Iowa Dental Ass'n v. Iowa Ins. Div.

• Decision Date: 17 May 2013
• Docket Number: No. 12–1280.,12–1280.
• Citation: 831 N.W.2d 138
• Parties: IOWA DENTAL ASSOCIATION, Appellant, v. IOWA INSURANCE DIVISION and Iowa Insurance Commissioner, Appellees, and Federation of Iowa Insurers, Intervenor–Appellee.
• Court: Iowa Supreme Court

831 N.W.2d 138

IOWA DENTAL ASSOCIATION, Appellant,

v. IOWA INSURANCE DIVISION and Iowa Insurance Commissioner, Appellees,andFederation of Iowa Insurers, Intervenor–Appellee.

No. 12–1280.

Supreme Court of Iowa.

May 17, 2013.

Rebecca A. Brommel of Brown, Winick, Graves, Gross, Baskerville and Schoenebaum, P.L.C., Des Moines, for appellant.

Thomas J. Miller, Attorney General, and Jeanie Kunkle Vaudt, Assistant Attorney General, for appellees.

Scott A. Sundstrom of Nyemaster Goode, P.C., Des Moines, for intervenor–appellee.

MANSFIELD, Justice.

This case asks us to decide whether to uphold the Iowa Insurance Commissioner's interpretation of a recently enacted law governing dental insurance plans. SeeIowa Code § 514C.3B (2011). Under the Commissioner's interpretation of that law, an insurer may limit the maximum fees charged by dentists for services that are generally included in the insurer's dental plan, even though they are not actually reimbursed by the insurer because of a plan restriction.

On our review, we find that interpretation of the term at issue has not been clearly vested by a provision of law in the discretion of the Commissioner. Therefore, de novo review is appropriate. See id. § 17A.19(10)( c ). We then conclude that the services in question do not meet the statutory definition of “covered services,” because they have not been “reimbursed under the dental plan.” See id. § 514C.3B(3)( a ). Accordingly, the fee for them may not be “set by the dental plan.” See id. § 514C.3B(1). For these reasons, we reverse the decision of the district court upholding the Commissioner's declaratoryruling and remand for further proceedings consistent herewith.

I. Facts and Procedural Background.

This case centers on the contractual relationships between dentists and insurers that provide dental plans. Many dentists in Iowa enter into these plans, under which insurers reimburse all or part of the costs of various dental procedures. Typically the plan contracts include maximum fee schedules. In the schedule, the insurer sets a maximum amount the dentist can charge for a particular service. Dentists agree to abide by these maximum fees, in exchange for the benefit of providing services to insured patients.

Generally, the plans exclude certain services, such as cosmetic dentistry and teeth whitening. Preventive plans have additional exclusions. But even when services are covered, there may be limits such as deductibles, maximum annual benefits, waiting periods, and frequency limitations. A common frequency limitation is that patients may be reimbursed for up to two teeth cleanings per year, but not for a third cleaning within that same time period.

Before the general assembly passed section 514C.3B, some dental plans contained maximum fees that dentists could charge for services that were never reimbursable under their dental insurance plans, like teeth whitening. In 2010, and in apparent response to this practice, the legislature adopted “An Act prohibiting the imposition by a dental plan of fee schedules for the provision of dental services that are not covered by the plan.” 2010 Iowa Acts ch. 1179 (codified at Iowa Code § 514C.3B).

Iowa's law provides:

A contract between a dental plan and a dentist for the provision of services to covered individuals under the plan shall not require that a dentist provide services to those covered individuals at a fee set by the dental plan unless such services are covered services under the dental plan.

Iowa Code § 514C.3B(1). The statute contains the following definition of “covered services”:

“ Covered services ” means services reimbursed under the dental plan.

Id. § 514C.3B(3)(b). And a final subsection of the statute states:

Nothing in this section shall be construed as limiting the ability of an insurer or a third-party administrator to restrict any of the following as they relate to covered services:

a. Balance billing.

b. Waiting periods.

c. Frequency limitations.

d. Deductibles.

e. Maximum annual benefits.

Id. § 514C.3B(4).

Following enactment of this law, insurers continued imposing maximum fees on services that were actually reimbursed under their dental plans, such as semiannual teeth cleanings. But some insurers went further. They placed maximum fees on services that were potentially reimbursable but were not actually reimbursed because of some plan limit, such as a frequency limit. For example, an insurer would require a dentist to charge no more than a certain amount for any teeth cleaning, even though only the first two cleanings were actually reimbursed under the plan.

