State ex rel. Clark v. Blue Cross Blue Shield
| Decision Date | 04 December 1998 |
| Docket Number | No. 24625-24627. |
| Court | West Virginia Supreme Court |
| Parties | STATE of West Virginia ex rel. Hanley C. CLARK, Insurance Commissioner of the State of West Virginia, Plaintiff Below, Appellee, v. BLUE CROSS BLUE SHIELD OF WEST VIRGINIA, INC., Defendant Below, West Virginia State Medical Association, Intervenor Below, Appellee, West Virginia Hospital Association; Blue Cross Western Pennsylvania; International Union; United Mine Workers; and Joann Williams, et al., Intervenors Below, Pennsylvania Blue Shield, Intervenor Below, Appellant. State of West Virginia ex rel. Hanley C. Clark, Insurance Commissioner of the State of West Virginia, Plaintiff Below, Appellee, v. Blue Cross Blue Shield of West Virginia, Inc., Defendant Below, West Virginia State Medical Association, Intervenor Below, Intervenor, Appellee, West Virginia Hospital Association; Pennsylvania Blue Shield; International Union; United Mine Workers; and Joann Williams, et al., Intervenors Below, Blue Cross Western Pennsylvania, Intervenor Below, Appellant. State of West Virginia ex rel. Hanley C. Clark, Insurance Commissioner of the State of West Virginia, Plaintiff Below, Appellee, v. Blue Cross Blue Shield of West Virginia, Inc., Defendant Below, West Virginia State Medical Association, Intervenor Below, Intervenor, Appellee, West Virginia Hospital Association; Blue Cross Western Pennsylvania; Pennsylvania Blue Shield; International Union; United Mine Workers; and Joann Williams, et al., Intervenors Below, United States of America, on Behalf of CHAMPUS, Department of Veterans Affairs—Va Hospitals, Department of Defense, Department of Health and Human Services, Office of Personnel Management and Medicaid, et al., Claimant Below, Appellant. |
James A. McKowen, James F. Humphreys & Associates, Charleston, West Virginia, Edward L. Springer, Gerri L. Sperling, James H. Webster, Springer, Bush & Perry, Pittsburgh, Pennsylvania, Attorneys for the Appellants, Highmark, Inc. (formerly Pennsylvania Blue Shield, and Blue Cross of Western Pennsylvania).
Frank W. Hunger, Assistant United States Attorney General, Rebecca A. Betts, United States Attorney, Southern District of West Virginia, Charleston, West Virginia, Stephen M. Horn, Assistant United States Attorney, J. Christopher Kohn, Sandra P. Spooner, Mary R. Bohan, Department of Justice, Washington, District of Columbia, Attorneys for the Appellant, The United States of America.
John T. Miesner, Hoyer, Hoyer, Smith & Miesner, Robert L. Greer, Assistant Deputy Receiver, West Virginia Department of Insurance, B. Keith Huffman, Office of the Insurance Commissioner, Charles R. McElwee, Paul G. Papadopoulos, Robinson & McElwee, Charleston, West Virginia, Attorneys for the Appellee, Hanley C. Clark, Insurance Commissioner of the State of West Virginia.
Steven L. Thomas, Kay, Casto, Chaney, Love & Wise, Charleston, West Virginia, Attorney for the Intervenor, Appellee, West Virginia State Medical Association.
Michael E. Surguine, Kansas City, Missouri, Ancil G. Ramey, Steptoe & Johnson, Charleston, West Virginia, Attorneys for Amicus Curiae, National Association of Insurance Commissioners.
F. James Foley, Vorys, Sater, Seymour and Pease, Columbus, Ohio, Cheryl Connelly, Dustin C. Haley, Campbell, Woods, Bagley, Emerson, McNeer & Herndon, Huntington, West Virginia, Attorneys for Amici Curiae, National Organization of Life & Health Insurance Guaranty Associations and National Conference of Insurance Guaranty Funds.
