Zipperer et al v. Premera Blue Cross Blue Shield of Alaska
Filing
43
ORDER granting in part and denying in part 26 Motion to Dismiss. Count I is dismissed only as to insurance claims filed in relation to patients enrolled in the Service Benefit Plan and insurance claims filed in relation to patients enrolled in self-funded ERISA health benefit plans. Count II remains in its entirety. Signed by Judge John W. Sedwick on 8/16/16. (GMM, CHAMBERS STAFF)
1
2
3
4
5
6
7
8
UNITED STATES DISTRICT COURT
9
DISTRICT OF ALASKA
10
11
12
JOHN D. ZIPPERER, JR., M.D.,
13
14
Plaintiff,
vs.
15
16
17
PREMERA BLUE CROSS BLUE
SHIELD OF ALASKA,
Defendant.
)
)
)
)
)
)
)
)
)
)
)
)
3:15-CV-00208 JWS
ORDER AND OPINION
[Re: Motion at docket 26]
18
19
20
I. MOTION PRESENTED
At docket 26, Defendant Premera Blue Cross and Blue Shield of Alaska
21
(“Premera”) filed a motion to dismiss the First Amended Complaint filed by John D.
22
Zipperer, Jr., M.D. (“Plaintiff”). Plaintiff responded at docket 31. Premera replied at
23
docket 35. Oral argument was heard on July 27, 2016.
24
25
II. BACKGROUND
Plaintiff is a doctor practicing in Alaska. He owns and operates Zipperer Medical
26
Group (“ZMG”), which is a clinic that specializes in providing interventional pain
27
management and addiction recovery services in Anchorage, Wasilla, Eagle River, and
28
Fairbanks. The dispute in this case involves unpaid insurance claims ZMG filed with
Premera for laboratory services that were provided to patients enrolled in various
1
Premera health plans with dates of service ranging from December 2014 to the present.
2
Plaintiff asserts that all the insurance claims at issue were properly assigned to him
3
from insured patients.
4
ZMG operates laboratories in Alaska and Tennessee. According to Plaintiff’s
5
complaint, the laboratory in Tennessee is a “physician office laboratory,” as that term is
6
defined under federal regulations because it is owned by ZMG, bills under ZMG’s billing
7
number, is used solely for ZMG patients, and is registered with Medicare as a location
8
of the physician group.1 Its Alaska laboratory does not maintain a certain compliance
9
certification and, as a result, cannot process some types of laboratory tests needed by
10
ZMG patients. Therefore, ZMG uses its Tennessee laboratory when necessary to
11
service its Alaskan patients. Plaintiff alleges that for the laboratory claims at issue here,
12
the insured patient would meet with a doctor in Alaska and provide a sample. The
13
sample was then sent to the Tennessee laboratory for processing.
14
When filing a claim for payment for these Tennessee laboratory services, ZMG
15
completes Premera’s standard claim form referred to as the “HCFA 1500.” In Box 32 of
16
that form, ZMG marks that the laboratory service location was Alaska, not Tennessee,
17
because Alaska is where the doctor and patient had the f ace-to-face contact and where
18
the sample was taken from the patient. Plaintiff asserts that this practice is proper and
19
required under HIPAA and its transaction and code set rules. How ever, to be
20
transparent, ZMG also lists the Tennessee laboratory’s identification number in Box 23
21
of the form to show that the samples were processed in Tennessee rather than Alaska.
22
Premera believes that Box 32 of the form should reflect that the laboratory services
23
were performed in Tennessee regardless of where the doctor-patient contact took
24
place. Premera also asserts that claims for laboratory services performed for patients
25
enrolled in Premera’s health insurance plan for federal employees (referred to as the
26
27
28
1
Based on correspondence between ZMG and Premera, it appears as if Premera does
not agree that the Tennessee laboratory should be considered a physician office laboratory.
-2-
1
“Service Benefit Plan”) should be sent to Blue Cross and Blue Shield of Tennessee for
2
payment processing.
