SHAH v. HORIZON BLUE CROSS BLUE SHIELD OF NEW JERSEY

Filing 16

OPINION. Signed by Judge Noel L. Hillman on 3/27/2018. (tf, )

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

RAHUL SHAH, MD
ON ASSIGNMENT OF MARY A.,
Plaintiff,

1:17-cv-00632-NLH-AMD
OPINION

v.
HORIZON BLUE CROSS BLUE
SHIELD OF NEW JERSEY,
Defendant.

APPEARANCES:
MICHAEL GOTTLIEB
CALLAGY LAW PC
650 FROM ROAD
SUITE 565
PARAMUS, NJ 07652
On behalf of Plaintiff
MICHAEL E. HOLZAPFEL
BECKER LLC
354 EISENHOWER PARKWAY
SUITE 1500
LIVINGSTON, NJ 07039
On behalf of Defendant

HILLMAN, District Judge
This matter concerns claims by an out-of-network physician,
as assignee of his patient’s rights, against a benefits plan for
violations of the Employee Retirement Income Security Act of
1974 (“ERISA”), 29 U.S.C. § 1001 et seq., when the plan paid him
less than $10,000 for what he valued to be a $217,000 elective

spinal surgery.
Defendant has moved for summary judgment in its favor on
all of Plaintiff’s claims, arguing that it is entitled to
judgment in its favor that it did not act arbitrarily and
capriciously when it reimbursed Plaintiff according to its plan
terms regarding payment to out-of-network providers.

For the

reasons expressed below, Defendant’s motion will be granted.
BACKGROUND
On August 27, 2014, Plaintiff, Rahul Shah, M.D., performed
a non-emergency, elective, outpatient spinal surgery on his
patient, Mary A.

The patient is a participant and beneficiary

of a health benefit plan sponsored by her spouse’s employer (the
“Plan.”

The plan is administered by Defendant, Horizon Blue

Cross Blue Shield of New Jersey, and it is governed by ERISA.
For reason explained more fully below, Defendant describes the
plan it had in place for Mary A.’s spouse’s employer as a “70/30
plan” as it relates to out-of-network providers.
At the time of the surgery, Plaintiff was an out-of-network
provider under the Plan.

The patient assigned her rights to

benefits under the Plan to Plaintiff, who then filed for
reimbursement for the surgery.

Plaintiff submitted a claim for

$217,363.00, and the Plan paid Plaintiff $9,762.95.

Plaintiff

followed the Plan’s appeal process, with the Plan ultimately
concluding that the reimbursement amount was properly calculated
2

at the rate prescribed by the Plan.
Plaintiff claims that Defendant violated ERISA §
502(a)(1)(B), demanding additional benefits owed to him, and
ERISA § 404, for Defendant’s alleged breach of fiduciary duty. 1
Plaintiff seeks $207,600.05 in unpaid benefits, plus interest,
attorney’s fees, and costs.

Defendant has moved for summary

judgment in its favor, and Plaintiff has opposed Defendant’s
motion.
DISCUSSION
A.

Subject matter jurisdiction

Defendant removed this action pursuant to 28 U.S.C. §§
1331, 1441(a) & (c), and 28 U.S.C. § 1446 to this Court from the
Superior Court of New Jersey, Law Division, Cumberland County.
Federal question jurisdiction exists in this matter pursuant to
28 U.S.C. § 1331, which provides that the district court has
original jurisdiction of “all civil actions arising under the
Constitution, laws or treaties of the United States.”

Employee

Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C.
§ 1001 et seq., further provides that the district courts of the
United States shall have at least concurrent, and sometimes

1

Plaintiff’s complaint also asserted a count for breach of
contract under state law and a count for the violation of 29
C.F.R. § 2560.503-1, which is an ERISA timing and disclosure
regulation governing the claims adjudication and appeals
process. Plaintiff has agreed to dismiss those claims. (See
Docket No. 11 at 7.)
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exclusive, jurisdiction over the ERISA causes of action pleaded
in the complaint. 29 U.S.C. § 1132(e)(1).
B.

