Cupp v. Johns et al

Filing 13

OPINION AND ORDER that Humana Insurance Company's 8 motion to dismiss is granted, and plaintiff's claim against defendant Humana Insurance Company is dismissed without prejudice; further to the extent that any claims may remain pending against Defendant Dane F. Johns, case is to be REMANDED to the Circuit Court of Johnson County, AR for resolution of those claims.. Signed by Honorable P. K. Holmes, III on March 10, 2014. (rw)

IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FORT SMITH DIVISION
DARRELL RICHARD CUPP
v.

PLAINTIFF
Case No. 2:14-cv-02016

DANE F. JOHNS; and HUMANA INSURANCE COMPANY

DEFENDANTS

OPINION AND ORDER
Currently before the Court is Defendant Humana Insurance Company’s (“Humana”) motion
to dismiss (Doc. 8) and brief in support (Doc. 9). No response has been filed by Plaintiff Darrell
Richard Cupp, and the response period has passed.
Humana argues that this case should be dismissed for lack of jurisdiction, as Cupp has failed
to exhaust his administrative remedies as required by the Medicare Program, Title XVIII of the
Social Security Act (“Medicare Act”), 42 U.S.C. § 1395, et seq. Alternatively, Humana argues that
the case should be dismissed for failure to state a claim, as the Arkansas state law pursuant to which
Cupp brings his claims is pre-empted by federal Medicare law. The Court finds that the case should
be dismissed as to Humana for failure to follow the administrative review procedure required by the
Medicare Act. The Court therefore declines to consider any alternate basis for dismissal on the
merits.
I.

Background
On August 22, 2007, Cupp was injured in an automobile accident caused by separate

Defendant Dane F. Johns. Cupp was insured by Humana for health insurance coverage through a
Medicare Advantage (“MA”) policy. After the accident, Humana paid approximately $25,000 in
medical payments under the policy. Cupp subsequently filed a negligence action against Johns in
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the Circuit Court of Johnson County, Arkansas. On or about September 15, 2010, Cupp received
and accepted a settlement of $25,000 on his negligence claim from Johns’s automobile liability
insurance carrier, State Farm Insurance Company. After learning of the settlement, Humana asserted
a subrogation claim against Cupp for the amount it had previously paid for his medical expenses.1
Cupp then filed an amended complaint in his state-court action against Johns adding Humana as an
additional defendant and seeking a declaration, pursuant to Arkansas subrogation law, that Humana
has no right to reimbursement from any portion of Plaintiff’s settlement. Humana then removed the
case to this Court claiming that this Court has subject matter jurisdiction pursuant to the Federal
Officer Removal Statute, 28 U.S.C. § 1442(a)(1). Humana now moves the Court to dismiss this
action arguing that the Court lacks jurisdiction to hear Cupp’s claims as Cupp has not properly
exhausted his administrative remedies as required by the Medicare Act. Humana also argues that,
even if Cupp had exhausted his administrative remedies, his case should be dismissed as the
Arkansas subrogation law cited to by Cupp is pre-empted by the Medicare Act.
II.

Discussion
MA plans, such as the one Cupp had with Humana, are also called Medicare Part C plans or