3
On March 19, 2015, Premera wrote ZMG informing ZMG that Premera was
4
placing it on pre-payment review of all laboratory claims. The letter stated that pre-
5
payment review was necessary to review laboratory codes used by ZMG and that any
6
electronic insurance claim submitted to Premera “will pend and a statement may be
7
sent to the provider indicating the need for additional documentation in order to
8
determine the location where the laboratory services were performed.”2 It also stated
9
that ZMG was filling out Box 32 improperly and further instructed that for patients
10
enrolled in the federal Service Benefit Plan, claims for laboratory tests processed in
11
Tennessee must be sent to Blue Cross Blue Shield of Tennessee.
12
3
Plaintiff filed its complaint against Premera. Count I alleges a violation of
13
Alaska’s Prompt Pay Statute, AS § 21.36.495. The Prompt Pay Statute requires
14
Premera to pay insurance claims or provide notice to the claimant as to what is needed
15
to process the claim or setting forth the reasons for denial within thirty calendar days of
16
its receipt of the claim. Plaintiff alleges that Premera has failed to pay, deny, or provide
17
the necessary notice as to the insurance claims at issue here. He further alleges that
18
Premera’s decision to place ZMG on pre-payment review is “in fact a pretext to avoid
19
application of the [Prompt Pay Statute].”4 Plaintiff asks that the court “declare that
20
[Permera] is in violation of the [Prompt Pay Statute] due to its failure to pay or deny the
21
claims at issue and failure to meet the specific notice requirements within 30 calendar
22
days after it received the claim”5 and that the court order Premera to pay the claims with
23
interest as required under the law. He also requests that the court direct Premera to
24
25
2
Doc. 23-1 at p. 2.
26
3
27
4
28
5
Id.
Doc. 23 at p.8, ¶ 47.
Doc. 23 at p.9, § 2.
-3-
1
rescind its notice placing ZMG under pre-payment review. Count II is brought pursuant
2
to HIPAA. Plaintiff asks the court to “declare that ZMG has submitted all laboratory
3
claims at issue with the proper [code] in Box 32, as is consistent with HIPAA.”6
4
Both parties agree that some of the insurance claims at issue involve patients
5
enrolled in the Service Benefit Plan, which is created pursuant to FEHBA, and some of
6
the insurance claims at issue involve patients enrolled in health benefit plans governed
7
by ERISA. The remaining claims are those brought under other Premera health
8
insurance plans. Premera argues: 1) that Count I should be dismissed as to Plaintiff’s
9
insurance claims for laboratory services rendered to patients insured under the Service
10
Benefit Plan because the Prompt Pay Act is expressly preempted pursuant to FEHBA,
11
displaced by federal common law, impliedly preempted by FEHBA, and barred by the
12
federal government’s sovereign immunity; and 2) that Count I should be dismissed as to
13
Plaintiff’s insurance claims relating to laboratory services rendered to patients insured
14
under self-funded ERISA-governed health benefit plans because the Prompt Pay
15
Statute is preempted by ERISA as to those claims. Premera also argues that Count I
16
should be dismissed in its entirety. It asserts Plaintiff has not adequately stated a claim
17
for which relief can be granted under the Prompt Pay Statute. Premera also argues
18
that Count I should be dismissed as to all insurance claims because Plaintiff has failed
19
to exhaust his administrative remedies provided for under Alaska’s Insurance Code.
20
As for the HIPAA claim in Count II, Premera argues that Plaintiff does not have
21
standing to bring such an action in relation to insurance claims filed under the federal
22
Service Benefit Plan.
23
24
25
III. STANDARD OF REVIEW
Rule 12(b)(6) tests the legal sufficiency of a plaintiff’s claims. In reviewing such
a motion, “[a]ll allegations of material fact in the complaint are taken as true and
26
27
28
6
Doc. 23 at p. 9, ¶ 6.
