Health Care Service Corp. v. Methodist Hospitals o
814 F.3d 242
| 5th Cir. | 2016Background
- HCSC (Blue Cross Blue Shield of Texas division BCBSTX) administered: employer self-funded plans, state government plans, BlueCard claims, and FEHBP plans for federal employees; it sometimes only processed claims and did not assume risk.
- Methodist is a preferred provider with a network agreement; it sued for Chapter 1301 penalties for alleged late payment of claims processed by BCBSTX.
- Chapter 1301 (Texas Prompt Pay Act for preferred provider plans) requires timely determinations/payments of "clean claims" and imposes penalties for late payment of approved claims; it applies to "insurers" providing coverage through a "health insurance policy" and extends to certain administrators with whom an insurer contracts.
- HCSC sought declaratory relief that Chapter 1301 does not apply to BCBSTX’s administrative roles and that FEHBA preempts application of Chapter 1301 to FEHBP claims; district court granted summary judgment for HCSC.
- On appeal, the Fifth Circuit affirmed: Chapter 1301 does not apply to BCBSTX when it merely administers the self-funded, state, or BlueCard plans; FEHBA preempts Chapter 1301 as applied to FEHBP claims administered by BCBSTX.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Chapter 1301 applies to BCBSTX when it only administers self-funded, state, or BlueCard plans | Chapter 1301 should not apply because BCBSTX only administers and does not provide benefits or bear risk; administrator role falls outside the statute | Chapter 1301’s definitions are broad; BCBSTX’s administrator/provider agreements function as a "health insurance policy" or otherwise bring it within the statute | Held: Chapter 1301 does not apply — BCBSTX does not "provide for payment through [its] health insurance policy" when merely administering; administrator/provider agreements do not confer benefits to insureds |
| Whether section 1301.109 reaches administrators of self-funded and out-of-state plans | N/A (HCSC) — section 1301.109 applies only where an "insurer" (as defined) contracts with the administrator | Methodist: section 1301.109 extends to BCBSTX because it is an insurer and administers claims, including some BlueCard claims tied to HCSC divisions | Held: Section 1301.109 inapplicable because self-funded and state plans are not "insurers" under the statute; Methodist’s late appellate theory about some out-of-state HCSC divisions was waived and unsupported by evidence |
| Whether stop-loss coverage turns BCBSTX into an "insurer" subject to Chapter 1301 | Methodist argued stop-loss could make HCSC effectively an insurer if triggered at low thresholds | HCSC: no evidence stop-loss triggers at unreasonably low amounts; stop-loss does not convert administrative role into providing benefits | Held: Speculative stop-loss argument fails on the facts; no evidence of stop-loss making BCBSTX an insurer here |
| Whether FEHBA preempts Chapter 1301 as applied to FEHBP claims | HCSC: FEHBA’s express preemption supersedes state laws that "relate to" FEHBP coverage, benefits, or payment administration | Methodist: Chapter 1301 only imposes remedies for late payment of approved claims and does not "relate to" plan coverage or benefits | Held: FEHBA preempts Chapter 1301 for FEHBP claims — the statute’s timing/penalty rules affect claims processing and carriers’ obligations, disrupting nationwide uniformity required by FEHBA |
Key Cases Cited
- Brown v. Granatelli, 897 F.2d 1351 (5th Cir. 1990) (stop-loss insurance may be treated as accident-and-sickness coverage if it effectively functions as direct insurance)
- Burkey v. Gov’t Emps. Hosp. Ass’n, 983 F.2d 656 (5th Cir. 1993) (state penalties for claim-handling are preempted by FEHBA because they relate to plan administration and would disrupt uniform administration)
- Empire HealthChoice Assur., Inc. v. McVeigh, 396 F.3d 136 (2d Cir. 2005) (articulating FEHBA preemption test: whether contract terms relate to coverage/benefits and whether state law relates to health insurance or plans)
- America’s Health Ins. Plans v. Hudgens, 742 F.3d 1319 (11th Cir. 2014) (state prompt-pay statutes compel plan administrators to act and thus can be preempted because they affect benefit determinations and plan administration)