Peters v. Aetna Inc.

• Decision Date: 22 June 2021
• Docket Number: No. 19-2085,19-2085
• Parties: Sandra M. PETERS, on behalf of herself and all others similarly situated, Plaintiff – Appellant, v. AETNA INC.; Aetna Life Insurance Company; Optumhealth Care Solutions, Inc., Defendants – Appellees. American Medical Association ; Maryland State Medical Society ; Medical Society of Virginia; North Carolina Medical Society; South Carolina Medical Association, Amici Supporting Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

2 F.4th 199

Sandra M. PETERS, on behalf of herself and all others similarly situated, Plaintiff – Appellant,

v.AETNA INC.; Aetna Life Insurance Company; Optumhealth Care Solutions, Inc., Defendants – Appellees.

American Medical Association ; Maryland State Medical Society ; Medical Society of Virginia; North Carolina Medical Society; South Carolina Medical Association, Amici Supporting Appellant.

No. 19-2085

United States Court of Appeals, Fourth Circuit.

Argued: October 26, 2020

Decided: June 22, 2021

ARGUED: D. Brian Hufford, ZUCKERMAN SPAEDER LLP, New York, New York, for Appellant. Earl B. Austin, III, BAKER BOTTS L.L.P., New York, New York; Brian D. Boone, ALSTON & BIRD, LLP, Charlotte, North Carolina, for Appellees. ON BRIEF: Jason M. Knott, Washington, D.C., Jason S. Cowart, Nell Z. Peyser, ZUCKERMAN SPAEDER LLP, New York, New York; Larry S. McDevitt, David Wilkerson, THE VAN WINKLE LAW FIRM, Asheville, North Carolina, for Appellant. Michael R. Hoernlein, Rebecca L. Gauthier, ALSTON & BIRD LLP, Charlotte, North Carolina; E. Thomison Holman, HOLMAN LAW, PLLC, Asheville, North Carolina; Jessica F. Rosenbaum, BAKER BOTTS L.L.P., New York, New York, for Appellees. Leonard A. Nelson, Kyle A. Palazzolo, AMERICAN MEDICAL ASSOCIATION, Chicago, Illinois, for Amici American Medical Association, North Carolina Medical Society, Maryland State Medical Society, South Carolina Medical Association, and Medical Society of Virginia.

Before AGEE, FLOYD and THACKER, Circuit Judges.

Affirmed in part, reversed in part, vacated in part, and remanded by published opinion. Judge Agee wrote the opinion, in which Judge Floyd and Judge Thacker joined.

AGEE, Circuit Judge:

Sandra Peters appeals the district court's grant of summary judgment in favor of Aetna Inc., Aetna Life Insurance Company, and Optumhealth Care Solutions, Inc. (individually, "Aetna" and "Optum"; collectively, "Appellees"), as well as the denial of her motion for class certification. For the reasons discussed below, we affirm in part, reverse in part, vacate in part, and remand for further proceedings consistent with this opinion.

I.

Mars, Inc. ("Mars") operated a self-funded health care plan ("the Plan") and hired Aetna as a claims administrator of the Plan pursuant to a Master Services Agreement ("MSA").¹ Under the MSA, Aetna's obligations included processing the participants’ claims for the Plan and providing a cost-effective network of health care providers. The MSA contained a "Service and Fee Schedule" ("the Fee Schedule"), explaining that "[a]ll Administrative Fees from this [Statement of Available Services] are summarized in the following Service and Fee Schedule." J.A. 6025. The Fee Schedule notes that [Redacted] J.A. 6026, 6028. Aetna's compensation, in return for providing all of the agreed services under the MSA, was set at [Redacted], meaning that [Redacted] J.A. 3142.

The Aetna-Optum Relationship

The MSA permitted Aetna to subcontract "[t]he work to be performed by Aetna" for the Plan. J.A. 5999. Aetna subsequently executed such subcontracts with Optum for Optum to provide chiropractic and physical therapy services to the Plan participants for more cost-effective prices than Aetna alone could provide. Optum's "downstream providers" offered in-network services to Aetna insureds (including the Plan participants) at competitive rates. In exchange for Optum's services, it was to be paid a fee.

Section 20(B) of the MSA specified that "Aetna shall be solely responsible for payments due such subcontractors." J.A. 5999. However, Aetna did not wish to pay Optum out of the fees it received from Mars through the Plan. Instead, Aetna requested that Optum "bury" its fee within the claims submitted by Optum's downstream providers. J.A. 2692. By doing so, the Plan and its participants effectively would pay part or all of Optum's administrative fee notwithstanding the contrary terms of the MSA.

As a result, the fee breakdown for health care services provided to Plan participants through Optum operated as follows: After treatment, the health care provider submitted its claim to Optum for the services rendered. Optum then added a "dummy code" to the claim from the Current Procedural Terminology ("CPT")² to reflect a bundled rate fee, consisting of Optum's administrative fee and the cost of the health care provider's services. Optum would then forward the bundled rate fee claim to Aetna for its approval. In turn, this bundled rate fee would be paid based on the Plan's responsibility framework, depending on the coinsurance required and whether a patient-paid deductible had been reached.

