Lone Star Ob/Gyn Associates v. Aetna Health Inc.

Decision Date18 August 2009
Docket NumberNo. 08-50646.,08-50646.
Citation579 F.3d 525
PartiesLONE STAR OB/GYN ASSOCIATES, Plaintiff-Appellee, v. AETNA HEALTH INC., Defendant-Appellant.
CourtU.S. Court of Appeals — Fifth Circuit

Martin Jonathan Siegel (argued), Law Offices of Martin J. Siegel, Houston, TX, Stephen W. Boyd, Boyd & Holland PLC, San Antonio, TX, for Plaintiff-Appellee.

John Bruce Shely (argued), Cameron P. Pope and Dimitri Zgourides, Andrews Kurth, L.L.P., Houston, TX, for Defendant-Appellant.

Appeal from the United States District Court for the Western District of Texas.

Before HIGGINBOTHAM, GARZA and PRADO, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

Lone Star OB/GYN Associates ("Lone Star") brought this action in Texas state court under Texas law, alleging that health insurance provider Aetna Health Inc. ("Aetna") failed to pay the proper amount for services provided to patients treated by Lone Star. Aetna removed the case to federal court, arguing that Lone Star's state law claims were completely preempted by the Employee Retirement Income Security Act (ERISA). Lone Star successfully moved in district court to amend its complaint and remand the case back to state court. For the following reasons, we vacate and remand.


Lone Star is a health care provider that entered into a contract (hereinafter "Provider Agreement") with Aetna Health, an administrator of "employee welfare benefit plans" regulated by ERISA. See 29 U.S.C. § 1002(1). Among the benefit plans administered by Aetna are health insurance plans for The Boeing Company ("Boeing Plan"), Hyatt Corporation ("Hyatt Plan") and UPS ("UPS Plan"). By entering into the Provider Agreement with Aetna, Lone Star became a "Participating Provider" for individuals enrolled in Aetna-administered insurance plans ("Plan Members"), entitling Lone Star to inclusion in physician directories that Aetna sends to its members.

Lone Star sued Aetna in Texas court under the Texas Prompt Pay Act ("TPPA"). Lone Star alleged that Aetna had not paid Lone Star's payment claims1 at the rates set out in the Provider Agreement and within the time period required by the TPPA. Attached to Lone Star's complaint was a list of disputed payment claims.

Aetna removed the case to federal court on the basis that Lone Star's state law claims were completely preempted by ERISA. In district court, Lone Star filed a motion to remand to state court. Aetna pointed to payment claims that it argued were preempted by ERISA because coverage was denied. Lone Star sought leave to amend its pleadings so as to remove certain claims. The new list of payment claims redacted those payment claims for which Aetna submitted no payment because coverage was denied. All payment claims that Aetna had partially paid remained. The district court granted Lone Star's motions for leave to amend and remanded the amended claims. Aetna timely appealed.2


The party seeking removal bears the burden of showing that federal jurisdiction is proper. Carpenter v. Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 365 (5th Cir.1995). Once the case is removed, a plaintiff's voluntary amendment to a complaint will not necessarily defeat federal jurisdiction; it is within the district court's discretion whether to remand the action to state court. Henry v. Indep. Am. Sav. Ass'n, 857 F.2d 995, 998 (5th Cir.1988). However, the district court may not remand if the defendant demonstrates the presence of a "substantial federal claim, e.g., one completely preempted by ERISA[.]" Giles v. NYLCare Health Plans, Inc., 172 F.3d 332, 337 (5th Cir. 1999). We review the question of whether a claim is preempted under ERISA de novo. Ellis v. Liberty Life Assur. Co. of Boston, 394 F.3d 262, 269 (2004).


In enacting ERISA, Congress created a comprehensive civil-enforcement scheme for employee welfare benefit plans that completely preempts any state-law cause of action that "duplicates, supplements, or supplants" an ERISA remedy. Aetna Health Inc. v. Davila, 542 U.S. 200, 209, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004). Complete preemption converts a state law civil complaint alleging a cause of action that falls within ERISA's enforcement provisions into "`one stating a federal claim for purposes of the well-pleaded complaint rule.'" Id. (quoting Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 65-66, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987)). In other words, even if the plaintiff did not plead a federal cause of action on the face of the complaint, the claim is "`necessarily federal in character'" if it implicates ERISA's civil enforcement scheme. Giles, 172 F.3d at 336-37 (quoting Taylor, 481 U.S. at 64-65, 107 S.Ct. 1542).

