Mass. Laborers' Health & Welfare Fund v. Blue Cross Blue Shield of Mass.
| Decision Date | 30 March 2022 |
| Docket Number | Civil Action 21-10523-FDS |
| Parties | MASSACHUSETTS LABORERS' HEALTH AND WELFARE FUND and TRUSTEES OF THE MASSACHUSETTS LABORERS' HEALTH AND WELFARE FUND, as fiduciaries, Plaintiffs, v. BLUE CROSS BLUE SHIELD OF MASSACHUSETTS, Defendant. |
| Court | U.S. District Court — District of Massachusetts |
F Dennis Saylor IV, United States District Court Chief Judge
This is a case arising out of the administration of a union health-benefit plan. Plaintiff Massachusetts Laborers' Health and Welfare Fund (the “Fund”) operates a self-funded multi-employer health-benefit plan (the “Plan”) for its members. The Plan is governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq.
The Trustees of the Plan hired defendant Blue Cross and Blue Shield of Massachusetts to be a third-party administrator for the Plan. The Fund has brought suit against Blue Cross alleging breaches of fiduciary duties under ERISA and violations of state law. According to the Fund, Blue Cross violated its fiduciary duties and the terms of the plan by failing to process claims correctly, overpaying benefits neglecting to recoup overpayments properly, and refusing to provide the information needed by the Fund to verify that claims were priced appropriately.
Blue Cross has moved to dismiss the complaint for failure to state a claim. The central question, for present purposes, is whether Blue Cross is a fiduciary of the Plan. Blue Cross contends that as a third-party administrator, its obligations to the Fund are solely contractual in nature, not fiduciary, and that accordingly this dispute is not governed by ERISA. Blue Cross further asserts that the Court should decline to exercise its supplemental jurisdiction over the remaining state-law claims.
For the reasons set forth below, the motion to dismiss will be granted.
The facts are set forth as alleged in the complaint unless otherwise noted.
The Massachusetts Laborers' Health and Welfare Fund provides a self-funded multi-employer health-benefit plan to members of the Laborers' Local Union in Massachusetts and parts of northern New England. (Am. Compl. ¶ 7). The Plan is governed by ERISA and is superintended by the Trustees of the Fund, who are fiduciaries of the Plan. (Id. ¶¶ 8, 10).
Blue Cross Blue Shield of Massachusetts is a licensed health-insurance company headquartered in Boston, Massachusetts. (Id. ¶ 11). Among other things, Blue Cross is a preferred-provider organization (“PPO”), meaning that it has established a network of healthcare providers with which it has negotiated rates for services. (Id. ¶ 18). Presumably because of the size and volume of its business, Blue Cross has generally been able to negotiate favorable rates with those providers. (See id.). The establishment and maintenance of that PPO, and the negotiation of those rates, has occurred independently of any relationship between Blue Cross and the Fund.
In 2006, the Fund hired Blue Cross to provide administrative services to the Plan. (Id. ¶¶ 28, 30). The agreement between the Fund and Blue Cross is governed by an Administrative Services Account Agreement (“ASA”), which has been renewed annually since its original execution in May 2006. (Id. ¶ 30).
The ASA governs how Blue Cross processes claims, recoups or settles erroneously paid benefits, provides Fund members access to its network of providers and negotiated rates, and assesses fees charged to the Fund. (ASA at 1, ECF No. 16-2).[1]
a. Administrative Services Account Agreement
The ASA provides that Blue Cross is obligated to perform “certain administrative services in connection with the Fund's self-insured group health plan.” (Id. at 1). The ASA outlines its duties and responsibilities as follows:
Blue Cross and Blue Shield has been designated by the fund to provide certain administrative services for its group health plan, including arranging for a network of health care providers whose services are covered by the group health plan, providing services to network providers, claims processing, individual case management, medical necessity review, utilization review, quality assurance programs and disease monitoring and management services.
(Id. at 6).
In addition, the ASA describes the roles of the parties under ERISA:
The Trustees are the “administrator” and “named fiduciary” of the Fund as that term is defined in Section 3(16)(A) and 402(a), respectively, of ERISA. Blue Cross and Blue Shield is engaged as an independent contractor to perform the specific duties and responsibilities which the Trustees delegate to it. It is understood and agreed that Blue Cross and Blue Shield exercises its duties within the framework of the Plan of Benefits established by the Trustees. Blue Cross and Blue Shield and the Trustees of the Fund accept that the definitions of a fiduciary are contained in ERISA Section 3(21)(A).