-4-
1
construed in the light most favorable to the nonmoving party.”7 To be assumed true,
2
the allegations, “may not simply recite the elements of a cause of action, but must
3
contain sufficient allegations of underlying facts to give fair notice and to enable the
4
opposing party to defend itself effectively.”8 Dismissal for failure to state a claim can be
5
based on either “the lack of a cognizable legal theory or the absence of sufficient facts
6
alleged under a cognizable legal theory.”9 “Conclusory allegations of law . . . are
7
insufficient to defeat a motion to dismiss.”10
8
9
To avoid dismissal, a plaintiff must plead facts sufficient to “‘state a claim to relief
that is plausible on its face.’”11 “A claim has facial plausibility when the plaintiff pleads
10
factual content that allows the court to draw the reasonable inference that the
11
defendant is liable for the misconduct alleged.”12 “The plausibility standard is not akin
12
to a ‘probability requirement,’ but it asks for more than a sheer possibility that a
13
defendant has acted unlawfully.”13 “Where a complaint pleads facts that are ‘merely
14
consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and
15
plausibility of entitlement to relief.’”14 “In sum, for a complaint to survive a motion to
16
17
18
19
20
7
Vignolo v. Miller, 120 F.3d 1075, 1077 (9th Cir. 1997).
21
8
22
9
23
10
24
11
25
Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).
Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990).
Lee v. City of Los Angeles, 250 F.3d 668, 679 (9th Cir. 2001).
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 570 (2007)).
26
12
27
13
28
14
Id.
Id. (citing Twombly, 550 U.S. at 556).
Id. (quoting Twombly, 550 U.S. at 557).
-5-
1
dismiss, the non-conclusory ‘factual content,’ and reasonable inferences from that
2
content, must be plausibly suggestive of a claim entitling the plaintiff to relief.”15
3
4
IV. DISCUSSION
A.
Failure to state a Prompt Pay Statute claim
5
Premera argues that Count I should be dismissed in its entirety because Plaintiff
6
failed to adequately allege a violation of Alaska’s Prompt Pay Statute. It argues that its
7
March 19, 2015 letter to Plaintiff constituted proper notice under the Prompt Pay
8
Statute, and therefore, Plaintiff’s claims are not “clean” claims subject to prompt
9
payment. The letter, however, is not adequate notice under AS §21.36.495(b).
10
According to the statute, the notice required must provide “the basis for denial or the
11
specific information that is needed for the insurer to adjudicate the claim.”16 Here, the
12
letter did not address any specific insurance claim, but rather, just put Plaintiff on notice
13
that Premera was placing ZMG on pre-payment review status. That is, it did not state
14
that it was going to deny a claim or a group of claims, nor did it set forth “the specific
15
information that is needed for the insurer to adjudicate the claim.” Rather, the letter
16
merely stated that any electronically submitted laboratory claims “will pend and a
17
statement may be sent to the provider indicating the need for additional
18
documentation.”17
19
Premera also argues that Plaintiff’s claim for prompt payment in Count I is
20
inadequate because Premera “is within its contractual right to keep Plaintiff on
21
prepayment review for reasons unrelated to Box 32 or the entity to which [Plaintiff]
22
submitted the claim.”18 However, as Plaintiff notes in his response brief, his “argument
23
24
25
15
Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009); see also Starr, 652 F.3d
at 1216.
26
16
27
17
28
18
A.S. § 21.36.495(b).
Doc. 23-1 at p. 2.
Doc. 26 at p. 43.
-6-
1
has nothing to do with whether [Premera] has the general contractual right to place a
2
provider on prepayment review.”19 His argument is that regardless of ZMG’s
3
prepayment status, Premera has nonetheless violated the Prompt Pay Statute by failing
4
to pay or provide the requisite notice. The court concludes that Count I properly alleges
5
a violation of the Prompt Pay Statute.
6
B.
7
Failure to exhaust administrative remedies
Premera argues that Count I should be dismissed in its entirety because Plaintiff
8
failed to exhaust his state administrative remedies. Here, administrative remedies are
9
provided for under the state insurance code. An insured m ay file a complaint with the
10
director of Alaska’s division of insurance and then the director may conduct an
11
investigation to determine whether a person is engaged in an unfair method of
12
competition or a practice prohibited under Chapter 36 of the insurance code, which
13
includes the Prompt Pay Statute.20 The director may then provide for an administrative
14
proceeding as set forth in the insurance code. 21 However, while an administrative
15
remedy is provided for under Chapter 36 of the insurance code, there is nothing in the
16
insurance code, including the Prompt Pay Statute itself, that indicates this
17
administrative process is a mandatory step before an insured, or his or her provider,
18
can file a lawsuit against an insurer.