Medicare+Choice plans, and are provided for under the Medicare Act. 42 U.S.C. § 1395w21(a)(1)(B). The MA program was enacted to be an alternative to Medicare Parts A and B that
allows individuals to receive their Medicare benefits from private insurance companies instead of
receiving their benefits directly from the federal government. See id. (an individual eligible to enroll
in Medicare+Choice is entitled to elect to receive benefits either through the original fee-for-service
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Humana, in its brief, cites to the letter it sent to Cupp asserting the subrogation, or
reimbursement, claim. It does not appear, however, that the letter has been made a part of the record
in this case.
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program under Medicare Parts A and B or through an MA plan). Under MA plans, private insurance
companies contract with the federal government to administer the plans. 42 U.S.C. § 1395w-27.
Persons who elect to enroll in an MA plan must be provided with the same benefits available to those
individuals enrolled in Medicare Parts A or B. 42 U.S.C. § 1395w-22(a)(1).
In 1980, Congress passed legislation that made Medicare the secondary payer to certain
primary plans in an effort to shift costs from Medicare to the appropriate private sources of payment.
The Medicare Secondary Payer (“MSP”) provisions of the Medicare Act provide that, as a secondary
payer, an MA provider may not generally make a payment where “payment has been made or can
reasonably expected to be made . . . under an automobile or liability insurance policy or plan
(including a self-insured plan) or under no fault insurance.” 42 U.S.C. § 1395y(b)(2)(A). “Medicare
benefits are secondary to benefits payable by a primary payer even if State law or the primary payer
states that its benefits are secondary to Medicare benefits or otherwise limits its payments to
Medicare beneficiaries.” 42 C.F.R. § 411.32(a)(1). The MSP provisions do, however, allow the
Secretary, and by extension MA providers under contract with the federal government, to make
conditional payments “with respect to an item or service if a primary plan . . . has not made or cannot
reasonably be expected to make payment with respect to such item or service promptly (as
determined in accordance with regulations),” with any such payment being conditioned on
reimbursement to the Medicare secondary payer. 42 U.S.C. § 1395y(b)(2)(B)(i); accord 42 U.S.C.
§ 1395w-22(a)(4) (making MSP provisions applicable to Medicare+Choice organizations) and 42
C.F.R. § 422.108(f) (“The MA organization will exercise the same rights to recover from a primary
plan, entity, or individual that the Secretary exercises under the MSP regulations . . . .”).
Reimbursement to the Medicare secondary payer is required “if it is demonstrated that [the] primary
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plan has or had a responsibility to make payment with respect to such item or service. A primary
plan’s responsibility for such payment may be demonstrated by a judgment, a payment conditioned
upon the recipient’s compromise, waiver, or release . . . or by other means.” 42 U.S.C. §
1395y(b)(2)(B)(ii). If a Medicare enrollee receives from an MA provider covered services that are
also covered by a primary payer, the MA provider may charge an individual, in accordance with the
MSP provisions, “to the extent that the individual has been paid under such law, plan, or policy” by
the primary payer. 42 U.S.C. § 1395w-22(a)(4)(B); see also 42 C.F.R. § 422.108(d)(2) (an MA
provider may bill a Medicare enrollee under the MSP provisions “to the extent that he or she has
been paid by [a] carrier, employer, or entity for covered medical expenses”).
The Court finds that Humana was acting according to the provisions of the Medicare Act,
as an MA provider as contemplated by that Act, when it demanded payment from Cupp pursuant to
the MSP provisions and corresponding regulations. Cupp received payment from a primary
payer—Johns’s automobile liability insurance carrier—and Humana subsequently sought
reimbursement of the conditional payment it made as the secondary payer under the MSP provisions.
The appropriate remedy for Cupp to challenge Humana’s demand is for Cupp to go through the
administrative review and appeals process required by the Medicare Act. 42 U.S.C. § 1395w-22(g)
(cross-referencing provisions of 42 U.S.C. § 405); Shalala v. Ill. Council on Long Term Care, Inc.,
529 U.S. 1 (2000) (cross-reference to 42 U.S.C. § 405 in Medicare provision made special review
procedure created by the Medicare statutes mandatory before a district court could exercise
jurisdiction over the claims arising under the Medicare Act).
The Court finds that Cupp’s claim that Humana is wrongfully demanding reimbursement of
its conditional payment arises under the provisions of the Medicare Act and is a claim that requires
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a determination regarding what amount Cupp—as an MA enrollee—is required to pay with respect
to the services he received. His claim falls within the ambit of those claims required to first be
presented through the Medicare review and appeals process. If, after going through that process,
Cupp receives a determination that he believes is erroneous or unsatisfactory, he may then adjudicate
his claim through the courts. At that point, the court would have the substantial benefit of a
complete administrative record for review. Furthermore, any Arkansas law regarding subrogation
cannot limit Humana’s ability to seek reimbursement of a conditional payment under the Medicare
Act and corresponding regulations. See, e.g., 42 C.F.R. § 422.108(f) (“A State cannot take away an
MA organization’s right under Federal law and the MSP regulations to bill . . . for services for which
Medicare is not the primary payer.”).
III.

Conclusion
For all the reasons set forth above, IT IS ORDERED that Humana’s motion to dismiss (Doc.

8) is GRANTED, and Plaintiff’s claim against Defendant Humana Insurance Company is
DISMISSED WITHOUT PREJUDICE.
To the extent that any claims may remain pending against Defendant Dane F. Johns, this case
is to be REMANDED to the Circuit Court of Johnson County, Arkansas for resolution of those
claims.
IT IS SO ORDERED this 10th day of March, 2014.

/s/P. K. Holmes, III
P.K. HOLMES, III
CHIEF U.S. DISTRICT JUDGE

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