d 474, 475 (6th Cir), cert. denied, 498 U.S. 867, 111 S.Ct. 182, 112 L.Ed.2d 145 (1990). A complaint need only give "fair notice of what the plaintiff's claim is and the grounds upon which it rests." Lawler v. Marshall, 898 F.2d 1196, 1199 (6th Cir.1990) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 103, 2 L.Ed.2d 80 (1957)). A judge may not grant a Fed. R.Civ.P. 12(b)(6) motion to dismiss based on a disbelief of a complaint's factual allegations. Id. While this standard is decidedly liberal, it requires more than the bare assertion of legal conclusions. Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir.1988). "In practice, `a ... complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory.'" Id. (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir.1984), cert. denied, 470 U.S. 1054, 105 S.Ct. 1758, 84 L.Ed.2d 821 (1985)).

Plaintiffs' first cause of action is a claim for benefits pursuant to ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B). Section 1132(a)(1)(B) provides that "a civil action may be brought—(1) by a participant or beneficiary ... (B) to recover benefits due to him under the terms of his plan...." Plaintiffs' complaint alleges, inter alia, that group health care plan participants have been obligated to make co-payments in excess of the fixed percentage set forth in the group plan. Plaintiffs claim that the excess payments are the result of the allegedly undisclosed practice of defendant negotiating discounts with health care providers and failing to pass a proportionate share of such discounts on to its insureds. As a result, plaintiffs allege that defendant actually pays a percentage of the health care providers' charges which is less than that specified by the terms of the plan. The insureds' portion, on the other hand, is not discounted, but is still based on the total charges. Thus, the copayment paid by the insured is greater than that specified by the terms of the plan.

Defendant argues that plaintiffs' claim for benefits must be dismissed because, as a matter of law, their group plan does not entitle them to the benefit of any discounts that defendant negotiates and receives. Defendant argues that plan documents clearly reveal that negotiated discounts are for the benefit of BCBSO only. It bases its argument on two theories, one applicable to plaintiff Fred Everson, and the other to plaintiffs Jeffrey McConocha and Lawrence Engel.

The Court must look to the plan documents applicable to each plaintiff to determine what benefits are due under the terms of each plan. As to plaintiff Everson, BCBSO submits plaintiff's group insurance contract and his subscriber certificate as the applicable plan documents.¹ It argues that these two documents should be viewed as a single, integrated document. Defendant contends that the group contract clearly discloses BCBSO's discounts, that such discounts are for the sole benefit of BCBSO, and that co-payments are not calculated upon any such discounts. Thus, BCBSO argues that the contract language defeats any claim that Everson has for benefits.

Plaintiffs, on the other hand, argue that the Subscriber Certificates (hereinafter Certificates) which were received by each employee under the plan, and which were drafted by defendant, are ERISA summary plan descriptions. Plaintiffs contend that to the extent there are inconsistencies between the language in the Certificates and the employer's group contract, the language in the Certificate controls. Indeed, the Sixth Circuit has determined that statements in the summary plan description control where those statements conflict with the plan itself. Edwards v. State Farm Mut. Auto. Ins. Co., 851 F.2d 134, 136 (6th Cir.1988); Flacche v. Sun Life Assurance Co. of Canada, 958 F.2d 730, 736 (6th Cir.1992). However, for the following reason, this Court concludes that the Everson Certificate is not an ERISA summary plan description.

ERISA requires the plan administrator to provide a summary of the plan to all participants and beneficiaries. 29 U.S.C. §§ 1021(a), 1024(b)(1). By definition, a summary of the plan does not reproduce, word for word, each term of the plan itself. In this case the plan documents consist of the group contract and the Subscriber Certificate. The Certificate sets forth, inter alia, the schedule of benefits, exclusions from coverage, copayment limits, deductibles, how to make claims and how to appeal claims. The group contract includes none of these terms; rather, it incorporates the Subscriber Certificate into the contract by reference. See Exhibit C, Group Contract § 3.1. Thus, the Certificate is itself a part of the plan containing terms found in no other plan document. Because the plan and a summary of the plan require two distinct documents, the Subscriber Certificate, in this case, cannot also be a summary plan description. See Hansen v. Continental Insurance Co., 940 F.2d 971 (5th Cir.1991).

In addition, any obligation to provide a summary plan description to participants and beneficiaries as required under ERISA belongs to the plan administrator. See 29 U.S.C. §§ 1021(a), 1024(b)(1). ERISA defines plan administrator as the person designated by the terms of the plan documents or, if not so designated, the plan sponsor. Id. at § 1002(16). Neither Everson's Certificate nor the group contract identify the plan administrator. Therefore, the plan sponsor is the administrator in this case. "Plan sponsor" is defined as "the employer in the case of an employee benefit plan established or maintained by a single employer." Id. Thus, Everson's employer, Acme Printing Company, not BCBSO, was obligated to furnish a summary plan description in compliance with ERISA. Because the Court concludes that the Certificate is not a summary plan description, it must consider the group contract and the Certificate as an integrated document in determining what benefits are due Everson under the terms of his plan. Under ERISA, the construction of the contract is governed by principles of federal law. Turner v. Safeco Life Ins. Co., 17 F.3d 141, 145 1994 U.S.App. LEXIS 2686, at *12 (6th Cir.1994) citing Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56-57, 107 S.Ct. 1549, 1557-1558, 95 L.Ed.2d 39 (1987). A basic principle of contract construction is that "each provision of a contract should be interpreted as part of an integrated whole, to the end that all of the provisions may be given effect if possible." Musto v. American General Corp., 861 F.2d 897, 906 (6th Cir.1988). "Where ambiguities exist, the court may look to other words and phrases in the ... agreement for guidance." UAW v. Yard-Man, Inc., 716 F.2d 1476, 1480 (6th Cir.1983).

In this case, the Certificate sets forth the benefits available to Everson and that such benefits are subject to the terms and conditions of the group contract. These benefits include, inter alia, payment of a fixed percentage of the health care provider's reasonable charge. The "provider's reasonable charge" is defined in the Certificate as: "the charge that we determine is reasonable for Covered Services provided to you. A Contracting Provider's Reasonable Charge is established by the agreement between us and the provider." Exhibit B, Subscriber Certificate at p. 40 (emphasis added).

In a section entitled "How Claims Are Paid," the Certificate states that the "amount of copayment ... is specified in the Schedule of Benefits...." Id. at 31 (emphasis added). However, the Schedule of Benefits states only the percentage of charges which BCBSO will pay. When these provisions are...