Loren v. Blue Cross & Blue Shield of Mich.

• Citation: 505 F.3d 598
• Decision Date: 20 September 2007
• Docket Number: No. 06-2090.,06-2090.
• Parties: Eugene LOREN; Danielle Hagemann, Plaintiffs-Appellants, v. BLUE CROSS & BLUE SHIELD OF MICHIGAN, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

505 F.3d 598

Eugene LOREN; Danielle Hagemann, Plaintiffs-Appellants, v. BLUE CROSS & BLUE SHIELD OF MICHIGAN, Defendant-Appellee.

No. 06-2090.

United States Court of Appeals, Sixth Circuit.

Argued: July 24, 2007.

Decided and Filed September 20, 2007.

Rehearing Denied October 10, 2007.

ARGUED: Stephen F. Wasinger, Stephen F. Wasinger PLC, Royal Oak, Michigan, for Appellants. Catherine E. Stetson, Hogan & Hartson, Washington, D.C., for Appellee. ON BRIEF: Stephen F. Wasinger, Stephen F. Wasinger PLC, Royal Oak, Michigan, John H. Eggertsen, Eggertsen & Associates, Pittsfield Township, Michigan, for Appellants. Catherine E. Stetson, Evan Miller, Hogan & Hartson, Washington, D.C., Robert P. Hurlbert, Dickinson Wright, Bloomfield Hills, Michigan, K. Scott Hamilton, Dickinson Wright, Detroit, Michigan, for Appellee.

Before: COLE and GILMAN, Circuit Judges; MARBLEY, District Judge.^*

OPINION

ALGENON L. MARBLEY, District Judge.

Plaintiff-Appellants Eugene Loren ("Loren") and Danielle Hagemann ("Hagemann") (collectively, "Plaintiffs") appeal the district court's order granting Defendant Blue Cross Blue Shield of Michigan's ("BCBSM") Motion to Dismiss Plaintiffs' claims brought pursuant to Sections 502(a)(2) and 502(a)(3) of the Employee Retirement Income Security Act ("ERISA"), codified in 29 U.S.C. §§ 1132(a)(2) and 1132(a)(3), respectively.¹ Plaintiffs allege that BCBSM violated its fiduciary duties under ERISA, and they seek to represent a class of all participants and beneficiaries of ERISA self-funded plans for which BCBSM administers claims and/or handles plan assets. In granting BCBSM's Motion to Dismiss, the district court concluded that, although Loren had statutory standing when the complaint was filed, his claims were rendered moot after he withdrew from the coverage administered by BCBSM and, therefore, now lacks an interest in the remedies available to a participant under §§ 1132(a)(2) and 1132(a)(3). In addition, the district court concluded that, even before filing the suit, Hagemann was covered as a beneficiary under a health care option for which BCBSM does not administer claims, and, therefore, she lacks statutory standing to bring claims against BCBSM. Accordingly, the district court dismissed Plaintiffs' complaint for lack of subject matter jurisdiction. Plaintiffs appeal, asserting that they both have statutory and constitutional standing to assert their claims against BCBSM. For the reasons set forth below, we AFFIRM in part, REVERSE in part, and REMAND the case to the district court for further proceedings.

I. BACKGROUND

BCBSM is a health care corporation, organized under the State of Michigan, that administers and processes claims for various ERISA welfare benefit plans, including self-insured (or "self-funded") health benefit plans sponsored and maintained by Ford Motor Company ("Ford") and American Axle & Manufacturing ("Axle"). In a self-insured plan, the employer elects to pay the health care costs of its covered employees using its own funds, rather than paying premiums to an insurer in exchange for the insurer's assumption of the risk to pay the cost of employer-promised health care. Basically Ford and Axel act as their own insurance companies with respect to their self-funded benefit plans, accepting the financial risk of coverage and obligation to pay claims using its own funds. Insurance companies such as BCBSM often act as third-party administrators to carry out the daily operations of employers' self-funded plans, since insurance companies already have operations in place to process claims, collect employee premiums, and manage enrollment. In practice, health care providers bill the administrator for the health care services, and the administrator then collects the full payment from the employer, along with a processing fee. BCBSM negotiates rates for hospital services throughout the state, and these rates are reflected in the reimbursement rates and services fees that BCBSM collects from self-insured clients such as Ford and Axle after BCBSM administers their claims.

BCBSM is also the parent company of Blue Care Network ("BCN"), a state-licenced health maintenance organization ("HMO"), which issues its own insurance policies to groups and individuals. BCBSM negotiates hospital reimbursement rates on BCN's behalf, and these rates are factored into the premiums BCN charges to its customer base. Thus, BCBSM has negotiated agreements with various Michigan hospitals with respect to the rates BCN will reimburse the hospitals for the medical services provided to BCN participants and beneficiaries and the rates that BCBSM will reimburse the hospitals for the medical services provided to participants and beneficiaries in self-insured plans administered by BCBSM, such as those offered by Ford and Axel.

