Mahajan v. Blue Cross Blue Shield Ass'n
| Decision Date | 22 September 2017 |
| Docket Number | 16-cv-6944 (PKC) |
| Parties | JACQUELINE WYKA MAHAJAN, individually and on behalf of all others similarly situated, Plaintiff, v. BLUE CROSS BLUE SHIELD ASSOCIATION, Defendant. |
| Court | U.S. District Court — Southern District of New York |
Invoking the Court's diversity jurisdiction, Jacqueline Mahajan brings this action on behalf of herself and all others similarly situated asserting state law claims for deceptive advertising, fraud, and negligent misrepresentation. Specifically, plaintiff alleges that defendant Blue Cross Blue Shield Association misrepresented the scope of its preferred provider network and the availability of in-network certified lactation consultants inducing her to enroll in defendant's health benefits plan and suffer damages.
Defendant moves to dismiss the amended complaint (Dkt. 23) under Rules 12(b)(1) and 12(b)(6), Fed. R. Civ. P. (Dkt. 31.) Because the Court concludes that plaintiff's claims are preempted by the Federal Employees Health Benefits Act, 5 U.S.C. § 8901 et seq. ("FEHBA"), both expressly and under the doctrine of conflict preemption, the motion to dismiss will be granted.
FEHBA directs the United States Office of Personnel Management ("OPM") to establish and regulate health benefits plans for the federal workforce. See 5 U.S.C. §§ 8902(a), 8913(a). Pursuant to its authority under FEHBA, OPM contracted with defendant Blue Cross Blue Shield Association to create a Service Benefit Plan for federal employees. FEHBA provides that any contract under the statute "shall contain a detailed statement of benefits offered and shall include such maximums, limitations, exclusions, and other definitions of benefits as [OPM] considers necessary or desirable." 5 U.S.C. § 8902(d). FEHBA also directs that each plan participant receive a statement of benefits, sometimes referred to as a plan brochure, containing an official description of the plan's terms. See 5 U.S.C. § 8907(b). That brochure is specifically authorized for distribution by OPM.
OPM has broad authority to "promulgate regulations to enforce the statutory scheme" and police the conduct of FEHBA insurance carriers. Botsford v. Blue Cross & Blue Shield of Montana, Inc., 314 F.3d 390, 395 (9th Cir. 2002), opinion amended on denial of reh'g, 319 F.3d 1078 (9th Cir. 2003); 5 U.S.C. §§ 8901-8913. For example, OPM regulations authorize it to ensure that carrier's marketing and informational materials are truthful and not misleading and to punish any carrier who fails to comply with OPM advertising guidelines. See 48 C.F.R. § 1652.203-70 ().
As the Supreme Court observed, "FEHBA concerns benefits from a federal health insurance plan for federal employees that arise from a federal law in an area with a long history of federal involvement." Coventry Health Care of Missouri, Inc. v. Nevils, 137 S.Ct. 1190, 1197 (2017) ("Coventry") (citations and quotation marks omitted). Given FEHBA's statutory contextand purpose, the Court has recognized that "[s]trong and 'distinctly federal interests are involved' . . . in uniform administration of the program, free from state interference, particularly in regard to coverage, benefits, and payments." Id. (quoting Empire HealthChoice Assur., Inc. v. McVeigh, 547 U.S. 677, 696 (2006) ("McVeigh II")).
The following factual allegations are taken from the amended complaint and the exhibits attached thereto and are accepted as true for purposes of defendant's motion.1 See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). All reasonable inferences are drawn in favor of the plaintiff as the non-movant. See In re Elevator Antitrust Litig., 502 F.3d 47, 50 (2d Cir. 2007).
Beginning in 2009, plaintiff and her family were enrolled in the defendant's Service Benefit Plan (the "Plan"). (Compl. ¶ 6.) According to the amended complaint, the Plan is a "fee-for-service plan that offers services through a Preferred Provider Organization ('PPO')" also referred to as a "preferred provider network." (Id. ¶¶ 8, 36.)