19
Premera contends that while the language of the statute is not mandatory the
20
court should nonetheless conclude that exhaustion is required. It argues that
21
exhaustion is required any time an administrative remedy is provided for under a statute
22
and when the disputed matter involves factual issues rather than a challenge to the
23
validity of the statute itself. The court disagrees with Premera’s assessment of the law.
24
Under Alaska law, exhaustion is usually required when the matter involves an agency
25
26
19
27
20
28
21
Doc. 31 at p.11, n.3.
AS § 21.36.910(a).
AS § 21.36.910(b).
-7-
1
decision, which is not the case here. 22 When discussing whether a court should require
2
exhaustion the Alaska Supreme Court has indicated that the court must assess the
3
“benefits obtained through affording an agency an opportunity to review the particular
4
action in dispute” and that one of the purposes of the exhaustion requirement is “to
5
correct its own errors so as to moot judicial controversies.”23 Indeed, the cases that
6
Premera relies on to support its exhaustion argument involve disputes over agency
7
actions24 or employment disputes with a municipal employer,25 not private insurance
8
disputes. The court declines to require Plaintiff to pursue an administrative remedy.
9
C.
FEHBA preemption of the Prompt Pay Statute as to Service Benefit Plan
insurance claims
10
Premera argues that Count I should be dismissed as to Plaintiff’s insurance
11
claims that were filed for laboratory services rendered to patients enrolled in the federal
12
Service Benefit Plan. It argues that as to these insurance claims the Prompt Pay
13
Statute is preempted by the contract terms between the federal government and Blue
14
Cross Blue Shield of Alaska (“BCBSA”) pursuant to FEHBA, 5 U.S.C. § 8902(m)(1).
15
1.
FEHBA in general
16
Congress enacted FEHBA to provide health benefits to federal employees.
17
Under FEHBA, the U.S. Office of Personnel Management (“OPM”) has the discretion to
18
establish insurance plans with multiple insurers.26 OPM contracted with BCBSA to
19
provide the Service Benefit Plan to federal employees in Alaska. Premera is a local
20
21
22
23
24
25
22
Smart v. State, Dep’t of Health & Soc. Servs., 237 P.3d 1010, 1015 (Alaska 2010)
(“Where . . . a regulation provides for administrative review of an agency decision, a person
ordinarily must exhaust such administrative remedies before bringing an action in superior court
challenging the decision.” (emphasis added)).
23
Ben Lomond, Inc. v. Municipality of Anchorage, 761 P.2d 119, 121-22 (Alaska 1988)
26
24
27
25
28
26
State, Dep’t of Revenue v. Andrade, 23 P.3d 58 (2001); Smart, 237 P.3d at 1015.
Bruns v. Municipality of Anchorage, 32 P.3d 362 (2001).
5 U.S.C. §§ 8902-03, 8913.
-8-
1
BCBSA licensee that insures and administers the Service Benefit Plan. Under FEHBA,
2
OPM has the authority to determine the benefit structure of each plan and set forth the
3
plan’s statement of benefits.27 OPM has established a mandatory administrative
4
remedy at the agency level for those who believe that the carrier has wrongfully denied
5
benefits.28 If OPM upholds the denial of benefits, the enrollee, or his or her medical
6
provider, can bring suit only against OPM and not the carrier or carrier’s subcontractors.
7
Furthermore, there is no allowance for the recovery of penalties or interest. 29
8
2.
9
FEHBA contains an express preemption provision, 5 U.S.C. § 8902(m)(1), which
10
11
12
Preemption
states as follows:
The terms of any contract under this chapter which relate to the nature,
provision, or extent of coverage or benefits (including payments with respect
to benefits) shall supersede and preempt any State or local law, or any
regulation issued thereunder, which relates to health insurance or plans. 30
13
“The policy underlying section 8902(m)(1) is to ensure uniformity in the administration of
14
FEHBA benefits.”31 Under the statute, two conditions must be met to warrant
15
preemption: “(1) the FEHBA contract terms at issue ‘relate to the nature, provision, or
16
extent of coverage or benefits (including payment with respect to benefits)’ and (2) the
17
18
state or local law ‘relates to health insurance or plans.’” 32 “A law ‘relates to’ an
employee benefit plan, in the normal sense of the phrase, if it has a connection with or
19
20
21
27
5 U.S.C. § 8902(a), (d); 5 U.S.C. § 8907.
22
28
23
5 C.F.R. §§ 890.105, .107(d)(1).
29
24
25
26
27
28
5 C.F.R. § 890.107(c).
30
5 U.S.C. § 8902(m)(1).
31
Hayes v. Prudential Ins. Co. of Am., 819 F.2d 921, 925 (9th Cir. 1987).
