Saginaw Chippewa Indian Tribe of Mich. v. Blue Cross Blue Shield Michigan
| Decision Date | 30 August 2018 |
| Docket Number | No. 17-1932,17-1932 |
| Parties | SAGINAW CHIPPEWA INDIAN TRIBE OF MICHIGAN; WELFARE BENEFIT PLAN, Plaintiffs-Appellants, v. BLUE CROSS BLUE SHIELD OF MICHIGAN, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Sixth Circuit |
NOT RECOMMENDED FOR PUBLICATION
File Name: 18a0451n.06
BOGGS, Circuit Judge. This case is one of many brought in recent years against Blue Cross Blue Shield of Michigan ("BCBSM") contending that BCBSM breached its fiduciary duties under the Employee Retirement Income Security Act of 1974 ("ERISA") by charging its self-insured customers hidden administrative fees. In Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of Michigan, 751 F.3d 740 (6th Cir. 2014), we affirmed the district court's ruling after a bench trial that BCBSM violated its fiduciary obligations under ERISA by marking up Hi-Lex's hospital claims with hidden administrative surcharges. Id. at 742.
In the instant case, the Saginaw Chippewa Indian Tribe of Michigan ("the Tribe") alleged that BCBSM similarly inflated the Tribe's medical bills with undisclosed administrative fees. Had that been all that the Tribe alleged, this would be a relatively simple case. But the Tribe also contended that BCBSM breached its fiduciary duties under ERISA by failing to take advantage of federal regulations that permit Indian Tribes to pay reduced rates for services provided by Medicare-participating hospitals. The Tribe further claimed that BCBSM charged it hidden fees as part of the company's Physician Group Incentive Program ("PGIP)—a program and fees that were not at issue in Hi-Lex. Complicating matters more is that the Tribe maintained two self-insured policies with BCBSM—one for tribal members and another for tribal employees.
Although the Tribe prevailed in part on its hidden-fees claim below, it appeals several adverse rulings by the district court. The district court ruled that ERISA did not apply to the policy that covered only tribal members. The court also concluded that BCBSM did not breach any fiduciary duties owed to the Tribe under ERISA through its operation of PGIP or by its failure to pay less for services provided by Medicare-participating hospitals. The Tribe appeals each of these rulings as well as the district court's supposed failure to award the Tribe prejudgment interest on the hidden-fees claim on which it was successful below.
For the reasons set forth below, we affirm the district court's judgment in part and reverse in part.
The Tribe is a federally recognized Indian Tribe that owns and operates a casino and several other commercial enterprises and employs both tribal members and individuals who are not members of the Tribe. The Tribe maintains two separate health-insurance group policies through BCBSM. When the Tribe first purchased health-insurance coverage for its employees from BCBSM in the 1990s, the policy was fully insured, meaning that the Tribe paid a premium to BCBSM for coverage, and BCBSM was responsible for paying participants' medical claims.
In 2002, the Tribe began offering health-insurance coverage to tribal members. The Tribe also purchased this coverage through BCBSM, but this policy ("Member Policy"), unlike the fully insured policy for the Tribe's employees ("Employee Policy"), was self-funded. Under this arrangement, the Tribe paid the cost of healthcare benefits for covered individuals out of its own pocket and paid BCBSM a fee for administering the policy. The Tribe and BCBSM entered into an Administrative Services Contract ("ASC") for the Member Policy. Two years later, the Tribe executed a second ASC with BCBSM to transition the Employee Policy from being fully insured to self-funded.
From 2004 through all times relevant to this case, the Tribe offered self-funded health-insurance coverage to tribal employees and tribal members through these two policies with BCBSM. The two policies had distinct eligibility requirements and offered coverage to different groups of people. The Member Policy was available only to tribal members—spouses and dependents who were not themselves tribal members could not participate in that policy. The Employee Policy, by contrast, covered tribal employees as well as spouses and dependents of employees, regardless of their tribal membership status. Although many tribal employees received coverage through the Member Policy, they made up only a small percentage of participants in that group policy: for all relevant years, more than 90% of Member Policy participants were not tribal employees. The Tribe also funded the two policies from different sources. The Member Policy was originally funded by the Tribe's Government Trust, which pays for governmental programs and benefits that the Tribe provides to tribal members. It currently is funded by the Tribe's Gaming Trust. The Employee Policy, by contrast, is funded by the Tribe's Fringe Trust, which pays for benefits provided to the employees of the Tribe.
