EUGENE LOREN; DANIELLE HAGEMANN, Plаintiffs-Appellants, v. BLUE CROSS & BLUE SHIELD OF MICHIGAN, Defendant-Appellee.
No. 06-2090
United States Court of Appeals, Sixth Circuit
Argued: July 24, 2007; Decided and Filed: September 20, 2007
07a0383p.06
Before: COLE and GILMAN, Circuit Judges; MARBLEY, District Judge.
RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206. Appeal from the United States District Court for the Eastern District of Michigan at Detroit. No. 05-74908—Patrick J. Duggan, District Judge.
COUNSEL
ARGUED: Stephen F. Wasinger, STEPHEN F. WASINGER PLC, Royal Oak, Michigan, for Appellants. Catherine E. Stetson, HOGAN & HARTSON, Washington, D.C., for Appellee. ON BRIEF: Stephen F. Wasinger, STEPHEN F. WASINGER PLC, Royal Oak, Michigan, John H. Eggertsen, EGGERTSEN & ASSOCIATES, Pittsfield Township, Michigan, for Appellants. Catherine E. Stetson, Evan Miller, HOGAN & HARTSON, Washington, D.C., Robert P. Hurlbert, DICKINSON WRIGHT, Bloomfield Hills, Michigan, K. Scott Hamilton, DICKINSON WRIGHT, Detroit, Michigan, for Appellee.
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OPINION
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ALGENON L. MARBLEY, District Judge. Plaintiff-Appellants Eugene Loren (“Loren“) and Danielle Hagemann (“Hagemann“) (collectively, “Plaintiffs“) appeal the district court‘s order granting Defendant Blue Cross Blue Shield of Michigan‘s (“BCBSM“) Motion to Dismiss Plaintiffs’ claims brought pursuant to Sections 502(a)(2) and 502(a)(3) of the Employee Retirement Income
I. BACKGROUND
BCBSM is a health care сorporation, organized under the State of Michigan, that administers and processes claims for various ERISA welfare benefit plans, including self-insured (or “self-funded“) health benefit plans sponsored and maintained by Ford Motor Company (“Ford“) and American Axle & Manufacturing (“Axle“). In a self-insured plan, the employer elects to pay the health care costs of its covered employees using its own funds, rather than paying premiums to an insurer in exchange for the insurer‘s assumption of the risk to pay the cost of employer-promised heath care. Basically, Ford and Axel act as their own insurance companies with respect to their self-funded benefit plans, accepting the financial risk of coverage and obligation to pay claims using its own funds. Insurance companies such as BCBSM often act as third-party administrators to carry out the daily operations of employers’ self-funded plans, since insurance companies already have operations in place to process claims, collect employee premiums, and manage enrollment. In practice, health care providers bill the administrator for the health care sеrvices, and the administrator then collects the full payment from the employer, along with a processing fee. BCBSM negotiates rates for hospital services throughout the state, and these rates are reflected in the reimbursement rates and services fees that BCBSM collects from self-insured clients such as Ford and Axle after BCBSM administers their claims.
BCBSM is also the parent company of Blue Care Network (“BCN“), a state-licenced health maintenance organization (“HMO“), which issues its own insurance policies to groups and individuals. BCBSM negotiates hospital reimbursement rates on BCN‘s behalf, аnd these rates are factored into the premiums BCN charges to its customer base. Thus, BCBSM has negotiated agreements with various Michigan hospitals with respect to the rates BCN will reimburse the hospitals for the medical services provided to BCN participants and beneficiaries and the rates that BCBSM will reimburse the hospitals for the medical services provided to participants and beneficiaries in self-insured plans administered by BCBSM, such as those offered by Ford and Axel.
Plaintiffs claim that in its agreements with Michigan hospitals, BCBSM negotiated rates more favorable to BCN than to the Ford and Axle self-insured plans that it administers. Specifically, Plaintiffs claim that BCBSM struck a deal with hospitals whereby the hospitals agreed to accept lower reimbursement payments from BCN in exchange for BCBSM‘s promise to pay those hospitals increased amounts for the services provided under the self-insured plans that BCBSM administered, which include the Ford and Axle plans.