Plaintiffs claim that in its agreements with Michigan hospitals, BCBSM negotiated rates more favorable to BCN than to the Ford and Axle self-insured plans that it administers. Specifically, Plaintiffs claim that BCBSM struck a deal with hospitals whereby the hospitals agreed to accept lower reimbursement payments from BCN in exchange for BCBSM's promise to pay those hospitals increased amounts for the services provided under the self-insured plans that BCBSM administered, which include the Ford and Axle plans.

Ford and Axle sponsor several different ERISA-regulated health benefit coverage alternatives for their employees and retirees, including options administered by BCBSM. Loren is a participant in, and Hagemann a beneficiary of, self-funded heath care plan options sponsored by Ford and Axle, respectively. Significantly, however, Plaintiffs are not covered under the BCBSM-administered coverage options offered by their employers. Loren was covered by the Axle self-funded option administered by BCBSM at the time of the filing, but as of January 1, 2006, Loren no longer receives coverage from the option serviced by BCBSM. Loren, instead, switched to Medicare benefits through another carrier that does not contract with BCBSM for its claims administration. Hagemann has not been a beneficiary of Ford's BCBSM-administered coverage option since March 1, 2000, at which time Hagemann's spouse elected coverage for her under CareChoices, a fully insured HMO offered by Ford as an alternative benefit plan option. Plaintiffs claim that all of the coverage alternatives sponsored by their employers—both the BCBSM-administered and non-BCBSM-administered coverage options—constitute one ERISA plan. Specifically, Loren asserts that the coverage that he currently receives is part of the same ERISA plan as the BCBSM-administered option because Axle reports both coverage options under the same ERISA identification number. Similarly, Hagemann asserts that the coverage options offered through CareChoices and BCBSM are part of the same ERISA plan because Ford reports both options under the same ERISA identification number. Conversely, BCBSM asserts that each coverage option offered by Axle and Ford is a separate and distinct ERISA health care plan. As such, BCBSM argues that Plaintiffs have no standing to bring claims against BCBSM because they are not participants in, or beneficiaries of, an ERISA plan connected to BCBSM.

Plaintiffs allege that BCBSM violated its fiduciary duties under ERISA when it negotiated different rates for BCN and the Ford and Axle self-insured plans. Plaintiffs assert that BCBSM inappropriately increased charges to the self-insured option in which they participated. Plaintiffs claim that even though they were not covered by the BCBSM-administered options, because their employers operate under single ERISA plans, the alleged increases caused by BCBSM's breach affected the plans as a whole, and Plaintiffs, therefore, had to pay excessive contributions, deductibles, and/or co-payments.

Plaintiffs sought to bring their claims as a class action, individually and on behalf of a class of all ERISA self-insured plans for which BCBSM administers claims, and the respective participants in and beneficiaries of those self-insured plans. Pursuant to 29 U.S.C. §§ 1132(a)(2) and 1132(a)(3), Plaintiffs filed an amended class action complaint ("Complaint") on March 2, 2006, asserting violations of the fiduciary duties as described in 29 U.S.C. § 1109. Specifically, Plaintiffs seek declaratory, injunctive and other equitable relief, including: (a) a declaration that BCBSM is a fiduciary under ERISA and breached its fiduciary duties when it obtained more favorable terms for BCN than for the self-funded ERISA plans; (b) an order enjoining BCBSM from entering into or enforcing contracts with hospitals that grant more favorable terms to BCN than to the self-funded ERISA plans; (c) an order for BCBSM to reimburse the self-funded ERISA plans for all excess charges it has imposed on such plans and to reimburse Plaintiffs for all excess contributions they have been required to pay as a result of BCBSM's illegal conduct; (d) an order for BCBSM to account to the self-funded ERISA plans for all plan assets retained by BCBSM for its own benefit and all profits earned through its breach of fiduciary duty; (e) an order for BCBSM to account for all sums due to the self-funded ERISA plans and to place such sums in a constructive trust for distribution to the self-funded ERISA plans; (f) an order to enjoin BCBSM from any further violation of their ERISA fiduciary obligations; and (g) an award of expenses, including costs, attorneys' and experts' fees. BCBSM moved to dismiss Plaintiffs' complaint for, among other reasons, lack of subject matter jurisdiction.

The district court granted BCBSM's motion. With respect to Loren, the court found that although he was covered under Axle's BCBSM-administered option at the time of the filing, because he later switched to a non-BCBSM-administered option, his claims were moot. In essence, the court concluded without analysis, that the BCBSM-administered coverage and the...