As a large-scale purchaser of healthcare services, BCBSM creates networks of approved medical providers with whom it negotiates compensation arrangements. Each year, BCBSM reviews the fees that in-network physicians receive and issues an update to the fee schedule that governs the financial arrangements that it has with the providers in its network. Prior to 2005, the fee update applied to all physicians equally, regardless of the health outcomes that they achieved. That changed in 2005 when BCBSM created PGIP, which required physicians to meet specified goals related to quality and efficiency, such as increasing the use of generic medications and reducing unnecessary procedures, to be awarded a portion of the fee update.
Under PGIP, physicians in the BCBSM network agreed to allocate a fixed percentage of the updated compensation amount to be paid to them to a pooled fund, the money in which is then re-distributed to physicians based on their individual success in meeting these performance objectives. When PGIP began in 2005, physicians contributed .5% of the payment they were entitled to under the updated fee schedule to the fund. That amount has increased over the years and is now 5%.
In July 2007, the Department of Health and Human Services implemented federal regulations that govern the payment amounts that Medicare-participating hospitals are permitted to accept for services provided to members of an Indian Tribe that carries out a Contract Health Service program on behalf of the Indian Health Service. See 42 C.F.R. § 136.30. The regulations provide that such a hospital must accept payment at a Medicare-like rate ("MLR"), that is, at a rate that is no more than what would be paid under Medicare for the same service. Id.
The Tribe filed this action in January 2016, alleging violations of ERISA and Michigan law. The Tribe requested prejudgment interest as part of its damages. BCBSM moved to dismiss the state-law claims as preempted by ERISA. The Tribe agreed that ERISA preempted its state-law claims, and the district court dismissed those claims. BCBSM also moved to dismiss the Tribe's claim related to BCBSM's alleged failure to pay Medicare-Like Rates. The district court granted BCBSM's motion, holding that BCBSM did not owe the Tribe a fiduciary duty under ERISA to ensure payment of MLRs.
BCBSM and the Tribe proceeded to discovery on the Tribe's remaining ERISA claims about PGIP, the Member Policy, and the Employee Policy, and the parties later filed cross-motions for partial summary judgment. The Tribe sought to prove that the Employee Policy and the Member Policy jointly constituted a single ERISA plan. The district court disagreed, holding that the Tribe had two distinct healthcare plans and that ERISA governed only the Employee Policy. The court also held that BCBSM's operation of PGIP did not violate ERISA. The court therefore dismissed the Tribe's claims to the extent that they related to PGIP or payment of hidden fees for the Member Policy.
BCBSM did not contest the Tribe's claim concerning the payment of hidden fees for the Employee Policy, however, and the district court granted summary judgment to the Tribe on that claim, awarding it roughly $8.4 million. The Tribe did not ask for prejudgment interest in its motion for partial summary judgment, and the district court did not award the Tribe interest as part of its damages. The Tribe now appeals.
On appeal, the Tribe first asserts that the district court erred in concluding that the Employee Policy and Member Policy are separate health-insurance plans, rather than two benefit options offered to employees under a single ERISA plan. The Tribe next contends that the court erred in ruling that ERISA does not cover the Member Policy.
We review the district court's grant of summary judgment de novo. Richmond v. Huq, 885 F.3d 928, 937 (6th Cir. 2018). Summary judgment is proper if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a).
The Tribe first contends that the Employee Policy and Member Policy constitute a single ERISA plan. The Tribe bears the burden of establishing that the policies collectively form such a plan. See Daft v. Advest, Inc., 658 F.3d 583, 590-91 (6th Cir. 2011) (). The Tribe's primary argument that it meets this burden contains two main premises: (1) that its Employee Policy is an ERISA plan and (2) that it is presumed that all benefits offered by an employer are part of one ERISA plan. The Tribe's argument falters at the second step because the presumption that the Tribe...
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