(Id. at 1).
In exchange for the services of Blue Cross, the Fund pays an administrative fee. (Id. at 16). In addition, “[b]ecause [Blue Cross] will pay providers of services before being able to bill the Fund, ” the Fund pays a “working capital amount” to Blue Cross “for estimated Claim Payments.” (Id.). The working capital amount is based on Blue Cross's “estimate of the amount needed to pay claims on a current basis, subject to review and approval by the Fund.” (Id.). From that amount, Blue Cross pays claims to hospitals, physicians, and other health-care providers.
Although both the administrative fee and working capital amount are determined monthly, the Fund pays those charges in weekly installments “in the pre-determined amounts approved by both parties.” (Id. at 16-17). At the end of each month, Blue Cross performs a “settlement calculation” where it calculates the actual administrative fees incurred that month and the total amount paid in claims. (Id. at 17). If, at the end of the month, the actual administrative charges and claim totals exceed the Fund's payment for that month, the Fund pays Blue Cross the difference in the next weekly payment. (Id.). If the Fund has overpaid, Blue Cross credits the difference to the Fund's next payment. (Id.).
Blue Cross sends the Fund various statements of paid claims and administrative charges on a monthly basis, as well as periodic reports of adjustments and interest payments (incurred if the Fund is untimely with its return of claim approvals) and a monthly settlement summary invoice. (Id.).
In the event the Fund disputes a monthly charge, it must notify Blue Cross of the disputed amount. (Id.). The Fund is still obligated, however, to pay the amount Blue Cross charges. (Id.). If Blue Cross confirms that the disputed amount was not the Fund's responsibility, then Blue Cross credits that amount to the Fund's next payment. (Id. at 17-18).
The ASA specifically acknowledges that Blue Cross maintains a network of preferred providers through its own contractual arrangements. (Id. at 6). Blue Cross is required by the ASA to make that network-and by extension, the favorable rates that it has negotiated with providers-available to Plan participants:
Blue Cross and Blue Shield will make its PPO network of preferred health care providers available to Participants in the Plan as provided in this Agreement. The Fund will have no responsibility for maintaining or administering the network on behalf of Participants . . . Blue Cross and Blue Shield will use commercially reasonable efforts to maintain the network as a competitive and cost effective network of providers.
(Id. at 7).
The ASA expressly permits Blue Cross to exercise discretion when negotiating rates with health-care providers for services:
Blue Cross and Blue Shield may negotiate different claim payment rates and arrangements with its providers and/or vendors . . . These claim payment rates and arrangements may vary based upon the type of health benefit plan, account-specific enrollment . . . and/ or product funding arrangement . . . from rates that may be otherwise assessed by providers and/or vendors and may reflect various negotiated discounts and factors (including but not limited to initial markdowns, rebates, volume, and other pricing concessions which may be based on all or a subset of Blue Cross and Blue Shield's book of business).
(Id.). According to the ASA, the Fund agrees that those negotiated rates determine the claim-payment rates paid by the Fund: “The Fund acknowledges and agrees that it is entitled only to those claim payment rates and provider/vendor arrangements that Blue Cross and Blue Shield offers to self-insured plans and that it approves the use of such rates and arrangements applied on behalf of its self-insured health benefit plans.” (Id.).
Blue Cross is responsible for processing claims on behalf of the Fund. (Id. at 4-5). When a beneficiary submits a claim, Blue Cross reprices the claim according to its provider arrangements. (Id. at 5). It then transmits the claim to the Fund to determine “member eligibility, the availability of benefits and claims adjudication.” (Id. at 4). After the Fund makes its determination, it transmits the adjudicated claim information back to Blue Cross for payment and reporting. (Id. at 5).
Blue Cross evaluates a claim by conducting “a medical necessity and utilization review of inpatient urgent nonurgent, and concurrent care claims using the Blue Cross and Blue Shield medical policy, medical technology assessment guidelines and utilization review policies and procedures as set forth in...
To continue reading
Request your trial