Saginaw Chippewa Indian Tribe of Mich. v. Blue Cross Blue Shield of Mich.

• Decision Date: 25 April 2022
• Docket Number: 21-1226
• Citation: 32 F.4th 548
• 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

32 F.4th 548

SAGINAW CHIPPEWA INDIAN TRIBE OF MICHIGAN; Welfare Benefit Plan, Plaintiffs-Appellants,

v.BLUE CROSS BLUE SHIELD OF MICHIGAN, Defendant-Appellee.

No. 21-1226

United States Court of Appeals, Sixth Circuit.

Argued: October 26, 2021

Decided and Filed: April 25, 2022

ARGUED: Perrin Rynders, VARNUM LLP, Grand Rapids, Michigan, for Appellants. Tacy F. Flint, SIDLEY AUSTIN LLP, Chicago, Illinois, for Appellee. ON BRIEF: Perrin Rynders, Herman D. Hofman, VARNUM LLP, Grand Rapids, Michigan, for Appellants. Tacy F. Flint, Abigail B. Molitor, Rebecca B. Shafer, SIDLEY AUSTIN LLP, Chicago, Illinois, for Appellee. James K. Nichols, THE JACOBSON, LAW GROUP, Saint Paul, Minnesota, for Amici Curiae.

Before ROGERS, STRANCH, and DONALD, Circuit Judges.

STRANCH, J., delivered the opinion of the court in which DONALD, J., joined. ROGERS, J. (pp. 565–68), delivered a separate opinion joining in Parts I and II, except Part II.B, of the majority opinion, and in the judgment for the reasons stated in his opinion.

JANE B. STRANCH, Circuit Judge.

The Saginaw Chippewa Indian Tribe and its Benefit Plan brought federal and common law claims against Blue Cross Blue Shield of Michigan (BCBSM or Blue Cross) for failing to fulfill its fiduciary duties in administering tribal health insurance plans. When we first encountered this dispute three years ago, we reversed the district court's dismissal of the Tribe's claims based on Blue Cross's alleged failure to insist on "Medicare-like rates" for care authorized by the Tribe's Contract Health Services¹ program and provided to tribal members by Medicare-participating hospitals. On remand, the district court granted summary judgment to Blue Cross, concluding that the Tribe's payments for qualified CHS care through the Blue Cross plans were not eligible for Medicare-like rates. The district court interpreted the relevant federal regulations as limiting the requirement of Medicare-like rates to payments for care that was authorized by CHS, provided to tribal members by Medicare-participating hospitals, and directly paid for with CHS funds. Based on the plain wording of the applicable regulations, we REVERSE and REMAND the case to the district court for further proceedings consistent with this opinion.

I. BACKGROUND

A. Federal Law Regulating Tribal Healthcare Plans

The two health insurance plans at the heart of this appeal—both authorized by the Saginaw Chippewa Indian Tribe and administered by Blue Cross Blue Shield of Michigan—sit against a backdrop of federal law providing for American Indian healthcare. Persons of American Indian descent have access to federally funded healthcare through the Indian Health Service (IHS), an agency within the Department of Health and Human Services. IHS funds and operates direct healthcare facilities for tribes and funds Contract Health Services (CHS) programs. See 25 U.S.C. §§ 1603(5), (12) ; 42 C.F.R. § 136.23.

CHS programs are "health services provided at the expense of the Indian Health Service from public or private medical or hospital facilities other than those of the [Indian Health] Service," 42 C.F.R. § 136.21. CHS care is provided "when necessary health services by an Indian Health Service facility are not reasonably accessible or available." Id. § 136.23(a). Federal regulations require pre-approval for CHS care:

In nonemergency cases, a sick or disabled Indian, an individual or agency acting on behalf of the Indian, or the medical care provider shall, prior to the provision of medical care and services notify the appropriate ordering official of the need for services and supply information that the ordering official deems necessary to determine the relative medical need for the services and the individual's eligibility.

42 C.F.R. § 136.24(b). After the ordering official approves an eligible individual for CHS care, the CHS program issues a purchase order to the medical-care provider authorizing the eligible individual to receive the specific medical services described on that order. Id. § 136.24(a).

