Hanson v. Blue Cross Blue Shield of Iowa

• Decision Date: 26 November 1996
• Docket Number: No. C 96-4047-DEO.,C 96-4047-DEO.
• Parties: August R. HANSON, Joni S. Hanson, Brittany N. Hanson, Plaintiffs, v. BLUE CROSS BLUE SHIELD OF IOWA a/k/a IASD Health Services Corporation, Defendants.
• Court: U.S. District Court — Northern District of Iowa

953 F.Supp. 270

August R. HANSON, Joni S. Hanson, Brittany N. Hanson, Plaintiffs, v. BLUE CROSS BLUE SHIELD OF IOWA a/k/a IASD Health Services Corporation, Defendants.

No. C 96-4047-DEO.

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

November 26, 1996.

Thaddeus E. Cosgrove, Holstein, IA, for Plaintiffs.

Scott A. Hindman, Sioux City, IA, Anthony F. Shelley, Washington, DC, for Defendants.

ORDER

DONALD E. O'BRIEN, Senior District Judge.

This matter comes before the Court on the plaintiffs' motion to remand this case to the Iowa District Court for Ida County. The Court held a hearing on this motion and after careful consideration of the parties' oral and written arguments, this Court denies the plaintiffs' motion to remand.¹

I. FACTUAL AND PROCEDURAL BACKGROUND

August R. Hanson is a federal government employee who is enrolled in the Service Benefit Plan, a federal health insurance plan. The Service Benefit Plan is procured and administered by OPM pursuant to the Federal Employees Health Benefits Act (FEHBA). 5 U.S.C. §§ 8901-8914. August R. Hanson seeks coverage of a communication prosthesis for his daughter, who has no functional speech.

Congress authorized OPM to contract for medical coverage for United States government employees, retirees, and eligible members under FEHBA. See 5 U.S.C. §§ 8902-8903; H.R.Rep. No. 957, 86th Cong. 1st Sess. 3 (1959). OPM procures such health coverage as it "considers necessary or desirable" including exclusions and limitations. 5 U.S.C. §§ 8902(d), 8904(a). OPM has the final, sole authority over coverage.

The Service Benefit Plan is a contract that OPM entered into with the Blue Cross and Blue Shield Association, which sponsors the plan on behalf of various Blue Cross and Blue Shield companies across the country. Although Blue Cross and Blue Shield of Iowa administers the plan in Iowa, there is no insurance contract between Hanson and BCBS because BCBS merely agreed to cover its pro rata share of (Iowa) the Service Benefit Plan for which the Blue Cross and Blue Shield Association bargained with OPM. 5 C.F.R. 890.101(a), 102-104, and subparts C, D, and E (1996). As mentioned, Blue Cross and Blue Shield of Iowa did not specifically contract for benefits with Hanson. Id. Thus, Hanson is not a party to the contract, but an enrollee, with his benefits subject to OPM regulations. Id.

OPM publishes and distributes an annual Statement of Benefits for each health benefit plan. 5 U.S.C.A. § 8907(b)(2), (3). The Statement of Benefits sets forth for each plan the "benefits, including maximums, limitations, and exclusions," the "procedure for obtaining benefits," and the "principal provisions of the plan affecting the enrollee and any eligible family members." Id. The Statement of Benefits is incorporated by reference into the contract between OPM and the Blue Cross and Blue Shield Association and is the official and exclusive description of the Plan benefits for the year. Id. Because the Statement of Benefits is an enactment of OPM, it has the full force and effect of federal regulations. 5 U.S.C.A. § 8902(m)(1); Caudill v. Blue Cross & Blue Shield of N.C., Inc., 999 F.2d 74, 80 (4th Cir.1993).

Each contracting carrier must abide by OPM's decisions regarding coverage. 5 U.S.C. § 8902(j). OPM has established a mandatory administrative process for the review of denied claims. 5 C.F.R. § 890.107(d)(1) (providing that judicial review of OPM's final decision may not be brought prior to exhaustion of the remedies in § 890.105). Federal regulations spell out the specific requirements for submitting claims and for reviewing and resolving disputes. 5 C.F.R. § 890.105 (1996). The final step in the administrative process involves review by officers in the OPM Office of Insurance Programs. Id. Individuals who disagree with OPM's decision must then sue OPM to recover compensation for health care benefits. 5 C.F.R. 890.107(c). Under FEHBA, such a lawsuit must be brought in federal court. 5 U.S.C. § 8912.²

August R. Hanson made two claims for the communication prosthesis. Those claims were denied by Blue Cross and Blue Shield of Iowa on the ground that it was not covered medical equipment under the Service Benefit Plan's Statement of Benefits. August R. Hanson subsequently sought an administrative appeal from OPM, and the agency upheld the denial of benefits.