Plaintiffs allege that BCBSM violated its fiduciary duties under ERISA when it negotiated different rates for BCN and the Ford and Axle self-insured plans. Plaintiffs assert that BCBSM inappropriately increased charges to the self-insured option in which they particpated. Plaintiffs claim that even though they were not covered by the BCBSM-administered options, because their employers operate under single ERISA plans, the alleged increases caused by BCBSM‘s breach affected the plans as a whole, and Plaintiffs, therefore, had to pay excessive contributions, deductibles, and/or co-payments.
Plaintiffs sought to bring their claims as a class action, individually and on behalf of a class of all ERISA self-insured plans for which BCBSM administers claims, and the respective participants in and beneficiaries of those self-insured plans. Pursuant to
The district court granted BCBSM‘s motion. With respect to Loren, the court found that although he was covered under Axle‘s BCBSM-administered option at the time of the filing, because he later switched to a non-BCBSM-administered option, his claims were moot. In essence, the
As for Hagemann, the court found that she was a beneficiary of CareChoices, a non-BCBSM-administered benefit plan, even before filing the Complaint. Further, the court concluded that CareChoices and the BCBSM-administered coverage options offered by Ford are not part of a single Ford ERISA plan under which various coverage options are available, but are instead, different ERISA plans. The court found, therefore, that Hagemann lacks standing to assert claims against BCBSM because BCBSM does not act as a fiduciary with respect to Hagemann‘s health plan. Plaintiffs now appeal, asserting that their employers each have only one ERISA plan in which they are members, and they are not barred from maintaining suit against BCBSM merely because they elected coverage options other than the BCBSM-administered alternatives.
II. ANALYSIS
A. Standard of Review
A district court‘s decision to dismiss for lack of subject matter jurisdiction is subject to a de novo standard of review. Taveras v. Taveraz, 477 F.3d 767, 771 (6th Cir. 2007).
B. Number of ERISA Plans
Though the main issue is one of standing, the crux of this case lies in the determination of whether the individual coverage options offered by Axle and Ford constitute one employee benefit plan for purposes of ERISA, or multiple plans. Plaintiffs assert that, assuming statutory standing, both have Article III standing because they each sue to recover as a result of injury to the single ERISA plans sponsored by Ford and Axle, respectively, which simply include as one coverage oрtion, the plans administered by BCBSM. Defendant maintains that each coverage option offered by Axle and Ford is a separate ERISA health care plan, and because Plaintiffs are not members of BCBSM-administered plan, they cannot establish any element of constitutional standing. Therefore, we must first determine whether the multiple coverage options offered by Ford and Axle constitute one ERISA plan or multiple plans.
Determining whether multiple coverage options constitute one plan under ERISA is a case of first impression for this Court. To be sure, there have been numerous сases considering the issue of “what is a plan,” but those cases address whether an ERISA plan exists at all—i.e., whether the employee benefits arranged by employers constitute a plan for ERISA purposes, thereby subjecting the administrator to fiduciary duties under ERISA. See Kolkowski v. Goodrich Corp., 448 F.3d 843 (6th Cir. 2006) (determining existence of an ERISA plan); Hughes v. White, 467 F. Supp. 2d 791 (S.D. Ohio 2006). Here, there is no doubt about whether there is an ERISA plan. The question is how many.
Because of the paucity of case law on the issue, we will look to administrative interpretation. The only guidance from this source comes from a proposed regulation governing the group health plan portability provisions of thе Health Insurance Portability and Accountability Act (“HIPAA“), jointly issued by the Department of Labor and the Department of Health and Human Services. See Notice of Proposed Rulemaking for Health Coverage Portability, 69 Fed. Reg. 78800-01 (proposed Dec. 30, 2004) (to be codified at 29 C.F.R. pt. 2590). To address uncertainty regarding whether an individual who changed benefit elections was switching between benefit options under a single plan, or switching from one plan to another (thereby triggering various provisions that apply when an
all medical care benefits made available by an employer or employee organization . . . are generally considered to constitute one group health plan (the default rule). However, the employer or employee organization can establish more than one group health plan if it is clear from the instruments governing the arrangements to provide medical care benefits that the benefits are being provided under separate plans and if the arrangements are operated pursuant tо the instruments as separate plans.