Standard for Summary Judgment

Summary judgment is appropriate where the Court is
satisfied that the materials in the record, including
depositions, documents, electronically stored information,
affidavits or declarations, stipulations, admissions, or
interrogatory answers, demonstrate that there is no genuine
issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.

Celotex Corp. v.

Catrett, 477 U.S. 317, 330 (1986); Fed. R. Civ. P. 56(a).
An issue is “genuine” if it is supported by evidence such
that a reasonable jury could return a verdict in the nonmoving
party’s favor.
248 (1986).

Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

A fact is “material” if, under the governing

substantive law, a dispute about the fact might affect the
outcome of the suit.

Id.

In considering a motion for summary

judgment, a district court may not make credibility
determinations or engage in any weighing of the evidence;
instead, the non-moving party's evidence “is to be believed and
all justifiable inferences are to be drawn in his favor.”
Marino v. Industrial Crating Co., 358 F.3d 241, 247 (3d Cir.
2004)(quoting Anderson, 477 U.S. at 255).
Initially, the moving party has the burden of demonstrating
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the absence of a genuine issue of material fact.
v. Catrett, 477 U.S. 317, 323 (1986).

Celotex Corp.

Once the moving party has

met this burden, the nonmoving party must identify, by
affidavits or otherwise, specific facts showing that there is a
genuine issue for trial.

Id.

Thus, to withstand a properly

supported motion for summary judgment, the nonmoving party must
identify specific facts and affirmative evidence that contradict
those offered by the moving party.
57.

Anderson, 477 U.S. at 256-

A party opposing summary judgment must do more than just

rest upon mere allegations, general denials, or vague
statements.

Saldana v. Kmart Corp., 260 F.3d 228, 232 (3d Cir.

2001).
C.

Analysis

Plaintiff - who stands in the shoes of his patient through
the assignment of benefits - seeks benefits he claims he is owed
under the Plan, and claims that Defendant violated its fiduciary
duty by failing to pay him the benefits owed.

These claims are

governed by ERISA § 502(a)(1)(B), which allows a plan
participant or beneficiary to bring a civil action to, among
other things, “recover benefits due to him under the terms of
his plan,” 29 U.S.C. § 1132(a)(1)(B), and § 404 of ERISA, which
provides that a “fiduciary shall discharge his duties with
respect to a plan solely in the interest of the participants and
beneficiaries . . . [by] providing benefits to participants and
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their beneficiaries,” 29 U.S.C. § 1104.
This Court’s standard of review for claims alleging
violations of these provisions is an abuse of discretion
standard.

See Fleisher v. Standard Ins. Co., 679 F.3d 116, 120

(3d Cir. 2012) (citations omitted) (explaining that when an
ERISA plan grants its administrator discretionary authority, as
in the case here, the deferential standard of review is
appropriate, and an administrator’s decision is arbitrary and
capricious if it is without reason, unsupported by substantial
evidence or erroneous as a matter of law).

Thus, the issue to

be decided is whether Defendant was arbitrary and capricious in
its interpretation of the plan and resulting payment to
Plaintiff.

The Court finds that Defendant did not abuse its

discretion in this case.
The plan determined that as an out-of-network provider,
Plaintiff was entitled to 70% of 150% of the Medicare-prescribed
amount for the same services. 2

Defendant points to the following

2

As discussed more fully below, the plan and attendant documents
also clearly indicate that the provider may bill the plan
participant 30% of the amount determined to be 150% of the
Medicare-prescribed amount. This is because the plan
participant has a co-insurance (or perhaps more accurately a
self-insurance) obligation of 30% of the same allowance under
the plan payable to out-of-network providers. This provides an
incentive for participants insured under the plan to choose innetwork providers who have agreed by contract with Defendant to
provide services at a reduced rate. Of course, 70% plus 30%
equals 100%. This is because under the view of the plan, the
out-of-network provider is, of course, entitled to 100% (or
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provisions in the plan to support its determination:
If a member receives a “Covered Service” from an out-ofnetwork provider, then the plan will pay a percentage of the
“Covered Charge,” “up to the Allowance.” 3
31, Plan Definitions.)