32
Vrijesh S. Tantuwaya MD, Inc. v. Anthem Blue Cross Life & Health Ins. Co.,
No. 15cv1671, 2016 WL 1253867, at *7 (S.D. Cal. Mar. 11, 2016) (quoting 5 U.S.C.
§ 8902(m)(1)).
-9-
1
reference to such a plan.”33 Under FEHBA’s exemption provision, “state law—whether
2
consistent or inconsistent with federal plan provisions—is displaced on matters of
3
‘coverage or benefits’” under FEHBA.34
4
Premera has identified the specific contract provisions between OPM and
5
BCBSA that relate to “payments with respect to benefits” that should preempt Alaska’s
6
Prompt Payment Statute. These provisions include ones that (1) specify the particular
7
remedies available in disputes over payments of FEHBA benefits, but that do not allow
8
for interest; (2) call for the processing of claims within time frames that are more lenient
9
than the thirty days required under the Prompt Pay Statute; and (3) allow Premera to
10
request information needed to demonstrate the claims are payable before Premera
11
pays a claim.35 Plaintiff argues that these contract provisions are procedural ones not
12
aimed at “coverage, benefits, or payments with respect to benefits” and thus do not
13
preempt the Prompt Pay Statute.
14
The Fifth Circuit has held that other states’ prompt pay laws are preempted by
15
FEHBA insurance contracts with similar terms. In Burkey v. Government Employees
16
Hospital Association, the court held that Louisiana’s prompt pay statute calling for
17
penalties for delays in processing health insurance claims was preempted under
18
§ 8902(m)(1).36 It rejected the plaintiff’s argument that her claim for penalties against
19
the insurer under the state’s prompt pay law only related to remedies and not to matters
20
of coverage or benefits.37 The court stated that “[t]ort claims arising out of the manner
21
in which a benefit claim is handled are not separable from the terms of the contract that
22
23
33
24
25
Botsford v. Blue Cross & Blue Shield of Mont., Inc., 314 F.3d 390, 394 (9th Cir. 2002).
34
Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 686 (2006).
26
35
27
36
28
37
Doc. 35 at p. 6.
983 F.2d 656 (5th Cir. 1993).
Id. at 660.
-10-
1
governs benefits.”38 The Fifth Circuit reasserted its preemption holding as to Texas’s
2
prompt pay law earlier this year. It stated that “[b]y imposing penalties for late
3
payments, [the state prompt pay law] mandates that insurers process and pay claims
4
within the set time periods,” and, as a result the law, “would directly affect the operation
5
of the plans and expand FEHBA carriers’ duties under the plans.” 39
6
The Ninth Circuit has not specifically addressed preemption of a state prompt
7
pay law pursuant to FEHBA. However, in Hayes v. Prudential Insurance Co. of
8
America, the court examined whether the plaintiff’s state law claims, which involved “the
9
manner in which a benefit claim is handled,” were preempted pursuant to FEHBA. 40 It
10
rejected the plaintiff’s argument that preemption does not apply to laws that deal with
11
how a claim is processed. Analogously, a state prompt pay law involves the manner in
12
which a benefit claim is handled, and therefore preemption is likewise proper.41
13
Plaintiff argues that the Prompt Pay Statute is analogous to subrogation and
14
reimbursement laws and that such laws have not been preempted by FEHBA, citing a
15
Seventh Circuit case, Blue Cross Blue Shield of Illinois v. Cruz.42 However, as noted by
16
Premera, Plaintiff misconstrues the case law. Most federal courts have actually held
17
18
38
Id.
19
39
20
21
22
23
24
25
26
27
28
Health Care Serv. Corp. v. Methodist Hosps. of Dallas, 814 F.3d 242, 255 (5th Cir.
2016).
