Health Care Plan, Inc. v. Aetna Life Ins. Co.

• Decision Date: 10 June 1992
• Docket Number: No. 1113,D,1113
• Citation: 966 F.2d 738
• Parties: 15 Employee Benefits Cas. 1929 The HEALTH CARE PLAN, INC., Plaintiff-Appellant, v. AETNA LIFE INSURANCE COMPANY, Defendant-Appellee. ocket 91-9234.
• Court: U.S. Court of Appeals — Second Circuit

Page 738

966 F.2d 738

15 Employee Benefits Cas. 1929

The HEALTH CARE PLAN, INC., Plaintiff-Appellant, v. AETNA LIFE INSURANCE COMPANY, Defendant-Appellee.

No. 1113, Docket 91-9234.

United States Court of Appeals Second Circuit.

Argued March 13, 1992.

Decided June 10, 1992.

James L. Magavern, Buffalo, N.Y. (Cheryl Smith Fisher, Robin J. Chapman, Magavern & Magavern, of counsel), for plaintiff-appellant.

Michael Wolford, Rochester, N.Y. (Richard S. Crummins, Nixon, Hargrave, Devans & Doyle, of counsel), for defendant-appellee.

Before OAKES, Chief Judge, WALKER, Circuit Judge, and PARKER, District Judge. ^*

OAKES, Chief Judge:

This appeal presents the question whether 42 U.S.C. § 300e-9 (1988) of the Health Maintenance Organization Act of 1973 confers on health maintenance organizations (HMOs) a private cause of action against employers. The Health Care Plan, Inc. ("HCP")--a federally-qualified HMO--brought an action for damages and injunctive relief against Aetna Insurance Co., pursuant to 42 U.S.C. § 300e-9 and N.Y.Pub.Health Law § 4407 (McKinney 1985 & Supp.1992), to remedy Aetna's refusal to include HCP as an option in its 1992 employee health benefits plan. HCP appeals from a judgment of the United States District Court for the Western District of New York, John T. Curtin, Judge, which dismissed the federal claims on the grounds that section 300e-9 bestowed no private right of action on HMOs and refused to entertain pendant jurisdiction over the state law claim. 776 F.Supp. 118 (W.D.N.Y.1991). HCP's sole argument on appeal is that section 300e-9(a)-(b) creates an implied right of action. We find that there is no evidence that Congress intended to provide HMOs with a cause of action under section 300e-9; therefore, we affirm the district court's dismissal of HCP's claims.

I

Section 300e-9(a)--known as the dual option requirement--specifies that employers which are subject to minimum wage regulations under the Fair Labor Standards Act, 29 U.S.C. § 206 (1988), ¹ employ at least twenty-five employees per year, and offer their employees a health benefits plan must also offer their employees the option of joining an HMO, if a federally-qualified HMO is available in the area. ² If both the staff-model and the individual-practice/group-model varieties of HMOs exist in the area, ³ employers subject to section 300e-9 must include within their benefits options at least one of each of these two types of HMOs. 42 U.S.C. § 300e-9(b) (1988).

In 1979, HCP--a qualified, staff-model HMO, providing services in Erie County, New York--requested that Aetna offer its Erie County employees the option of participating in HCP's health program. Aetna complied with HCP's request, as required by section 300e-9. By 1990, twelve of Aetna's thirty-five employees in Erie County belonged to HCP. In 1991, Aetna informed HCP that, as of 1992, it would no longer offer HCP as an option in their employee health benefits plan. Aetna cited as the basis for discontinuing the HCP option HCP's failure either to respond to a letter of agreement Aetna had circulated to HMOs included in its health benefits plans or to submit a written request to be included among Aetna's options to its employees in 1992 as required by 42 C.F.R. § 417.152 (1991). HCP, on the other hand, denies the validity of both of the reasons Aetna provided for dropping the HCP option. The dispute over whether Aetna discontinued offering its employees HCP's services in violation of section 300e-9, however, is not before us on appeal. The only issue on appeal is whether the district court erred in its determination that section 300e-9 does not confer on HCP, or any other HMO, the right to bring a private action in federal court against an employer.

