Obstetricians-Gynecologists, P.C. v. Blue Cross and Blue Shield of Nebraska

Decision Date08 February 1985
Docket NumberNo. 83-646,OBSTETRICIANS-GYNECOLOGIST,P,83-646
Citation219 Neb. 199,361 N.W.2d 550
PartiesC., a Nebraska Professional Corporation, Individually and On Behalf Of Similarly Situated Nebraska Physicians, Appellant, v. BLUE CROSS AND BLUE SHIELD OF NEBRASKA, a Nonprofit Hospital Service Corporation, Appellee.
CourtNebraska Supreme Court

Syllabus by the Court

Insurance: Public Policy. Provisions in Blue Cross and Blue Shield of Nebraska medical insurance policies forbidding assignment of benefits are not void or unenforceable as a matter of public policy in Nebraska.

Edward D. Hotz of Hotz, Kizer & Jahn, P.C., Omaha, for appellant.

John E. North and John F. Thomas of McGrath, North, O'Malley & Kratz, P.C., Omaha, for appellee.

KRIVOSHA, C.J., and BOSLAUGH, WHITE, HASTINGS, SHANAHAN, and GRANT, JJ.

GRANT, Justice.

This is an appeal by the plaintiff, Obstetricians-Gynecologists, P.C., a Nebraska professional corporation (hereinafter OB-GYN), from the district court's denial of OB-GYN's petition for a declaratory judgment and the court's denial of certification of the "class" of physicians which OB-GYN sought to represent in this action.

The action was brought by OB-GYN under the Uniform Declaratory Judgments Act, Neb.Rev.Stat. §§ 25-21, 149 et seq. (Reissue 1979), seeking to determine the validity of a nonassignment provision in health care contracts issued by defendant-appellee, Blue Cross and Blue Shield of Nebraska, a nonprofit hospital service corporation (hereinafter Blue Shield).

After trial the court denied the relief sought by OB-GYN. OB-GYN appeals, alleging three assignments of error. The first two assignments may be combined in that they allege generally that the trial court erred in not holding Blue Shield's nonassignment provisions void as a matter of public policy. The third assignment of error alleged by OB-GYN is that the trial court erred "in finding that the plaintiff did not meet the requirements of a class action." For the reasons hereinafter set out we affirm the action of the trial court.

OB-GYN is a corporation of physicians providing health care services to patients. Blue Shield is in the business of writing health care insurance, including insurance for prepaid medical, surgical, hospital, nursing home, dental, and similar services. Its existence is authorized under the hospital service corporations statutes, Neb.Rev.Stat. §§ 21-1509 et seq. (Reissue 1983).

Blue Shield provides health care insurance to its members, who are known as "subscribers," and to certain members of subscribers' families if agreed upon. Subscribers are individuals--most of them belonging to groups such as employee groups, labor unions, or governmental or professional associations. These individuals, either alone or through their groups, enter into contracts with Blue Shield whereby, upon payment of a periodic subscription premium by the subscriber or on his behalf, Blue Shield agrees to pay a certain amount for described health care services contracted for by the subscriber. The amount to be paid is determined by the terms of the insurance contract between Blue Shield and the subscriber.

The hospitals, physicians, and others who provide health care services to the subscribers are known as "providers." Following its "Physician's Voluntary Cost Effectiveness" program, instituted in 1978, Blue Shield entered into separate contracts with providers who wish to participate in Blue Shield's program. The providers who enter into these contracts with Blue Shield are called "participating" providers. Each of the contracts between Blue Shield and the participating providers requires the providers to accept agreed-upon payments for specified services as payment in full, and requires Blue Shield to pay each participating provider directly.

Providers who have not entered into contracts with Blue Shield to accept agreed-upon payments as payment in full are called "nonparticipating" providers. OB-GYN is a nonparticipating provider.

The amount of benefits paid by Blue Shield does not depend on whether services are provided by a participating or nonparticipating provider. The payment is the same in either case. However, where services are rendered by a participating provider, payment is made directly to the provider by Blue Shield on behalf of the subscriber--as provided in the Blue Shield-subscriber insurance contract. When the services are performed by a nonparticipating provider, on the other hand, payment is made by Blue Shield directly to the subscriber--also as provided in the Blue Shield-subscriber insurance contract. These payment provisions are included in all Blue Shield-subscriber contracts.