(Docket No. 11-3 at

The “Allowance,” in turn, is “an amount

determined by Horizon BCBSNJ as the least of the following
amounts: (a) the actual charge made by the Provider for the
service or supply; (b) in the case of In-Network Providers, the
amount that the Provider has agreed to accept for the service or
supply; or (c) in the case of Out-of-Network Providers, the
amount determined as 150% of the amount that would be reimbursed
for the service or supply under Medicare.”

(Id. at 28, Plan

stated differently all) of the allowance under the plan for his
services (70% directly from the insurance company and 30% from
the patient). It does not help for merely simplicity and ease
of calculation purposes that in order to calculate the actual
amount of the doctor’s fee payable directly from the insurance
company one must: a) determine the Medicare rate for the coded
service; b) determine 150% of that amount; and c) determine 70%
of the amount of (b). That this process takes several steps as
outlined in the clear terms of the plan and some elementary math
does not, as Plaintiff contends, make it indecipherable, vague,
or unfair. In fact, it is clearly what Mary A.’s spouse’s
employer bargained for when it engaged Defendant to administer
the health insurance plan. A reasonable person may wonder what
Mary A.’s premiums and, if it were an employer subsidized plan,
what Mary A.’s spouse’s employer share of the premiums would be
if an out-of-network medical provider could subjectively set the
value of its own services and then demand 70% of that amount.
3

The definitions section of the plan explains, “Covered Charges:
The authorized charges, up to the Allowance, for Covered
Services and Supplies.” (Docket No. 11-3 at 31, Plan
Definitions.)
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Definitions.)
“Coinsurance” is the “percent applied to Covered Charges
(not including Deductibles) for certain Covered Services or
Supplies in order to calculate benefits under the Program.
These are shown in the Schedule of Covered Services and
Supplies.

The term does not include Copayments.

For example,

if Horizon BCBSNJ's Coinsurance for an item of expense is 70%,
then the Covered Person's Coinsurance for that item is 30%.”
(Id. at 30, Plan Definitions.)

Defendant contends that the plan

provided for, and properly paid Plaintiff for, 70% of 150% of
the Medicare-prescribed amount for the same services.

Defendant

further states that Plaintiff does not dispute that he was paid
that amount.
Plaintiff, however, contends that he should have been paid
70% of his charges - as he himself calculates them - without
reference to any other provision in the Plan.

Plaintiff’s

argument is based simply and exclusively on the plan’s “Schedule
of Covered Services and Supplies,” which states: “Surgical
Services – Out-of-Network - Outpatient - Subject to Deductible
and 70% Coinsurance.”

(Docket No. 11-3 at 56, SCHEDULE OF

COVERED SERVICES AND SUPPLIES, A. COVERED BASIC SERVICES AND
SUPPLIES.)

Plaintiff argues that having to unpack, like Russian

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nesting dolls, 4 the provisions buried in the plan relied upon by
Defendant is deceptive and constitutes a breach its fiduciary
duties. 5

4

Plaintiff refers to another case pending in this district,
where the court denied Horizon’s motion to dismiss on the issue
of the validity of an ERISA benefits plan’s anti-assignment
clause. The court in that case denied Horizon’s motion to
dismiss, finding that the “anti-assignment clause forces the
reader to undertake a Russian-nesting-doll-like inquiry, where
each provision reveals yet another term or exception defined
elsewhere in the Plan. And when the reader finally reaches the
ostensible end of this multi-step inquiry, there is still no
clear answer as to what constitutes an ‘Eligible Charge.’”
University Spine Center v. Horizon Blue Cross Blue Shield of New
Jersey, 2017 WL 3610486, at *3 (D.N.J. Aug. 22, 2017). Even
though Plaintiff uses the nesting doll analogy in this case, the
procedural posture of, and precise issue before, the court in
the University Spine Center case is very different from the
matter here. Nevertheless, this Court credits the nesting doll
analogy to describe the need to consider several provisions in
the plan at issue in this case to form the basis for Defendant’s
determination of Plaintiff’s claim. The difference in this
case, however, is that at the end of the multi-step inquiry, a
clear answer is found.
5