Appellees sought to keep this fee breakdown from being known by Mars or the Plan participants. As one Aetna employee explained, "We need to ensure that the members are not being relayed this information about wrap or administration fees as they are feeling they are absorbing costs, which in turn makes most of them unhappy." J.A. 2699. Nonetheless, some Aetna and Optum employees exhibited concern over the fee "bumping" arrangement, stating, for instance:

The scenario where the co-insurance amount is calculated based on Aetna's payment to us is very problematic – the essence of the [Department of Insurance ("DOI")] complaint on this will be patients are being forced to pay a % of our fee, this is not going to viewed favorably by the DOI.

J.A. 2647.

The Terms of the Plan

Plan Participants received a Summary Plan Description ("SPD"), which set out their rights and benefits under the Plan, including the charges for health care services and their participant responsibility. And in the circumstances of this case, the SPD represents the terms³ of the Plan.⁴ Relevant to this appeal, the SPD, as also reflected in the subcontract provision of the MSA, did not authorize the Plan or its participants to be charged Optum's administrative fee. This is evident when considering the SPD's definitions of appropriate charges. The SPD defines "Negotiated Charge" as "the maximum charge a Network Provider has agreed to make as to any service or supply for the purpose of the benefits under this Plan." J.A. 3067. Critically, "[t]he Plan does not cover expenses that are not considered Medically Necessary or appropriately provided." J.A. 3030. "Charges for a service or supply furnished by a Network Provider in excess of the Negotiated Charge" are not covered. J.A. 3032.

Under the Plan, a "Network Provider" does not encompass an entity such as Optum, as that is defined to be "[a] health care provider or pharmacy that has contracted to furnish services or supplies for this Plan, but only if the provider is, with Aetna's consent, included in the directory as a Network Provider." J.A. 3067. In contrast, an "Out-of-Network Provider" is "[a] health care provider or pharmacy that has not contracted with Aetna, an affiliate or a third-party vendor to furnish services or supplies for this Plan." J.A. 3067. As explained below, Optum is not a health care provider or pharmacy.

The SPD further explains the payment responsibility framework for Plan benefits, reflecting that the "Annual Deductible" is "[t]he part of [the Plan participant's] Covered Expenses [they] pay each calendar year before the Plan starts to pay benefits." J.A. 3063. And "Coinsurance" is "[t]he amount [the Plan participant] pay[s] for Covered Expenses after [they] have met the annual deductible." J.A. 3064. Finally, "Annual Coinsurance Maximum" is "[t]he amount of Coinsurance [the Plan participant] pay[s] each year before the Plan pays 100% of the Negotiated Charge (for in-network services)." J.A. 3063. As these definitions provide, each calendar year stands on its own, so that a Plan participant begins anew the process of accruing her Annual Deductible and Annual Coinsurance Maximum each year.

In application, the Plan required Peters, who participated in the Plan through her husband's employment with Mars, to pay 100% of covered expenses until she met her annual deductible of $250. After reaching the deductible, she was responsible for paying 20% of the covered expenses for claims as coinsurance, and the Plan paid the other 80% of those claims. However, once Peters paid the annual coinsurance maximum of $1,650, the Plan paid 100% of covered expenses for the rest of the year.

Peters’ Claims

From 2013 to 2015, in addition to obtaining other non-Optum medical services, Peters received treatment from chiropractors and physical therapists provided by Optum under its contract with Aetna. Based on her comparison of the Explanation of Benefits ("EOBs") documents she received to the remittance advice forms that Optum sent her health care providers, Peters determined that she made payments in excess of her health care provider's Negotiated Charge, which was the amount owed according to the terms of the Plan.

For instance, Peters received treatment from a provider in Optum's network on July 16, 2014. The health care provider submitted a claim to Optum for $40, but the provider's Negotiated Charge with Optum was limited to $34. When Optum received the health care provider's claim, it added the dummy CPT code to cover its administrative fee of $36.89, resulting in a bundled rate fee of $70.89 ($34.00 + $36.89). When the claim reached Aetna, it then applied the Plan's responsibility framework, determining that Peters owed her coinsurance of 20% so that she paid $14.18 of the $70.89 bundled rate fee, while the Plan owed the balance ($56.71). Because Peters had paid her coinsurance charge of $14.18 and the Negotiated Charge between the provider and Optum was for $34, Optum paid the balance due of $19.82 to the provider and kept the remaining $36.89 that it received from Aetna on behalf of the Plan.

Conversely, had the Plan's responsibility framework been applied based on the health care provider's Negotiated Charge of $34 alone, and not the bundled rate fee, Peters would have owed only 20% of $34 ($6.80) and the Plan would have owed 80% ($27.20). Accordingly, Peters alleged that Appellees...