On April 16, 1996, the plaintiffs brought this suit against the carrier BCBS in the Iowa District Court for Ida County, alleging, as mentioned, the failure of the defendant, to pay the necessary costs and charges associated with the required purchase of a communication prosthesis for the plaintiffs' daughter, Brittany. On May 10, 1996, the defendant filed a timely Notice of Removal to this Court on the basis of 28 U.S.C. § 1441, and 28 U.S.C. § 1442(a)(1),³ two alternative theories. On June 5, 1996, the plaintiffs filed a motion to remand the case to state court.

II. DISCUSSION

The plaintiffs' argument in support of remand is that this case must contain a federal question in order for this Court to have jurisdiction under 28 U.S.C. § 1441. The plaintiffs assert the defendant's breach of contract and bad faith refusal to pay the claims do not raise a federal question and, therefore, removal was improper. The plaintiffs contend this is a private contractual dispute between an insured and a health care insurer and argue the well-pleaded complaint rule should govern this case.

Removal of a state court action based on federal question jurisdiction is proper only if the action asserts a claim "arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. §§ 1331, 1441. Ordinarily, as plaintiffs contend, a case "arises under" federal law only when a federal question appears on the face of the plaintiffs' well-pleaded complaint. Caterpillar Inc. v. Williams, 482 U.S. 386, 391-92, 107 S.Ct. 2425, 2428-29, 96 L.Ed.2d 318 (1987) (holding "the presence or absence of federal-question jurisdiction is governed by the `well pleaded complaint rule,' which provides that federal jurisdiction exists only where a federal question is presented on the face of [the plaintiffs'] properly pleaded complaint"). Under that rule, a case cannot be removed because the defendant raises a federal defense to a state law claim, including the federal defense of preemption. Gaming Corp. of America v. Dorsey & Whitney, 88 F.3d 536, 543 (8th Cir.1996); Louisville & Nashville R.R. Co. v. Mottley, 211 U.S. 149, 152, 29 S.Ct. 42, 43, 53 L.Ed. 126 (1908) (holding that federal issues interposed as a defense generally do not create a cause of action "arising under" federal law). The right of removal under § 1441 and § 1331 is decided by the pleadings, viewed at the time the petition for removal is filed. See American Fire & Cas. Co. v. Finn, 341 U.S. 6, 71 S.Ct. 534, 95 L.Ed. 702 (1951).

It is undisputed that the plaintiffs' complaint fails to state a federal question on its face. Ordinarily, the well-pleaded complaint rule would therefore bar removal of this case from state to federal court. However, the United States Supreme Court has fashioned a significant, narrow exception to the well-pleaded complaint rule known as the complete preemption doctrine. The doctrine states that when the preemptive force of a statute is "extraordinary," it "converts an ordinary common-law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule." Caterpillar, 482 U.S. at 393, 107 S.Ct. at 2430 (quoting Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 65, 107 S.Ct. 1542, 1547, 95 L.Ed.2d 55 (1987)); DeSantiago v. Laborers Int. Nat. Union of North America, 914 F.2d 125, 127 (8th Cir.1990). This exception prohibits a plaintiff from defeating removal by failing to plead necessary federal questions in a complaint and allows a defense of federal preemption as a basis for removal.

The United States Supreme Court has found complete preemption in only three areas: (1) Section 301 of the Labor Management Relations Act of 1947 (LMRA), 29 U.S.C. § 185; (2) the Employment Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001-1461; and (3) in relation to Indian Rights. See Queen v. City of Detroit, 874 F.2d 332, 342 (6th Cir.1989). The Eighth Circuit has found complete preemption in other areas. See Deford v. Soo Line R.R., 867 F.2d 1080 (8th Cir.1989) (finding complete preemption under the Railway Labor Act, 45 U.S.C. §§ 151-188); M. Nahas & Co. v. First Nat. Bank of Hot Springs, 930 F.2d 608 (8th Cir.1991) (finding § 86 of the National Bank Act completely preempts the field of usury claims against national banks).

Determining whether the complete preemption doctrine permits removal of this case requires a two-step analysis. Gaming Corp., 88 F.3d at 543. First, the Court must determine whether FEHBA completely preempts the field of benefit claims under the Service Benefit Plan. Id. (citing Metropolitan Life, 481 U.S. at 64-66, 107 S.Ct. at 1546-48). Second, the Court must determine whether the plaintiffs' claims fall within the scope of the civil enforcement provisions of FEHBA. Gaming Corp., 88 F.3d at 543 (citing Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 24-26, 103 S.Ct. 2841, 2855, 77 L.Ed.2d 420 (1983)).

A. Complete Preemption Under FEHBA.

In determining the issue of complete preemption, the court looks to the congressional intent. There must exist "a clear indication of a Congressional intention" to permit removal despite the plaintiffs' exclusive reliance on state law. Metropolitan Life, 481 U.S. at 64-66, 107 S.Ct. at 1546-48. The language and provisions included in FEHBA, as compared to the language and provisions included in legislation such as ERISA is of particular relevance.

The Supreme Court, in deciding ERISA is intended to preempt all claims, rested its determination, at least in part on the act's civil enforcement provisions. See id. at 65-66, 107 S.Ct. at 1547-48 (extending...