In three appeals consolidated for purposes of rendering this opinion, Pennsylvania Blue Shield [hereinafter "PBS"], Blue Cross of Western Pennsylvania [hereinafter "BCWP"] and the United States of America [hereinafter "the United States"] challenge orders entered by the Circuit Court of Kanawha County in liquidation proceedings involving Blue Cross Blue Shield of West Virginia [hereinafter "BCBSWV"]. PBS and BCWP raise various issues, however, each complain that it did not receive adequate notice of the recommended decision of the court-appointed Referee regarding its respective claim, which decisions were adopted by the circuit court without a hearing. We find this issue is dispositive of the appeals of these two companies. Based upon our conclusion that the lower court failed to follow the mandatory directives of W. Va.Code § 33-24-25 (1990) (Repl.Vol.1996), we remand these two cases for additional proceedings consistent with that governing statute. In the third appeal herein consolidated, the United States first argues that the Receiver improperly applied state law and classified its late-filed proofs of claim in Class VII for purposes of distributing the BCBSWV liquidated estate. We find that the West Virginia priority scheme for late-filed claims, as expressed in W. Va.Code §§ 33-24-27(g) (1996) (Supp.1998) and 33-24-37(b) (1990) (Repl.Vol.1996), does not exceed state power, and furthermore, under the McCarran-Ferguson Act, 15 U.S.C. §§ 1011 et seq., W. Va.Code § 33-24-27 reverse preempts the federal priority statute asserted by the United States. Therefore, the classification assigned by the Receiver to the late-filed claims of the United States, which was subsequently adopted by the circuit court, was correct. Finally, the United States contends that the circuit court erred in finding that BCBSWV was not party to a contract entered between the Office of Personnel Management and the Blue Cross Blue Shield Association. We find that the Blue Cross Blue Shield Association acted as an agent for BCBSWV when it entered the contract. Therefore, the order appealed by the United States is affirmed in part, reversed in part, and remanded for further proceedings.
This case pertains to liquidation proceedings involving BCBSWV. By an "ORDER OF LIQUIDATION AND INJUNCTION" entered in the Circuit Court of Kanawha County on October 26, 1990, BCBSWV was placed into receivership. Hanley C. Clark, Insurance Commissioner of the State of West Virginia, was named as Receiver.
Three separate appeals have been filed in this Court challenging certain aspects of the BCBSWV liquidation proceedings below. The three parties appealing are PBS,1 BCWP2 and the United States. Because these appeals all relate to the BCBSWV liquidation proceedings, we have consolidated them for the purpose of rendering this opinion. However, the facts relevant to the appeals of PBS and BCWP differ from those relevant to the appeal of the United States. Therefore, we first relate the facts relevant to the appeals of PBS and BCWP. The facts pertaining to the appeal of the United States are reviewed thereafter.
The facts relevant to the appeals of PBS and BCWP are similar, and are described together in this section of the opinion. Appellants PBS and BCWP, and the appellee BCBSWV, are all members of the Blue Cross and Blue Shield Association [hereinafter "the Association"], a national organization to which all Blue Cross and Blue Shield plans belong.
The Association oversees the national system of Blue Cross Blue Shield plans. According to the parties, regional "Blue" plans interact with each other to provide, inter alia, health insurance coverage and claims servicing across state lines. This interaction is necessary to accommodate employer-subscribers having employees in two or more states. These employer-subscribers, who must interact with two or more "Blue" plans in order to provide health insurance for their employees, are referred to as "National Accounts."
At the time liquidation of BCBSWV was ordered, agreements were in place between BCBSWV and PBS, and between BCBSWV and BCWP, to administer health claim benefits for various National Accounts. In connection with these agreements, PBS and BCWP made certain payments, referred to as "advance deposits," to BCBSWV.3
After BCBSWV was placed into receivership, the Receiver took control of its assets and liabilities (the liquidation estate) pursuant to W. Va.Code § 33-24-1 et seq. In accordance with the statutory requirements, and after consultation with certain potential claimants, the Receiver filed a liquidation plan in the circuit court. The court approved the plan, which included a procedure whereby parties holding claims against the liquidated estate could assert them by filing proofs of claim. Pursuant to the court-approved plan, proofs of claim would be reviewed by the Receiver, who would then issue notices of determination to each claimant. Thereafter, the claimants could submit objections for resolution by a court-appointed referee.4
In accordance with the court-approved procedure, PBS and BCWP each filed a proof of claim in which they sought to recover the amount of their advance deposits. In addition, PBS's proof of claim sought $77,224.02 for payments made to Pennsylvania health care providers for the satisfaction of obligations incurred by BCBSWV, and $47,153.70 as reimbursement for funds made available by PBS to cover dishonored health care claims payment checks issued by BCBSWV.
The Receiver made his determinations regarding the proofs of claim filed by PBS and BCWP, and sent each company a notice of determination. The notices revealed that the Receiver had effectively categorized PBS's and BCWP's claims as Priority Class V, under W. Va.Code § 33-24-27 (1996) (Supp. 1998),5 for purposes of payment. The two companies timely filed objections to the Receiver's determinations. The disputed claims were then referred to a court-appointed Referee.
Presumably to assist in the management of the numerous disputed claims to be addressed by the Referee, the circuit judge, by order entered June 16, 1993, adopted specific rules to guide the proceedings before the Referee. These rules were titled "CLAIMANTS' RULES OF PROCEDURE BEFORE REFEREE" [hereinafter "Claimants' Rules"]. The circuit...
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