. . . . .
These rules provide plan sponsors great flexibility while minimizing the burden of making decisions about how many plans to maintain. For example, many employers may wish to minimize the number of certificates of creditable coverage required to be furnished to continuing employees. Under the default rule, because all health benefits provided by an employer are considered a single group health plan, there is no need to furnish a certificate of creditable coverage when an employee merely switches coverage among the options made available by the employer. This need would arise only if the employer designated separate benefit packages as separate plans in the plan documents and only if the benefit packages were also operated pursuant to the plan documents as separate plans.
Id. (emphasis added).
The Tenth Circuit is the only circuit to address this issue in the context of ERISA litigation. See Chiles v. Ceridian Corp., 95 F.3d 1505, 1511 (10th Cir. 1996). In Chiles, the Tenth Circuit faced the question of whether a particular employer‘s ERISA benefit plan, interpreted in light of the plan documents, included payment of health care premiums after termination of a long-term disability plan. Id. at 1517. As a threshold matter, the Chiles court had to decide whether the four plan documents established one ERISA plan or four ERISA plans. Id. at 1511. In concluding that these documents created four distinct ERISA plans, the Tenth Circuit started with the assumption that separate plan documents create separate plans. Id. The Tenth Circuit concluded that the plaintiffs failed to defeat the presumption that different plan documents create different plans. Id. The court found that the plaintiffs did not proffer sufficient evidence to prove that the employer intended thеre to be only one plan or that it operated the plans as a single plan. Id. In reaching its conclusion, the court considered three factors: (1) whether each plan had a different ERISA identification number; (2) whether the language of the plan documents indicated that the employer intended to establish multiple plans; and (3) whether the plans shared the same administrator or trust. Id.
Given HIPPA‘s default rule that all medical benefits offered by an employer are generally considered to be part of one ERISA health plan, and the fact that if an employer intends to creatе multiple plans it has the ability to do so by filing multiple plan documents, we start with the strong presumption that the filing of only one ERISA plan document indicates that the employer intended to create only one ERISA plan. Thus, the burden is on Defendant to defeat this presumption by establishing through sufficient evidence that these plans were intended to operate as separate plans, or operated as such in practice.
Defendant claims that the district court was correct in concluding that Ford had multiple ERISA plans because finding that Ford had only a single plan comprised of multiрle benefit options “would expand the categories of individuals who may sue . . . further than Congress intended.” Loren v. Blue Cross & Blue Shield of Mich., No. 05-74908, 2006 WL 2228978, at *7 (E.D. Mich. Aug. 3, 2006). Defendant states that the instruments governing Ford‘s BCBSM-administered
Defendant concedes that Ford uses a single ERISA identification number and filed a single form 5500,2 but asserts that these plan options have distinct claims processing administrators, different levels of benefits and different funding regimes (e.g., CareChoices, as an HMO, bears the risk to pay the cost of health expenses, whereas BCBSM is a third party administrator for a self-funded plan for which Ford bears the risk to pаy the cost of health expenses). Defendant contends that Plaintiffs’ argument with respect to Loren fails for the same reasons, and that the coverage options under Axle are separate ERISA plans.
We conclude that Defendant has not overcome the presumption that the employee health benefits offered by an employer constitute a single ERISA plan. In order to defeat this presumption, Ford and Axle must show, through the plan documents, that such benefits are provided and operated under separate plans. The most obvious first step in this regard would be to register multiple ERISA plans by filing multiple plan documents. In this case, Ford and Axle have instead each registered only one plan document with one ERISA identification number. The evidence which Defendant proffers does not sufficiently establish that the employers either intended to operate these options as separate plans or actually did so in practice. If the Chiles factors were used in this case, two of the factors would favor Plaintiffs: (1) each plan has only one ERISA identification number; and (2) Defendant failed to point to any language in the plan documents that evinced that Ford or Axle‘s intent was to establish multiple plans. Given that Defendant has not overcome the presumption that filing one plan document establishes only a single ERISA plan, we hold that Ford and Axle each maintain a single ERISA group health plan with multiple benefit options.