ERISA's civil enforcement scheme is laid out in § 502(a) of the ERISA statute. Section 502(a)(1)(B) establishes that a civil action may be brought by a participant or beneficiary: "[T]o recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan[.]" 29 U.S.C. § 1132(a)(1)(B). Therefore, if a party's state law claims fall under this § 502(a)(1)(B) definition, they are preempted by ERISA.

Aetna argues that Lone Star's state law claims seek to recover benefits due to Lone Star under the terms of their patients' Member Plans and are thus preempted by ERISA. Lone Star, however, argues that their state law claims arise solely from the Provider Agreement, as Aetna failed to pay the correct contractual rate for services rendered to patients who were Members of Aetna Plans.3 There are thus two issues we must resolve: (1) whether state law claims that arise out of a contract between medical providers and an ERISA plan are preempted by ERISA; and (2) whether Lone Star's state law claims in fact implicate only rate of payment issues under the Provider Agreement, or if they actually involve benefit determinations under the relevant plan.


In order to determine whether Lone Star's claims fall within the scope of § 502(a), we must look at the relationship between the Provider Agreement and the ERISA plans. In Davila, the Supreme Court held that:

[I]f an individual, at some point in time, could have brought his claim under ERISA § 502(a)(1)(B), and where there is no other independent legal duty that is implicated by a defendant's actions, then the individual's cause of action is completely pre-empted by ERISA § 502(a)(1)(B).

Davila, 542 U.S. at 210, 124 S.Ct. 2488 (emphasis added). The ERISA preemption question thus turns on whether the Provider Agreement creates a legal duty "independent" of the ERISA plan—in this case, a duty to pay a specific contractual rate for services rendered under the ERISA plan.

It is clear that the Provider Agreement and the ERISA plans cross-reference each other.4 The Provider Agreement establishes that Aetna will pay Lone Star and Lone Star physicians' claims for "Covered Services," where "Covered Services" are those services recognized as "medically necessary" under the terms of the relevant ERISA plan. The ERISA plans state that Aetna will pay "Recognized Charges," and, under the definition of "Recognized Charges," state that where Aetna has an agreement with a health care provider, the "Recognized Charge" is the rate established in that agreement. The Provider Agreement also establishes the rates of payment receivable from Aetna for treating Plan Members. Under the Provider Agreement, Lone Star is to be paid the lesser of: (i) its usual, customary, and reasonable billed charges; (ii) the rates set forth in the Compensation Schedule; or (iii) the fee schedule in the Member's Plan.

However, determination of the rate that Aetna owes Lone Star under the Provider Agreement does not require any kind of benefit determination under the ERISA plan. The fee schedules in the Member Plans in this case all refer back to the Provider Agreement. The Provider Agreement sets out the Compensation Schedule, which establishes the rate of payment as a fixed percentage of the "Aetna Market Fee Schedule," a standard schedule used by Aetna that is updated annually and based on the location where the service is performed. The Aetna Market Fee Schedule relies on codes used by doctors known as "CPT Codes," which identify the medical procedure performed by the doctor. Each CPT Code has a different rate of reimbursement under the Aetna Market Fee Schedule. Thus, in calculating what it owes Lone Star, Aetna determines the reimbursement rate under the Aetna Market Fee Schedule for each CPT Code submitted by the doctor, and pays Lone Star the fixed percentage (set out in the Provider Agreement) of that amount.

Lone Star concedes that in calculating the correct contractual rate, the amounts of the Plan Member's Copayment/Coinsurance/Deductible will have to be accounted for, and those amounts are set out in the ERISA plan, not the Provider Agreement. However, Lone Star argues that mere consultation of an ERISA plan is not enough to bring the claims within the scope of § 502(a).

We agree. A claim that implicates the rate of payment as set out in the Provider Agreement, rather than the right to payment under the terms of the benefit plan, does not run afoul of Davila and is not preempted by ERISA. See Blue Cross v. Anesthesia Care Assocs. Med. Group, Inc., 187 F.3d 1045, 1051 (9th Cir. 1999). Though the plan and the Provider Agreement cross-reference each other, the terms of the plan—in particular, those related to coverage—are not at issue in a dispute over whether Aetna paid the correct rate for covered services as set out in the Provider Agreement. While Aetna is correct that any determination of benefits under the terms of a plan—i.e., what is "medically necessary" or a "Covered Service"— does fall within ERISA, Lone Star's claims are entirely separate from coverage and arise out of the independent legal duty contained in the contract and the TPPA.

In so holding, we adopt the reasoning of the Third and Ninth Circuits, and that of a...

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