Plaintiff also argues that despite Defendant’s contention that
it reimbursed Plaintiff in accordance with the plan’s terms (70%
of 150% of Medicare rates), two of the billed treatment codes –
CPT Codes 20936 and 20930 – did not contain a Medicare
reimbursement rate at the time of the subject treatment. Under
the terms of the plan, treatment codes not priced by Medicare
are reimbursed at UCR rates (“usual and prevailing payments made
to providers for similar services”). Plaintiff claims that his
billed charges are consistent with UCR as they are specifically
based on a UCR database, but that Defendant’s reimbursement for
the codes that fall under this criterion was woefully short of
UCR, resulting in the reimbursement of approximately 9% of his
charges for the two applicable treatment codes. Plaintiff
argues that these two treatment codes present another example of
Defendant’s arbitrary and capricious payment determination. To
support his argument, Plaintiff points to Exhibit E in his
complaint - his October 14, 2016 second notice of appeal letter
to Defendant - which is simply Plaintiff’s request that
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Plaintiff’s self-serving interpretation of the Plan
myopically ignores the clear inter-relationship and correlation
between sequential Plan provisions and is so lacking in support
from the terms of the Plan itself as to be borderline frivolous.
First, even accepting Plaintiff’s characterization that the
provisions in the plan regarding payment for an out-of-network
out-patient surgery must be “unpacked,” that does not mean that
the plan acted in an arbitrary and capricious manner when it
paid Plaintiff’s claim in accord with those provisions.

The

Plan language provides that for an out-of-network surgery, the
Plan will pay 70% of allowable charges, and those allowable
charges are 150% of the Medicare rates, with the plan
participant owing 30% of 150% of the Medicare rates to the
provider as co-insurance if the provider chose to bill the
participant for the additional amount.

As assignee of the Plan

participant’s benefits, Plaintiff is therefore entitled to no
more than 70% of the 150% of the Medicare rates directly from
Defendant.
Although the Plan language is required to be read in
reference to several defined terms of the Plan, the lack of one

Defendant provide him with documentation it believes supports
its determination of UCR. (Docket No. 1 at 38.) It does not
provide proof that Defendant’s reimbursement did not comply with
UCR. Thus, the Court finds that Plaintiff has not set forth
sufficient proof to support his claim that Defendant abused its
discretion as to these two treatment codes.
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compound sentence linking those terms does not cause the Plan’s
decision to be erroneous.

Moreover, Plaintiff’s disagreement

with the fairness of the reimbursement terms under the Plan does
not render the Plan’s decision, which followed those terms, to
be in error.

See, e.g., Shah v. Horizon Blue Cross Blue Shield

Of New Jersey, 2018 WL 801584, at *5 (D.N.J. 2018) (“A Plan that
requires a careful reading is not, without more, inherently
deceptive or misleading.”) 6; Professional Orthopedic Associates,
P.A., et al. v. Horizon Blue Cross Blue Shield Of New Jersey,
2017 WL 1838875, at *3 (D.N.J. 2017) (where a plan participant
underwent elective spinal surgery with an out-of-network
physician who was reimbursed at 250% of the amount that would be
paid pursuant to the fee schedule developed by CMS, finding that
the plan based its determination on the plain language of the
plan, and that the reimbursement was consistent with the express
language of the plan, despite the physician’s argument that the
payment was significantly below the usual and customary rate for
the surgery performed) (citing N.J. Back Inst. v. Horizon Blue
Cross Blue Shield Ins. Co., 2014 WL 809164, at *4 (D.N.J. 2014)
(granting summary judgment to a health benefit plan in a

6

In that case, which involves the same Plaintiff as in this
matter and similar surgical services, a court in this District
rejected the same arguments advanced by Plaintiff in this matter
finding that Plaintiff was entitled, under terms of a similar
“60/40” plan, to 60% of 150% of the Medicare set rate for the
services rendered. Shah, 2018 WL 801584, at *3.
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reimbursement dispute with an out-of-network provider, because
the plan set forth the manner in which reimbursements were
determined for out-of-network providers); Montvale Surgical Ctr.
v. Horizon Blue Cross Blue Shield of N.J., Inc., 2013 WL
4501475, at *3–4 (D.N.J. 2013) (granting summary judgment to a
health benefit plan in a reimbursement dispute with an out-ofnetwork provider based upon the same aforementioned reasoning)).
Second, even though Plaintiff argues that the Plan terms are
unfair and ambiguous, the claims before the Court do not require
the assessment of the Plan participant’s interpretation of the
Plan or her reliance on certain terms in the Plan.
entirely different case not pleaded here. 7

That is an

See CIGNA Corp. v.