C. Standing
Having determined that Ford and Axle each sponsor one ERISA plan, which includes both the BCBSM-administered and non-BCBSM-administered coverage options, we now consider whether Plaintiffs have standing to bring suit against BCBSM. Because “federal courts . . . have only the power that is authorized by Article III of the Constitution and the statutes enacted by Congress pursuant thereto,” a plaintiff must possess both constitutional and statutory standing in order for a federal court to have jurisdiction. Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986). Thus, even where statutory standing pursuant to ERISA is satisfied, the elements of Article III must be met. Cent. States Se. & Sw. Areas Health and Welfare Fund v. Merck-Medco Managed Care, 433 F.3d 181, 199 (2nd Cir. 2005). Congress “cannot erase Article III‘s standing requirements by statutorily granting the right to sue to a plaintiff who would not otherwise have standing.” Raines v. Byrd, 521 U.S. 811, 820 n.3 (1997). As the Supreme Court has explained, “[n]o principle is more fundamental to the judiciary‘s proper role in our system of government than the constitutional limitation of federal-cоurt jurisdiction to actual cases or controversies.” Id. at 818 (internal quotation marks omitted). “Article III standing . . . enforces the Constitution‘s case-or-controversy requirement.” Elk Grove Unified Sch. Dist. v. Newdow, 542 U.S. 1, 11 (2004). In evaluating a party‘s standing, this Court must determine whether the plaintiff has alleged “‘such a personal stake in the outcome of the controversy’ as to warrant his invocation of federal-court
As the party invoking federal jurisdiction, Plaintiffs bear the burden of establishing standing. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). If Plaintiffs cannot establish constitutional standing, their claims must be dismissed for lack of subject matter jurisdiction. Cent. States, 433 F.3d at 198. “Jurisdiction is power to declare the law, and when it ceases to exist, the only function remaining to the court is that of announcing the fact and dismissing the case.” Steel Co. v. Citizens for a Better Env‘t, 523 U.S. 83, 94 (1998) (citations omitted). Because the standing issue goes to this Court‘s subject matter jurisdiction, it can be raised sua sponte. Cent. States, 433 F.3d at 198. “To satisfy Article III‘s standing requirements, a plaintiff must show: ‘(1) it has suffered an “injury in fact” that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely sрeculative, that the injury will be redressed by a favorable decision.‘” Cleveland Branch NAACP v. City of Parma, 263 F.3d 513, 523-24 (6th Cir. 2001) (quoting Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., 528 U.S. 167, 180-81 (2000)).
Under ERISA, the contours of the requisite injury-in-fact depend on whether Plaintiffs seek monetary or injunctive relief. Plaintiffs in this case seek both forms of relief pursuant to
(a) Persons empowered to bring a civil action
A civil action may be brought . . .
(2) by the Secretary, or by a participant, beneficiary or fiduciary for appropriate relief under section 1109 of this title;3
(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) tо redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan; . . . .