According to the Iowa Dental Association (IDA), the petitioner in this action, a number of its dentist–members inquired to insurers about maximum fees on these reimbursable, but not actually reimbursed, services. The insurers responded that such services were “covered services” under section 514C.3B(3)( a ), and could accordingly be subject to their fee schedules, even though they were not being reimbursed in a particular instance.

The IDA argued that dentists faced “conflicting interpretations” of the statute: the dentists' own interpretation that such services were not “covered,” and the insurers' view that they were. Accordingly, on August 19, 2011, the IDA filed with the Insurance Division a request for a declaratory order clarifying the meaning of “covered services” in section 514C.3B. See id. § 17A.9 (setting forth the procedure for seeking a declaratory order from an agency). The IDA specifically requested an answer to the following question:

Is an insurer permitted to impose and enforce a maximum fee for services that are not reimbursed under the dental plan (except for standard co-payments or deductibles paid by the patient) due to limitations related to balance billing, waiting periods, frequency limitations, deductibles, and maximum annual benefits?

The IDA proposed that the Commissioner answer the question in the negative, based on its reading of the statute's definition of “covered services.”

The Federation of Iowa Insurers—which represents dental plan providers Wellmark Blue Cross and Blue Shield of Iowa, Delta Dental of Iowa, and the Principal Financial Group—petitioned to intervene in the matter. After its petition was granted, the Federation submitted briefs urging the Commissioner to answer the IDA's question in the affirmative.

On November 8, the Insurance Commissioner issued a declaratory order that agreed with the Federation's position: “covered services” include services that can be reimbursed generally, but that are not actually reimbursed in a particular circumstance due to a policy restriction. The Commissioner reasoned that this reading gave meaning to section 514C.3B(4) and also better served customers because it allowed insurers to keep prices down. As the Commissioner explained,

Subsection 3 must be read in conjunction with subsection 4, to give meaning to the entire statute, which places several limitations on covered services related to balance billing, waiting periods, frequency limitations, deductibles, and maximum annual benefits. Subsection 4 indicates that the “covered service” does not lose its status as a covered service because of limitations placed on reimbursement to the dentist. Thus, the statute does not require ... a service to actually be reimbursed under the dental plan. Stated another way, non-covered benefits are dental procedures that a dental plan does not cover and never pays for.

This determination fits well within the context of the consumer's dental insurance contract.

....

Patients benefit when there [i]s certainty in the amount that will be paid for a given service. They lack the expertise to discuss and/or negotiate dental fees with the dentists that do not fall within the definition of covered services. A patient could end up paying significantly more than the negotiated fee between the insurer and dentist without the benefit of the insurer's contract with the dentist.

On December 11, the IDA filed a petition in Polk County District Court requesting judicial review of the Commissioner's order. The IDA's petition advanced several alternative arguments: (1) the Commissioner lacked clearly vested interpretive authority over the statutory term “covered services” and her ruling was erroneous; (2) the Commissioner, even if clearly vested with authority, issued an illogical, irrational, and unjustifiable order; (3) the Commissioner failed to consider a relevant matter—namely the meaning of the term “reimbursed”; and (4) the Commissioner's action was otherwise unreasonable, arbitrary, capricious, or an abuse of discretion.

The Federation filed a brief in opposition. It argued the district court should uphold the ruling because the Commissioner was clearly vested with interpretive authority and the ruling was neither illogical, irrational, nor unjustifiable. The Federation also asserted that the Commissioner's ruling was correct even if the court employed a less deferential standard of review. Finally, the Federation highlighted policy concerns and insisted that the IDA's interpretation was anti-consumer because it would allow dentists to charge insured customers higher fees on policy-limited services, such as a third teeth cleaning.

The district court affirmed the Commissioner's declaratory ruling. The court relied on Iowa Code chapter 505 to conclude that the Insurance Commissioner had been clearly vested with interpretive authority. Section 505.8(2), in particular, provides:

The commissioner shall, subject to chapter 17A, establish, publish, and enforce rules not inconsistent with law for the enforcement of this subtitle and for the enforcement of the laws, the administration and supervision of which are imposed on the division, including rules to establish fees sufficient to administer the laws, where appropriate fees are not otherwise provided for in rule or statute.

Id. § 505.8(2). The court next read section 514C.3B(3) in...