HCA HEALTH SERVICES v. Aetna Life Ins. Co., Civ. A. No. 92-574-A.
Decision Date | 15 October 1992 |
Docket Number | Civ. A. No. 92-574-A. |
Citation | 803 F. Supp. 1132 |
Court | U.S. District Court — Eastern District of Virginia |
Parties | HCA HEALTH SERVICES OF VIRGINIA, INC., Plaintiff, v. AETNA LIFE INSURANCE COMPANY, Defendant. |
William D. Iverson, Washington, D.C., for plaintiff.
Laura Graham Fox, John Bowers McCammon, Richmond, Va., for defendant.
This matter comes before the Court on the parties' cross motions for summary judgment.1 For the reasons discussed below, Defendant's motion for summary judgment is GRANTED, and Plaintiff's motion for summary judgment is DENIED.
This matter is properly before this Court under the diversity jurisdiction prescribed by 28 U.S.C.A. § 1332 (West 1992). Plaintiff HCA Health Services ("HCA"), a Virginia corporation, sued defendant Aetna Life Insurance ("Aetna"), a Connecticut corporation, alleging that Aetna has unlawfully excluded HCA from the Preferred Provider Organization ("PPO") that Aetna operates in the Northern Virginia area.
A PPO is a mechanism by which subscribers to the PPO, who are generally employers providing their employees with health benefits, attempt to manage the cost of health care by entering into contracts at advantageous prices with "preferred" or "network" health care providers, such as hospitals or physicians. The cost reduction stems from the fact that under the PPO arrangement, selected health care providers agree to charge lower rates on services provided to participants, in anticipation of attracting a greater volume of patients from those participant groups, as well as the higher probability of receiving payment on behalf of persons covered in conjunction with this arrangement, as compared with the public at large. PPO networks may be established and maintained by either employee benefit plans themselves, third-party administrators, or, as in this case, by insurance companies who offer PPO arrangements to their employee benefit plan customers. Thus, the PPO Plan in this case is simply an insurance product offered by Aetna to subscribing employee benefit plans.
For purposes of analysis, it is important to understand the specific nature of the Aetna PPO Plan ("Plan") at issue in this case. The Plan is offered by Aetna only to employee benefit plans. See Def.'s Mem. Supp. Summ. J., Am. Aff. of John Coyle, former Exec. Dir. of Aetna Health Management at ¶¶ 4-6. The plan currently involves the employee benefit plans of over 250 employers, covering approximately 50,000 employees and their eligible dependents in the Northern Virginia/District of Columbia Metropolitan regions. Id. at ¶ 8.
Aetna administers all of these employee benefit plans under the federal Employee Retirement Income Security Act, 29 U.S.C. §§ 1001 et seq. (1988) ("ERISA") as ERISA plans, with two exceptions. Id. at ¶ 8. The two exceptions are the plans sponsored by Frederick County, Maryland, and the Maryland National Capital Park and Planning Commission, both of which are government plans. Id.2
Several of the employee benefit plans participating in the Aetna PPO are self-insured, for whom Aetna then provides merely administrative services. Id. at ¶ 10. For the remaining participants, Aetna acts both as the insurer and administrator of the plan. Id. at ¶ 11. In both instances, however, the arrangement for delivering health care through the Aetna PPO remains the same, irrespective of whether Aetna also acts as the insurer. Id. at ¶ 12.
Plaintiff operates HCA Reston Hospital Center in Reston, Virginia, and was formerly a preferred health care provider for the Aetna PPO. On June 5, 1991, Aetna notified the hospital that effective December 31, 1991, Aetna was terminating the hospital's contract as a preferred provider under the Aetna run PPO Plan. HCA has sued alleging that this exclusion violates the Virginia Preferred Provider Statute. See Va.Code Ann. § 38.2-3407 (Michie 1992).3 HCA claims that Aetna failed to establish terms and conditions for participation in the PPO network as required under the Virginia statute. HCA also claims that Aetna wrongfully failed to negotiate or allow the hospital to meet reasonable terms and conditions for continued participation in the Plan.
Charbonnages de France v. Smith, 597 F.2d 406, 414 (4th Cir.1979). Finally, summary judgment is appropriate as a matter of law if the nonmoving party fails to make a showing sufficient to establish the elements necessary to his case. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). With these legal parameters in mind, the Court proceeds to an analysis of the case at hand.
Aetna alleges that it is entitled to judgment as a matter of law because regardless of whether it violated the Virginia statute, the statute is preempted by ERISA. In order to decide whether the Virginia statute is in fact preempted, this Court must first decide whether the Virginia state law "relates to" an employee benefit plan as that term is understood under ERISA. Secondly, if the Virginia statute does relate to an employee benefit plan, this Court must then decide whether the statute is nevertheless saved from preemption as a state law "which regulates insurance," as that phrase has also come to be interpreted under ERISA.
29 U.S.C. § 1144(b)(2)(A) (emphasis added) ("Savings Clause"). Thus, in the context of this case, the Preemption and Savings Clauses in ERISA combine to preempt the Virginia state law if it "relates to any employee benefit plan," but not if the Virginia statute "regulates insurance" so that it is nevertheless saved from preemption. The Court therefore first turns to the issue of whether the Virginia statute is one that "relates to any employee benefit plan" under ERISA.
29 U.S.C. § 1002(1). The provisions of ERISA apply to any employee benefit plan established or maintained by an "employer engaged in commerce or in any industry or activity affecting commerce." 29 U.S.C. § 1003(a)(1).
Applying these portions of ERISA to the facts in this case, it is clear that the Aetna PPO customers other than the previously mentioned governmental plans, all of whom are employers providing employee health benefit plans, are providing employee welfare benefit plans subject to regulation under ERISA. Therefore, if the Virginia statute "relates to" these plans as contemplated by ERISA, it will have met the first step toward preemption under ERISA.
Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1983) (emphasis added).
As the Court has noted elsewhere, "the pre-emption provision was intended to displace all state laws that fall within its sphere, even including state laws that...
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