II

Section 300e-9 makes no explicit mention of a private right of action to pursue remedies for violations of the Act. We must determine, therefore, whether Congress intended in enacting the HMO Act or its amendments to create an implied private right of action. ⁴ Suter v. Artist M., --- U.S. ----, 112 S.Ct. 1360, 1370, 118 L.Ed.2d 1 (1992); Karahalios v. Local 1263, National Fed'n of Fed. Employees, 489 U.S. 527, 532, 109 S.Ct. 1282, 1286, 103 L.Ed.2d 539 (1989). The four factors set forth in Cort v. Ash, 422 U.S. 66, 78, 95 S.Ct. 2080, 2087-88, 45 L.Ed.2d 26 (1975), serve as tools for discerning Congress' intent in the face of statutory silence. See Suter, 112 S.Ct. at 1370; Thompson v. Thompson, 484 U.S. 174, 179, 108 S.Ct. 513, 516, 98 L.Ed.2d 512 (1988). These factors are: (1) whether the plaintiff is "one of the class for whose especial benefit the statute was enacted," Cort, 422 U.S. at 78, 95 S.Ct. at 2088; (2) whether there is "any indication of legislative intent, explicit or implicit, either to create such a remedy or deny one," id.; (3) whether private enforcement is "consistent with the underlying purposes of the legislative scheme," id.; and (4) whether the cause of action is "one traditionally relegated to state law." Id. Although Cort envisioned these factors as a four-pronged test for whether it was appropriate for a court to create common law remedies for statutory violations, the Supreme Court has since refocused (perhaps "shifted" would be a more apt description) the test by emphasizing the centrality of the second factor--congressional intent. Karahalios, 489 U.S. at 532-33, 109 S.Ct. at 1286-87; Touche Ross & Co. v. Redington, 442 U.S. 560, 575-76, 99 S.Ct. 2479, 2488-89, 61 L.Ed.2d 82 (1979); Erwin Chemerinsky, Federal Jurisdiction 318-20 (1989). The remaining Cort factors now enter into the analysis, if at all, only as proxies for legislative intent. Thompson, 484 U.S. at 179, 108 S.Ct. at 516; Pryor v. United States Steel Corp., 794 F.2d 52, 57 (2d Cir.), cert. denied, 479 U.S. 954, 107 S.Ct. 445, 93 L.Ed.2d 393 (1986); CETA Workers' Org. Comm. v. City of New York, 617 F.2d 926, 931-32 (2d Cir.1980). The Supreme Court, without expressly overruling the earlier precedents, for all practical purposes has adopted Justice Powell's dissenting views in Cannon v. University of Chicago, 441 U.S. 677, 730, 99 S.Ct. 1946, 1974-75, 60 L.Ed.2d 560 (1979).

Framing its arguments in terms of the Cort analysis, HCP argues that Congress' intent to create a private right of action emerges from section 300e-9. According to HCP, HMOs were the intended beneficiary of section 300e-9, thus, satisfying the first Cort factor. The logic that underlies this Cort factor is that if Congress intended to benefit a certain group through legislation, it is more likely that Congress intended for that group to seek relief directly in federal court. Pryor, 794 F.2d at 57. In arguing that HMOs are the intended beneficiary of the HMO Act, HCP, however, confuses the notions of "beneficiary" and "intended beneficiary." The legislative history of the Act reveals that Congress intended to benefit consumers by injecting increased competition into the health care market and, ultimately, by providing lower prices for services. See S.Rep. No. 129, 93rd Cong., 1st Sess., reprinted in, 1973 U.S.C.C.A.N. 3033, 3039-40; S.Rep. No. 837, 95th Cong., 2nd Sess., reprinted in, 1978 U.S.C.C.A.N. 4935, 4942. Congress, thus, viewed HMOs as a means rather than an end. However, even if HMOs were the intended beneficiary of the HMO Act, the bare fact that HMOs benefit from the statute does not require courts to create for them a private right of action to protect that benefit. See Transamerica Mortgage Advisors, Inc. (TAMA) v. Lewis, 444 U.S. 11, 24, 100 S.Ct. 242, 249, 62 L.Ed.2d 146 (1979); Touche Ross, 442 U.S. at 578, 99 S.Ct. at 2490.

HCP claims that the second Cort factor--the central question whether the language, structure, or legislative history of the statute provide a predicate for the implication of a private remedy--is satisfied by the "specific right-creating language" of section 300e-9(a)-(b). The language of section 300e-9 leaves no doubt that Congress intended to impose obligations upon employers. But these obligations, in and of themselves, do not provide a basis for conferring a private right of action on HMOs, without further indication of congressional intent. See TAMA, 444 U.S. at 16-18, 100 S.Ct. at 245-46. HCP fails to identify indicia of such intent. Section 300e-9(e), in fact, reveals that Congress envisioned an administrative rather than a judicial enforcement scheme. The Secretary of Health and Human Services ("HHS") (then Health, Education and Welfare) has the authority to assess civil penalties for employers who knowingly fail to comply with the Act. In situations in which Congress expressly relied upon an administrative scheme to induce compliance, we should be particularly reluctant to imply a private cause of action without sufficient evidence of Congress' intent. See Touche Ross, 442 U.S. at 574, 99 S.Ct. at 2488.

HCP argues that we must look to the context within which Congress legislated to uncover congressional intent. When Congress enacted the HMO Act, it operated on the basis of a different paradigm of the judiciary's role in the creation of causes of action. At that time, the prevailing view was that courts should create private rights of action if they would help effectuate the purpose of the statute and the legislative history did not bear witness to Congress' opposition to such remedies, see J.I. Case Co. v. Borak, 377 U.S. 426, 84 S.Ct. 1555, 12 L.Ed.2d 423 (1964); Chemerinsky, supra, at 317-18; thus, HCP argues, meager direct evidence of a congressional intent to create a private cause of action, with respect to statutes of this era, is not dispositive. But to the extent that HCP argues that the appropriate analysis in determining whether an implied cause of action exists is the method of analysis that courts applied at the time of the statute's enactment, we disagree, however much we may have been persuaded by the earlier view of the Court.

HCP seizes upon dicta from Merrill Lynch, Pierce, Fenner & Smith, Inc....