40
819 F.2d 921, 926 (9th Cir. 1987).
41
Cf. Tantuwaya, 2016 WL 1253867, at *8 (holding that the plaintiff’s state law claim
that he was entitled to be paid for non-covered emergency room services based on California’s
Knox-Keene Health Care Service Act, which requires insurers to pay emergency room doctors
reasonable and customary value for the emergency services rendered to the insurer’s
enrollees, even if the service rendered is not covered under the insurance plan, was preempted
under § 8902(m)(1) because, while not a dispute about coverage under the contract terms, it
nonetheless related to the processing and administration of the enrollee’s claims and reasoning
that the application of the act would expand the obligations of the insured beyond the terms of
the contract).
42
495 F.3d 510, 512 (7th Cir. 2007).
-11-
1
that state laws regarding subrogation and reimbursement are preempted under
2
§ 8902(m)(1) because subrogation and reimbursement are tied directly to payments
3
with respect to benefits.43 Furthermore, Cruz is inapplicable here because the Seventh
4
Circuit was not addressing whether the state law at issue—a common fund doctrine—
5
was related to health insurance plans and implicated coverage or benefit terms.
6
Rather, it was dealing with the issue of whether § 8902(m)(1) conferred exclusive
7
federal jurisdiction by completely preempting any and all state laws that might implicate
8
a FEHBA health insurance plan. It rejected the insurer’s argument that FEHBA’s
9
preemption provision was broad enough to completely preempt any state law dealing
10
with insurance contracts, finding that § 8902(m)(1) was not a jurisdiction-conferring
11
provision. Indeed, after finding a lack of federal jurisdiction and sending the case back
12
to state court, the Seventh Circuit nonetheless recognized that the insurer could plead
13
FEHBA preemption in state court based on the insurance contract term s as a defense
14
to the plaintiff’s invocation of the state common fund doctrine.44
15
Plaintiff also relies on a Supreme Court case, Empire Healthchoice Assurance,
16
Inc. v. McVeigh,45 for the proposition that the court should apply a limited reading of
17
§ 8902(m)(1). As with Cruz, however, Empire dealt with the jurisdictional doctrine of
18
complete preemption. It did not discuss the ordinary preemption issue presented here.
19
Indeed, other courts have found Empire’s holding limited in its reach: “As we view
20
[Empire], the Supreme Court held only that federal common law did not displace the
21
entire area of state law involving ‘FEHBA-authorized contracts at large.’ The Court left
22
open the possibility that state law could be displaced more narrowly.”46
23
24
43
25
44
26
27
28
See doc. 35 at p. 8.
Cruz, 495 F.3d at 514.
45
547 U.S. 677 (2006).
46
Bell v. Blue Cross & Blue Shield of Okla., No. 14-3731, 2016 WL 3027487, at *5 (8th
Cir. May 26, 2016).
-12-
1
Premera makes alternative arguments as to why the Prompt Pay Statute should
2
not apply here, including an argument that federal common law governs and an
3
argument that sovereign immunity prevents Plaintiff from suing Premera as to insurance
4
claims brought under the Service Benefit Plan. The court need not address these
5
arguments given that under FEHBA, 5 U.S.C. § 8902(m)(1), the Prompt Pay Statute is
6
preempted by the contract terms governing the Service Benefit Plan and therefore does
7
not apply to Plaintiff’s insurance claims for services provided to patients enrolled in the
8
Service Benefit Plan.
9
D.
ERISA preemption of the Prompt Pay Statute as to insurance claims made
under self-funded ERISA benefit plans
10
Premera argues that ERISA’s preemption provision preempts Alaska’s Prompt
11
Pay Statute as to Plaintiff’s insurance claims for services rendered to patients enrolled
12
in self-funded, ERISA-governed benefit plans. ERISA contains a broad preemption that
13
“expressly preempts all state laws ‘insofar as they may now or hereafter relate to any
14
15
employee benefit plan.’”47 ERISA’s preemption provision is limited by a “savings
clause.”48 Under the savings clause, a state law governing the insurance industry
16
escapes preemption. However, ERISA also contains a “deemer clause” that brings
17
laws that regulate self-funded ERISA benefit plans back within the scope of the
18
statute’s preemption provision.49 Application of the deemer clause means that a self-
19
funded ERISA benefit plan cannot become subject to a state’s otherwise “saved”
20
insurance laws.50 Consequently, the Prompt Pay Statute would not apply to self-funded
21
22
23
47
24
25
26
27
28
Cleghorn v. Blue Shield of Cal., 408 F.3d 1222, 1225 (9th Cir. 2005) (quoting 29
U.S.C. § 1144(a)).
