Kobleur v. Group Hospitalization and Medical Services, Inc., 91-8458

• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)
• Citation: 954 F.2d 705
• Docket Number: No. 91-8458,91-8458
• Parties: Patricia M. KOBLEUR, Individually and on Behalf of her Husband and Ward, Joseph M. Kobleur, and on behalf of all other persons similarly situated, Plaintiffs-Appellants, v. GROUP HOSPITALIZATION AND MEDICAL SERVICES, INC., d/b/a Blue Cross and Blue Shield of the National Capital Area, Defendant-Appellee.
• Decision Date: 28 February 1992

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954 F.2d 705 60 USLW 2652 Patricia M. KOBLEUR, Individually and on Behalf of her
Husband and Ward, Joseph M. Kobleur, and on behalf
of all other persons similarly situated,
Plaintiffs-Appellants,
v.
GROUP HOSPITALIZATION AND MEDICAL SERVICES, INC., d/b/a Blue
Cross and Blue Shield of the National Capital
Area, Defendant-Appellee. No. 91-8458. United States Court of Appeals,
Eleventh Circuit. Feb. 28, 1992.

Page 706

Brent J. Savage, Adams, Gardner & Ellis, P.C., James E. Starnes, Richard H. Middleton, Jr., Middleton & Anderson, P.C., Savannah, Ga., Robert H. Benfield, Jr., Middleton & Anderson, P.C., Atlanta, Ga., for plaintiffs-appellants.

Michael R. Hurst, Heymand and Sizemore, William H. Major, Atlanta, Ga., Terry L. Readdick, Dickey, Whelchel, Brown & Readdick, Brunswick, Ga., for defendant-appellee.

Appeal from the United States District Court for the Southern District of Georgia.

Before COX, Circuit Judge, JOHNSON ^* and REAVLEY ^**, Senior Circuit Judges.

REAVLEY, Senior Circuit Judge:

Patricia Kobleur, acting individually and on behalf of her husband and ward, Joseph M. Kobleur, brought suit against Group Hospitalization and Medical Services, Inc.,

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d/b/a Blue Cross and Blue Shield of the National Capital Area (Blue Cross), seeking declaratory and injunctive relief and damages for Blue Cross' denial of the Kobleurs' insurance claims. The district court dismissed the case without prejudice because of the Kobleurs' failure to exhaust their administrative remedies before the United States Office of Personnel Management (OPM), and the Kobleurs appeal. Because we find that an exhaustion requirement exists within the regulatory scheme of the Federal Employees Health Benefits Act, 5 U.S.C. §§ 8901-8914 (1988) (FEHBA), and that it is appropriate to require exhaustion in this case, we affirm.

I. BACKGROUND

Mr. Kobleur, a retired employee of the Federal Bureau of Alcohol, Tobacco, and Firearms, suffers from Alzheimer's disease. The Kobleurs obtained health insurance under a plan that the National Alliance of Postal and Federal Employees (the Alliance) offered to federal employees and retirees pursuant to a contract between the Alliance and OPM. The FEHBA grants OPM the authority to contract with private health insurance carriers like the Alliance to provide a variety of plans from which federal employees may elect their health insurance coverage. The Kobleurs chose the plan offered by the Alliance. Blue Cross was the underwriter for the health plan that the Alliance offered in 1989.

During that year, Mr. Kobleur received medical, psychiatric, and other services for the treatment of his Alzheimer's disease. The Kobleurs filed claims for benefits to cover the cost of these services, but Blue Cross denied or limited its obligation on several of the claims. Mrs. Kobleur's sister, Ann Horvath, who was handling the Kobleurs' financial affairs at the time, contacted a Blue Cross representative to inquire whether the Kobleurs could appeal Blue Cross' denials. The representative allegedly said no, and the Kobleurs did not seek an appeal.

Instead, on August 7, 1990, the Kobleurs began this suit by filing a "Class Action Complaint" against Blue Cross. The Kobleurs alleged that Blue Cross' denial of their claims was based on an unlawful scheme by Blue Cross to limit its liability under the health plan by classifying Alzheimer's and other "progressive dementia diseases" as "physical or biological disorders" when the patient is treated in a mental health facility, but as "mental disorders" when he is treated in a conventional hospital. The Kobleurs asserted that Blue Cross' classification of Alzheimer's as a mental disorder was arbitrary and capricious and thus constituted a breach of both the terms of the health plan and Blue Cross' fiduciary duties. ¹ The Kobleurs requested relief in the form of (1) an order certifying a class action with Mrs. Kobleur as the representative of the class; ² (2) a judgment that progressive dementia diseases are physical or biological disorders under the plans' terms; (3) a declaration that Blue Cross breached the plans' terms and its fiduciary duties; (4) a judgment clarifying the plaintiffs' rights under the plans; (5) an injunction against further breaches; and (6) an award of damages, interest, costs, and attorneys' fees.