1. Section 1132(a)(2)
Plaintiffs cannot bring suit under
Here, Plaintiffs claim that BCBSM charged the Axle and Ford too much for hospital services (to offset the lower amount BCN paid for hospital services), and this caused Axle‘s and Ford‘s ERISA plans to demand higher deductibles, co-payments, and/or contributions from participants. Plaintiffs claim that they have “incurred greater costs than they would otherwise have incurred if BCBSM had not violated its fiduciary duties under ERISA.” Plaintiff Loren states that he made “contributions” to the Axle Plan and that the level of his contributiоns “probably would have been less had BCBSM not engaged in the conduct” set forth in the Complaint. Hagemann offers no similar statement. This “injury” is neither concrete nor particularized, and is instead, arguably conjectural and hypothetical. Friends of the Earth, Inc., 528 U.S. at 180-81. Even having determined that Plaintiffs were each part of one ERISA plan, individual injury would only be possible if Plaintiffs paid percentage contributions instead of the usual flat-rate co-payment or deductible, and this assumes that Ford and Axle would pass on any increase in reimbursements or administrative fees that may have resulted from BCBSM‘s alleged wrongful negotiations. Cent. States, 433 F.3d at 202-03 (“[S]uсh an increase in cost would in all probability not affect [plaintiffs] absent a demonstration that they purchased drugs based upon percentage coinsurance payments or some other demonstration of individualized harm.“).
Merely because Plaintiffs claim that they are suing on behalf of their respective ERISA plans does not change the fact that they must also establish individual standing. See Glanton ex rel. ALCOA Prescription Drug Plan v. Advance PCS Inc., 465 F.3d 1123, 1127 (9th Cir. 2006) (“[Plaintiffs assert that] ERISA plan beneficiaries may bring suits on behalf of the plan in a representative capacity. We have no quarrel with this proрosition—so long as plaintiffs otherwise meet the requirements for Article III standing.“); Cent. States, 433 F.3d at 200 (“[A]n ERISA Plan participant or beneficiary must plead a direct injury in order to assert claims on behalf of a Plan.“); Harley v. Minn. Mining and Mfg. Co., 284 F.3d 901, 906-07 (8th Cir. 2002) (finding no constitutional standing where the “loss did not cause actual injury to plaintiff‘s interests in the plan” and determining that the “limits on judicial power imposed by Article III counsel against permitting participants or beneficiaries who have suffered no injury in fact from suing to enforce ERISA fiduciary duties on behalf of the Plan“).
Because Plaintiffs’ alleged injury is too speculative to establish constitutional standing, we AFFIRM the district сourt‘s decision to dismiss Plaintiffs’ complaint with respect to the claims asserted pursuant to
2. Section 1132(a)(3)
Although a plaintiff is limited to bringing suit on behalf of his or her ERISA plan when asserting a
Confrоnted with this obstacle to recovery of his loss, [Plaintiff] denominated his requested relief as “restitution” [which is permitted in equity under
Helfrich v. PNC Bank, Ky., Inc., 267 F.3d 477, 483 (6th Cir. 2001).
Therefore, Plaintiffs may bring suit in their individual capacities under
Although Plaintiffs cannot bring action under
Here, the disclosure requirements and fiduciary duties contained in ERISA create in [plaintiff] certain rights, including the rights to receive particular information and to have [defendant] act in a fiduciary capacity. Thus, [plaintiff] need not demonstrate actual harm in order to have standing to seek injunctive relief requiring that [defendant] satisfy its statutorily-created disclosure or fiduciary responsibilities. See Gillis v. Hoechst Celanese Corp., 4 F.3d 1137, 1148 (3d Cir. 1993) (finding “ERISA does not require that harm be shown before a plan participant is entitled to an injunction ordering the plan administrator to comply with ERISA‘s reporting and disclosure requirements“).
Therefore, Plaintiffs need not demonstrate individualized injury to proceed with their claims for injunctive relief under
Further, Plaintiffs have sufficiently alleged that BCBSM caused the injury they complain of in this case—specifically, breach of fiduciary duty by negotiating more favorable rates for BCN at the expense of the Ford and Axle plans administered by BCBSM. Finally, because we have determined that Ford and Axle sponsor single ERISA plans, any restitution of ill-gotten gains and other equitable relief available under
Based on the foregoing, we need not reach the additional issue raised on appeal by BCBSM of whether it acted in a fiduciary capacity when it engaged in the allegedly wrongful negotiations of reimbursement rates. This question was not analyzed by the district court, and it would most appropriately be addressed there first, with the benefit of additional discovery.
III. CONCLUSION
For the forgoing reasons, we AFFIRM in part and REVERSE and REMAND in part.