48
29 U.S.C. § 1144(b)(2)(A).
49
29 U.S.C. § 1144(b)(2)(B).
50
See Pilot Life Ins. Co v. Dedeaux, 481 U.S. 41, 45 (1987); FMC Corp. v. Holliday, 498
U.S. 52, 61 (1990).
-13-
1
health benefit plans if the statute is otherwise premempted under ERISA—that is, if it
2
“relates to” an employee benefit plan.
3
A state statute “relates to” an employee benefit plan, and is therefore preempted,
4
if it has (1) a “reference to” ERISA plans or (2) a “connection with” such plans.51 A state
5
law has a “reference to” an ERISA plan when it “acts immediately and exclusively upon
6
ERISA plans” or when “the existence of ERISA plans is essential to the law’s
7
operation.”52 A state law has an impermissible “connection with” ERISA plans, when
8
the law “‘governs . . . a central matter of plan administration’” or “‘interferes with
9
nationally uniform plan administration.’”53
10
The court concludes that Alaska’s Prompt Pay Statute has the requisite
11
connection with an ERISA health benefit plan. Indeed, “[c]ourts addressing the ERISA
12
pre-emption of claims brought under similar ‘prompt pay’ state statutes tend to find
13
preemption unless the claim for payment arises from an independent agreement
14
between provider and plan.”54 In America’s Health Ins. Plans v. Hudgens, the Eleventh
15
Circuit held that Georgia’s prompt-pay provision was preempted as applied to self-
16
funded ERISA plans because the provision interfered with uniform administration of
17
benefits.55 It stressed that the while the law’s “requirements will not necessarily directly
18
alter the coverage decision-making process” it nonetheless “will compel certain action
19
(prompt benefit determination and payments) by plans and their administrators” and
20
21
22
51
23
Gobeille v. Liberty Mut. Ins. Co., 136 S.Ct. 936, 943 (2016).
52
24
25
26
27
28
Id. (internal quotations omitted); Golden Gate Rest. Ass’n v. City & County of San
Francisco, 546 F.3d 639, 657 (9th Cir. 2008).
53
Gobeille, 1326 S.Ct. at 943 (quoting Egelhoff v. Egelhoff, 532 U.S. 141, 148 (2001)).
54
OSF Healthcare Sys. v. Contech Constr. Prods. Inc. Grp. Comprehensive Health Care,
No. 1:13-cv-01554, 2014 WL 4724394, at * 6 (C.D. Ill. Sept. 23, 2014).
55
742 F.3d 1319 (11th Cir. 2014).
-14-
1
“impact the amount paid to beneficiaries in the case of late payment or notice.”56
2
Consequently, “employers offering self-funded health benefit plans would be faced with
3
different timeliness obligations in different states, thereby frustrating Congress’s
4
intent.”57 Similarly, Alaska’s Prompt Pay Statute compels payment timeframes and
5
impacts the amount paid by an employer to a claimant under a self-funded ERISA plan,
6
and therefore the reasoning set forth in Hudgens is applicable here. Plaintiff did not
7
cite any Ninth Circuit authority that specifically conflicts with Hudgens or would
8
otherwise suggest that the reasoning behind Hudgens should not apply here.
9
E.