It is provided in the Blue Shield-subscriber insurance contract that benefits payable to a subscriber may not be assigned by the subscriber. The nonassignment provision in the Blue Shield-subscriber contract states: "No assignments of any amounts payable under this Contract shall be recognized or accepted by, or binding upon, the Company." Blue Shield's president testified as to the reason that Blue Shield inserted the nonassignment provisions in its contracts with its subscribers. That reason was stated to be that Blue Shield wished to have nonparticipating providers join the Blue Shield program so that they would accept the Blue Shield payment under the policy as payment in full for the medical services rendered, and thus help to keep down the costs of medical services to the subscribers. The only inducement that Blue Shield could offer to any provider was payment directly to the provider.

Prompt payment by Blue Shield directly to participating providers lessens the financial burden of debt collection for those providers, and ensures payment to the participating providers for health care services rendered. In an effort to collect payment directly from Blue Shield for services it provides to Blue Shield subscribers, OB-GYN (although it is a nonparticipating provider) has taken assignments of Blue Shield subscribers' benefits and submitted them to Blue Shield for payment. Blue Shield, relying on the nonassignment clause in its contracts with its subscribers, refuses to pay OB-GYN directly, but instead sends the payment to the subscriber. It is OB-GYN's attack on the validity of this nonassignment clause that forms the basis for this suit.

With regard to the three assignments of error as a whole, we first note that a declaratory judgment action is sui generis and may involve questions of both law and equity. S.I.D. No. 32 v. Continental Western Corp., 215 Neb. 843, 343 N.W.2d 314 (1983). Insofar as fact questions are concerned in a declaratory judgment action, those issues may be tried and determined as in other civil actions. § 25-21,157. All declaratory judgment decrees may be reviewed as other decrees. § 25-21,155. Pursuant to Neb.Rev.Stat. § 25-1925 (Reissue 1979), insofar as the appeal is one in equity, we review the trial court's finding of fact de novo on the record. With regard to questions of law, we have the obligation to reach independent conclusions with respect to those questions. Ranger Division v. Bayne, 214 Neb. 251, 333 N.W.2d 891 (1983); In re Estate of Corrigan, 218 Neb. 723, 358 N.W.2d 501 (1984). Also, in our review of this case on the questions of public policy, while our review is de novo, we note that in Beaver Lake Ass'n v. Beaver Lake Corp., 200 Neb. 685, 691, 264 N.W.2d 871, 875 (1978), we said, "Courts should be cautious in holding contracts void on ground of public policy and before they do so prejudice to the public interest should clearly appear."

The first two assignments of error may be considered together, since each of those assignments are based on Blue Shield's alleged violation of "public policy" in its nonassignment contractual provisions. In its brief, OB-GYN makes numerous references to public policy, but nowhere is that policy defined, except that OB-GYN alleges in the amended petition that "[p]laintiff [OB-GYN] claims the provision in defendant's [Blue Shield's] policies prohibiting benefit assignments after covered medical services are incurred are [sic] null and void as being contrary to public policy."

Nor is any proof offered by OB-GYN that such allegation correctly states the public policy of Nebraska, except in the form of a citation of one 1892 Nebraska case.

From this case OB-GYN concludes that the public policy of Nebraska is that there must be free alienation of choses in action and that Blue Shield's nonassignment provisions in its contracts are invalid solely because such provisions are against that public policy. In order to determine if Blue Shield's conduct violates a public policy of this state, it is necessary to determine if OB-GYN has proved what that policy is, and if that policy controls this case.

As stated in United Seeds, Inc. v. Hoyt, 168 Neb. 527, 531, 96 N.W.2d 404, 407 (1959):

Public policy has been defined in varying terms but a definition which has been accepted in numerous jurisdictions is as follows: "That principle of the law which holds that no subject can lawfully do that which has a tendency to be injurious to the public or against the public good. * * * The principles under which the freedom of contract or private dealings is restricted by law for the good of the community." Black's Law Dictionary (3d Ed.), p. 1374.

OB-GYN called four witnesses at the trial and defendant called one witness. No witness testified as to what the public policy of this state is on this matter. The trial court was not asked to take judicial notice of any constitutional provision, any statutory enactment, any legislative intent shown in legislative history in enacting any statutes, any specific declaration of public purpose in any enactment, or any case law aiding a determination of the meaning of the terms in this case. Nor was any evidence adduced, if such evidence would be admissible or relevant, as to any custom or public course of conduct...

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