The federal government does not act alone in this endeavor to provide healthcare to American Indians. The tribes themselves play a vital role in managing, funding, and providing healthcare to their members. In recognition of "the obligation of the United States to respond to the strong expression of the Indian people for self-determination by assuring maximum Indian participation in the direction of ... Federal services to Indian communities," 25 U.S.C. § 5302, Congress enacted the Indian Self-Determination and Education Assistance Act of 1975, id. § 5301, et seq. To promote the "orderly transition from the Federal domination of programs for, and services to, Indians to effective and meaningful participation by the Indian people in the planning, conduct, and administration of those programs and services," id. § 5302(b), the law empowers tribes to enter self-determination contracts with the federal government, id. § 5321(a)(1). These contracts shift the federal government's role from direct service provider to funder of tribal organizations that will administer and organize the necessary services. See FGS Constructors, Inc. v. Carlow , 64 F.3d 1230, 1234 (8th Cir. 1995). Tribes can manage and staff their own IHS facilities, contract with private insurers for tribal healthcare coverage, and operate their own CHS programs for eligible American Indians.

This framework, however, has not always ensured that healthcare is accessible or fully funded for those of American Indian descent. "The provision of health care for American Indians has historically been, and remains, plagued by chronic funding shortages and ineffective provision of services." Rancheria v. Hargan , 296 F. Supp. 3d 256, 259 (D.D.C. 2017). To combat financial constraints, IHS health programs—whether operated by the IHS itself or a tribe—are "the payer of last resort" for healthcare costs. 25 U.S.C. § 1623 ("Health programs operated by the Indian Health Service, Indian tribes, tribal organizations, and Urban Indian organizations ... shall be the payer of last resort for services provided by such Service, tribes, or organizations to individuals eligible for services through such programs. ..."). Therefore, Medicare, Medicaid, or private insurance must pay before IHS reimbursement is available. 42 C.F.R. § 136.30 ; see also 42 C.F.R. § 136.61 (defining these funding sources as "alternate resources").

CHS funding has faced particularly significant financial constraints, which amendments to federal law and regulation have sought to address. See Section 506 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003—Limitation on Charges for Services Furnished by Medicare Participating Inpatient Hospitals to Indians , 71 Fed. Reg. 25124, 25125 (Apr. 28, 2006) ("[H]istorically, purchase orders for CHS services have been for amounts at full billed charges that substantially exceeded the Medicare allowable rates and this problem could recur in the future."). The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 authorized the Secretary of the Department of Health and Human Services to demand Medicare pricing from hospitals providing services to tribes through the CHS program. Pub. L. No. 108–173. Specifically, the law inserted a new subparagraph into 42 U.S.C. § 1395cc requiring Medicare-participating hospitals that agree to provide medical care "under the contract health services program funded by the Indian Health Service and operated by the Indian Health Service, an Indian tribe, or tribal organization" to accept Medicare-like rates (MLR) as payment. 42 U.S.C. § 1395cc(a)(1)(U)(i). The law instructed the Secretary to publish rules implementing this new language. Id. § 1395cc(a)(1)(U). Accordingly, the Indian Health Service issued a final rule on June 4, 2007, which was codified in relevant part at 42 C.F.R. § 136.30. See Section 506 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003—Limitation of Charges for Services Furnished by Medicare Participating Inpatient Hospitals to Individuals Eligible for Care Purchased by the Indian Health Programs , 72 Fed. Reg. 30706 (June 4, 2007).

These federal regulations set a ceiling on payments that Medicare-participating hospitals receive for CHS care "authorized by IHS, Tribal, and urban Indian organization entities." 42 C.F.R. § 136.30(a). Providers must accept Medicare-like rates as payment for "all levels of care furnished by a Medicare-participating hospital ... that is authorized under part 136, subpart C by a contract health service program of the Indian Health Service (IHS)[ ] or authorized by a Tribe or Tribal organization carrying out a CHS program of the IHS. " Id. § 136.30(b).

The MLR regulations extend payor-of-last-resort status to include an "I/T/U" that "has authorized payment for items and services provided to an individual who is eligible for benefits under Medicare, Medicaid, or another third party payor." 42 C.F.R. § 136.30(g). An I/T/U is an IHS contract health service program, a "Tribe or Tribal organization carrying out a CHS program of the IHS under the Indian Self-Determination and Education Assistance Act," or "an urban Indian organization." Id. § 136.30(b).

These regulations further identify the steps that an eligible tribal member must take to get CHS care and cause the provider to accept a Medicare-like rate for that care. In most situations, there must be notification of the proposed CHS care to "the appropriate ordering official" to determine the individual's eligibility and the necessity of the care. Id. § 136.24(b). MLR payment for CHS is allowed only after the ordering official receives this notice and issues a purchase order to the medical care provider. Id. § 136.24(a).

B. The Tribe's Contract Health Services Program

The Saginaw Chippewa Indian Tribe of Michigan is a federally recognized Indian Tribe. The Tribe administers a CHS program under the Indian...