10
Standing to bring HIPAA action as to Service Benefit Plan insurance claims
Premera argues that Count II should be dismissed as to Plaintiff’s insurance
11
claims that were filed for laboratory services rendered to patients enrolled in the Service
12
Benefit Plan because Plaintiff does not have standing to bring such an action as to
13
these claims. It argues that Plaintiff does not have standing because the requested
14
remedy—a declaration that ZMG has submitted all laboratory insurance claims at issue
15
with the proper [code] in Box 32 as is consistent with HIPAA—will not redress the injury
16
here. According to Premera, even if ZMG is checking Box 32 correctly, those claims
17
still need to be filed with Blue Cross and Blue Shield of Tennessee (“BCBST”) to
18
receive payment. Originally, Premera did not provide any support for its argument that
19
these insurance claims need to be submitted to BCBST, but with the court’s permission
20
Premera filed supplemental documents that it claims support its assertion, along with
21
additional briefing on the matter of standing.58 Plaintiff filed a response to Premera’s
22
filing.59 Plaintiff disputes Premera’s interpretation of the documents submitted; he
23
stresses that the provisions Premera relies on to support its argument are not
24
25
56
Id. at 1331.
26
57
27
58
28
59
Id.
Doc. 39.
Doc. 41.
-15-
1
applicable to insurance claims involving out-of-state physician office laboratories where
2
the physician-patient encounter occurs in Alaska. After due consideration of both
3
parties’ filings, the court cannot conclude at this motion-to-dismiss stage that the
4
documents provided are sufficient to demonstrate that the Service Benefit Plan
5
insurance claims at issue must be filed in Tennessee. It appears that resolving the
6
issue of where Service Benefit Plan insurance claims should be filed is intertwined and
7
overlaps with the underlying issue in Count II—whether ZMG is properly coding its
8
insurance claims under HIPAA. Resolving Count II will involve a determination as to
9
the proper classification of ZMG’s Tennessee laboratory and consideration of whether
10
the location of the face-to-face contact between physician and patient is determinative.
11
Those are factual and legal issues that also impact where the insurance claims should
12
be filed based on the controlling contracts and procedure manuals provided by Premera
13
in its supplemental filing. The court cannot conclude, as Premera argues, that resolving
14
the coding issue will not affect how Premera processes and pays Plaintiff’s laboratory
15
claims. As Plaintiff points out, there are facts alleged in the complaint and in the
16
correspondence attached to the complaint that suggest otherwise.60 Moreover, even if
17
Plaintiff files these types of insurance claims with BCBST, he contends that he is legally
18
required under HIPAA and its related regulations and rules to fill out Box 32 with Alaska
19
listed as the laboratory service location as he has been doing. If that is the case,
20
BCBST would not pay the claim either.
21
Premera also asserts that Count II “offers no tangible relief on its own” if the
22
court concludes that the Prompt Pay Statute is preempted pursuant to FEHBA as to
23
Service Benefit Plan insurance claims, as it has here. It argues that because Count II
24
includes the allegation that Premera is using the Box 32 issue as a pretext to avoid the
25
Prompt Pay Statute and because the application of the Prompt Pay Act to Service
26
Benefit Plan insurance claims is preempted by FEHBA, there is no remaining
27
28
60
See Doc. 23 at p.6, ¶¶ 34-35; Doc. 23-1 at p.2.
-16-
1
substantive dispute between the parties as to these types of insurance claims. The
2
court, however, is not persuaded by Premera’s argument that there is no longer a
3
substantive dispute as it relates to HIPAA and Service Benefit Plan insurance claims.
4
As Plaintiff notes in its response to Premera’s supplemental filing, the complaint
5
alleges, and the correspondence between the parties shows, that Premera has
6
represented to Plaintiff that ZMG’s prepayment review status will only be lifted once
7
ZMG properly fills out the HCFA 1500 form. Therefore, resolution of the coding issue is
8
necessary before Plaintiff can receive payment on these insurance claims, regardless
9
of the Prompt Pay Statute.61
10
V. CONCLUSION
11
Based on the preceding discussion, Premera’s motion to dismiss at docket 26 is
12
GRANTED IN PART AND DENIED IN PART as follows: Count I is dismissed only as to
13
insurance claims filed in relation to patients enrolled in the Service Benefit Plan and
14
insurance claims filed in relation to patients enrolled in self-funded ERISA health benefit
15
plans. Count II remains in its entirety.
16
17
DATED this 16th day of August 2016.
18
/s/ JOHN W. SEDWICK
SENIOR JUDGE, UNITED STATES DISTRICT COURT
19
20
21
22
23
24
25
26
27
28
61
See Doc. 23 at p.6, ¶¶ 34-35; Doc. 23-1 at p. 2.
-17-
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?