The Plan offers two insurance options, the Basic Option and the Standard Option. (Id. ¶ 9.) Under both options, participants pay less for services when they use health care providers who are members of defendant's PPO, also referred to as "preferred providers." (Id. ¶¶ 8-10.) Under the Basic Option, plan participants must visit a preferred provider in order to receive benefits under the Plan. (Id. ¶ 9.) The cost of any care provided by a non-preferredprovider must be paid entirely by the plan participant. (Id.) Under the Standard Option, plan participants may visit both preferred providers and non-preferred providers but they pay less for care when they visit a preferred provider. (Id. ¶ 10.)
Lactation consultants are defined in the complaint as "health care professionals who specialize in the clinical management of breastfeeding" and provide breastfeeding training, counseling and support during pregnancy and after birth. (Id. ¶¶ 14-25.) The amended complaint alleges that "[a]s of November 2012, there were approximately 13,292 certified lactation consultants in the United States." (Id. ¶ 26.)
Plaintiff claims that under section 2713 of the Public Health Service Act, 42 U.S.C. § 300gg-13, the defendant was required to provide plan participants with coverage for certain preventative services and screenings, including lactation support during pregnancy and following birth.2 (Compl. ¶¶ 11-12.) In addition, plaintiff claims that under the statute defendant was prohibited from imposing any cost sharing mechanism for these services, such as a copayment, coinsurance or deductible, as long as the service was provided by a preferred provider. (Id. ¶ 13.)
Defendant disputes plaintiff's interpretation of its obligations under the statute. It contends that "the [statute's] prohibition against imposing cost-sharing applies regardless of whether the insured uses an in-network or out-of-network provider." (Def.'s Mem. at 8.) According to defendant, section 2713 does not require the Plan to offer these preventative services through in-network providers. (Id.) Rather, if the defendant does not have an in-network provider who can provide these services, section 2713 requires a health benefit plan, inthis case defendant's plans (both the Basic Option and the Standard Option), to cover the services provided by an out-of-network provider, without imposing cost-sharing on the insured. (Id. (citing 29 C.F.R. § 2590.715-2713(a)(3)(ii).) The precise requirements of section 2713 are ultimately immaterial to the Court's analysis.
Plaintiff alleges that due to the requirements of the ACA, as of January 1, 2011 certified lactation consultants were included for the first time as "covered professional providers" under the Plan.3 (Compl. ¶ 29). In addition, plaintiff claims that OPM required defendant to provide insurance benefits for "[b]reastfeeding education and individual coaching on breastfeeding by a physician, physician assistant, nurse midwife, nurse practitioner/clinical specialist, or registered nurse certified lactation consultant." (Id. ¶ 30.) The Plan Brochure also informed participants that "this Plan must provide preventative services and screenings to you without any cost sharing when the services are performed by a Preferred provider." (Id. ¶ 31 (citing 2011 Plan Brochure at 7).)
The amended complaint alleges that beginning in 2010, defendant engaged in a scheme to "circumvent the mandate of the ACA and its obligations under the Service Benefit Plan by excluding lactation consultants from its preferred and participating provider network." (Id. ¶ 32.) Specifically, plaintiff alleges that at all relevant times, defendant's preferred provider network did not include any certified lactation consultants anywhere in the United States, or alternatively, none in the New York/New Jersey region where plaintiff lived. (Id. ¶¶ 2, 33-34.) As part of its scheme, plaintiff alleges that defendant made "materially misleading and deceptivestatements in Plan documents and otherwise to conceal its misconduct and increase Plan subscriptions, renewals, and the profits it realized therefrom." (Id. ¶ 35.)
The amended complaint alleges that defendant "misled insureds and prospective insureds concerning its preferred/participating provider network and the actual cost to insureds for breastfeeding education and support." (Id. ¶ 46.) For example, plaintiff claims that defendant represented that the costs of receiving lactation support would be either entirely covered by the Plan or reduced if they used a preferred provider. (See, e.g., id. ¶¶ 39, 41-43.) Plaintiff claims that these statements were misleading because it was impossible for plan participants to take advantage of these cost savings due to the fact that defendant's preferred provider network did not include any certified lactation consultants. (See, e.g., id. ¶ 43.)
Plaintiff also claims that defendant repeatedly misrepresented the scope of its preferred provider network. For example, plaintiff cites the following allegedly deceptive statements:
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