Amara, 563 U.S. 421, 435–36 (2011) (finding that § 502(a)(1)(B)
only grants a court the power to enforce the terms of the plan,
not change the terms of the plan); id. at 443 (finding that when

7

Plaintiff has not asserted a claim of equitable reformation in
his complaint, and there is no evidence in the record that the
Plan participant relied upon the representations by the Plan
regarding the payment of benefits to Plaintiff that would
support Plaintiff’s contention that he was to be paid 70% of his
charges. Additionally, Plaintiff has not pleaded a claim for
violations of 29 U.S.C. §§ 1022(a), 1024(b) (ERISA §§ 102(a) and
104(b)), which require a plan administrator to provide
beneficiaries with summary plan descriptions and with summaries
of material modifications, “written in a manner calculated to be
understood by the average plan participant,” that are
“sufficiently accurate and comprehensive to reasonably apprise
such participants and beneficiaries of their rights and
obligations under the plan.”
12

a court exercises its authority under § 502(a)(3) to impose a
remedy equivalent to estoppel, including reformation, a showing
of detrimental reliance must be made).

Plaintiff may be

disappointed with the out-of-network reimbursement terms of his
patient’s benefits plan, which resulted in a payment that was a
small percentage of Plaintiff’s charges, but Plaintiff accepted
the terms of the Plan when he agreed with his patient to the
assignment of her benefits.
The parties are likely to agree, and it is certainly this
Court’s observation, that ERISA-governed employer-sponsored
health plans are complicated and comprehensive documents.
are several reasons for this.

There

There are many types of medical

providers and myriad services they perform.
to set a rate for or value those services.

There are many ways
A plan must

determine what it will cover, what it will not, and what it will
pay as benefits.

The plans may cover large groups of employees,

may cover multiple employers, and apply across state borders.
They are subject, therefore, to state and federal regulation and
the pressures of a competitive marketplace.

They set and define

processes to consider, evaluate, and pay out benefits and for
administrative review of disputes.

And like any well-drafted

contract a plan would seek to anticipate and address all
foreseeable scenarios.
When Mary A. first consulted Plaintiff about his services,
13

he had several options.

First, he could have set what he

perceived as the market rate for his services and conditioned
providing his services on the payment of that fee, leaving to
the patient reimbursement under applicable insurance.

Second,

he could have agreed to accept Mary A.’s insurance and the
benefit it provided (70% of 150% of the Medicare rate for the
covered service) and billed Mary for the remaining 30% of the
allowed and clearly defined benefit.
What he could not do was accept the benefit under the Plan,
take an assignment from Mary A. of any additional claims she
might have, and through this lawsuit seek to blow up – without
legal or factual support - the carefully and clearly drafted
mutually beneficial agreement between Mary A.’s spouse’s
employer and Defendant.

Plaintiff’s claim that he is entitled

to 70% of the fee he has set for his services as against this
Defendant lacks any support in the law or the Plan terms.
Despite his protestations to the contrary, as the Court can best
discern, Plaintiff seeks his demanded fee of over $217,000
simply because he thinks he’s entitled to it.
In sum, the clear, unambiguous, bargained for terms of the
Plan provide for the exact payment Defendant paid Plaintiff.
cannot be found, therefore, that Defendant’s benefits
determination was without reason, unsupported by substantial
evidence, or erroneous as a matter of law.
14

It

CONCLUSION
For the reasons expressed above, Defendant has established
that the Plan did not abuse its discretion when it paid
Plaintiff for his surgical services as an out-of-network
provider.

Consequently, Defendant is entitled to judgment in

its favor on all of Plaintiff’s claims.
An appropriate Order will be entered.

Date: March 27, 2018
At Camden, New Jersey

s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.

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