On January 14, 1991, the Kobleurs filed a Motion for Class Certification in which they requested certification of nine different plaintiff classes. ³ Four days later, they

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sought to amend their original complaint to include all of the alleged improprieties represented by the nine classes. Blue Cross filed a Motion to Dismiss for failure to exhaust administrative remedies, and the district court granted this motion, dismissing the case without prejudice. The Kobleurs appeal this decision.

II. JURISDICTION

Blue Cross contends that this court does not have jurisdiction to hear this appeal because the district court has not entered a final order in this case. Blue Cross originally moved for dismissal of the case, but the district court converted the motion into a motion for summary judgment so that it could consider materials outside the pleadings. Finding that the Kobleurs had failed to exhaust their administrative remedies, the court then refused to enter summary judgment because "[t]he proper remedy for failure to exhaust administrative remedies is to dismiss without prejudice." The court thus dismissed the case without prejudice, but stated that it would retain jurisdiction pending the completion of the administrative process. It then ordered the case closed "for statistical purposes."

A district court's dismissal of a case without prejudice for failure to exhaust administrative remedies is a final order, giving an appellate court jurisdiction under 28 U.S.C. § 1291. See Pittsburg & Midway Coal Mining Co. v. Yazzie, 909 F.2d 1387, 1389 n. 1 (10th Cir.), cert. denied, --- U.S. ----, 111 S.Ct. 581, 112 L.Ed.2d 586 (1990); United States v. Orr Water Ditch Co., 914 F.2d 1302, 1306-07 (9th Cir.1990); Klein v. Heckler, 761 F.2d 1304, 1305 (9th Cir.1985); Penny v. Southwestern Bell Tel. Co., 906 F.2d 183 (5th Cir.1990); Hochman v. Board of Educ., 534 F.2d 1094, 1096 (3d Cir.1976); 15 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 3914 (1976).

Although the district court in this case stated that it was "retaining jurisdiction" while "closing the case for statistical purposes," the practical effect of the court's order is to deny the Kobleurs judicial relief until they have exhausted their administrative remedies, and thus this case is no different than those we have cited. We conclude that the court below entered a final order giving this court jurisdiction to hear the appeal under 28 U.S.C. § 1291.

III. THE EXHAUSTION REQUIREMENT

The Kobleurs argue that the district court should not have dismissed this suit because the FEHBA does not require them to exhaust administrative remedies. ⁴ We find no fault in the district court's well-reasoned decision, and we write to explain

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our affirmance because of the absence of precedent on this issue in this or any other federal circuit.

A. EXHAUSTION UNDER THE FEDERAL EMPLOYEES HEALTH BENEFITS ACT

By enacting the FEHBA, Congress sought to "establish[ ] a comprehensive program to provide federal employees and retirees with subsidized health care benefits." Hayes v. Prudential Ins. Co. of America, 819 F.2d 921, 922 (9th Cir.1987), cert. denied, 484 U.S. 1060, 108 S.Ct. 1014, 98 L.Ed.2d 980 (1988). The FEHBA gives OPM the authority to administer the program by contracting with qualified private carriers to offer a variety of health care plans, 5 U.S.C. § 8902, by distributing information on the available plans to eligible employees, id. § 8907, by promulgating necessary regulations, id. § 8913, and by interpreting the plans to determine the carrier's liability in an individual case, id. § 8902(j). Under section 8902(j), any carrier that provides coverage pursuant to a contract with OPM must agree to be bound by OPM's interpretation of the carrier's plan. See Hayes, 819 F.2d at 924.

The doctrine of exhaustion of administrative remedies provides that "no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted." Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51, 58 S.Ct. 459, 463, 82 L.Ed. 638 (1938). Although the FEHBA does not expressly prescribe an administrative remedy, agency regulations promulgated under the authority of the statute may create an exhaustion requirement despite the absence of such a requirement within the text of the statute. Coit Indep. Joint Venture v. Federal Sav. & Loan Ins. Corp., 489 U.S. 561, 109 S.Ct. 1361, 1374, 103 L.Ed.2d 602 (1989). ⁵ Pursuant to its authority under section 8913, OPM has promulgated regulations that set forth a procedure for OPM review of a carrier's denial of a claim:

Each health benefits plan adjudicates claims filed under the plan. An enrollee must initially submit all claims to the health benefits plan in which he or she is enrolled. If the plan denies a claim, the enrollee may ask the plan to reconsider the denial. If the plan affirms its denial or fails to respond as required ..., the enrollee may ask OPM to review the claim.

5 C.F.R. § 890.105(a). Section 890.107 of these regulations, entitled "Legal actions," provides in part:

An action to recover on a claim for health benefits should be brought against the carrier of the health benefits plan.... [A]n enrollee's dispute of an OPM decision solely because it concurs in a health plan carrier's denial of a claim is not a challenge to the legality of OPM's decision. Therefore, any subsequent litigation to recover on the claim should be brought against the carrier, not against OPM.

The determination of whether these regulations actually create an exhaustion requirement is...