Opinion
Civil Action No. SA-03-CA-0089-FB.
March 22, 2004
ORDER ON PENDING MOTIONS
Before the Court are the following motions: (1) Opposed Motion for More Definite Statement (docket #15); (2) Motion for Stay of Action Pending Arbitration and to Compel Arbitration (docket #16); (3) Plaintiff's Motion to Remand (docket #17); (4) Motion for Leave to File Response in Excess of Ten Pages (docket #19), and (5) Motion for Leave to File United Healthcare of Texas Inc.'s Sur-Reply to Defendant's Response to Motion to Remand
Defendant United HealthCare of Texas seeks to file a response in excess of ten pages to plaintiff's motion to remand Although Western District of Texas Local Rule CV-7(c) and (d) limit motions and responses to ten pages in length, this Court accepts motions and responses twenty pages in length without leave of Court. Accordingly, IT IS HEREBY ORDERED that the Motion for Leave to File Response in Excess of Ten Pages (docket #19) is GRANTED and the Clerk is ordered to file United HealthCare of Texas, Inc.'s Response to Plaintiff's Motion to Remand twelve pages in length received on March 11, 2003.
The Court has also considered defendant United HealthCare's motion for leave to file a surreply to plaintiff's reply to defendant's response to plaintiff's motion to remand Because leave is requested to address an argument raised for the first time in plaintiff's reply, the Court finds the motion has merit and should be granted. Accordingly, IT IS HEREBY ORDERED that the Motion for Leave to File United HealthCare of Texas Inc.'s Sur-Reply to Defendant's Response to Motion to Remand (docket #27) is GRANTED and the Clerk shall file the Sur-Reply received on March 31, 2003. Having granted the motions for leave, the Court will next consider the motion to remand to determine whether this Court has jurisdiction to grant or deny the remaining motions.
In the motion to remand, plaintiff claims it filed suit against the named defendants because of their failure to pay the amounts they had contractually agreed to pay for medical services rendered by the plaintiff. Plaintiff further asserts its causes of action are under Articles 3.70-3C and 20A.18B of the Texas Insurance Code and Title 28 of the Texas Administrative Code which are referred to as the Texas Prompt Payment statutes. Plaintiff argues its claims are based entirely on state law and arise by virtue of contracts entered into between plaintiff and each of the defendants and are outside of any claimed benefits of any Employee Retirement Income Security Act (ERISA) plan. Therefore, plaintiff maintains no federal question exists and this Court lacks jurisdiction to entertain its claims.
The Court recognizes that Article 20A.18B has been repealed effective June 1, 2003. Article 20A.18B can now be located in TEX. INS. CODE ANN. § 843.336-.344 (Vernon's Supp. 2003). Because this case was brought prior to the Article's repeal, the Court will discuss the motion to remand in terms of 20A.18B as alleged.
Defendants Group Pension Administrators, Inc., United HealthCare of Texas, Inc., UNICARE Health Plans of Texas, Inc., and Fortis Insurance Company have filed responses to the motion to remand They assert this Court has jurisdiction because plaintiff is seeking recovery of benefits due from ERISA-based employee health benefit plans. Defendants maintain that to the extent any state law claims exist, this Court may exercise its supplemental jurisdiction.
According to the petition, the defendants are required to comply with the Texas prompt payment statutes and Texas Department of Insurance prompt payment regulations which obligate defendants to promptly and properly pay physician and provider claims for covered health care provided to defendants' members. The regulatory requirements obligate defendants, not later than forty-five days after receipt of a clean claim, to:
(1) pay the total amount of the clean claim in accordance with its contract;
(2) deny the entire clean claim with written explanation of the denial;
(3) pay 85% of the entire clean claim and audit the entire clean claim; or
(4) pay the portion of the clean claim for which liability is acknowledged in accordance with the contract and either deny the unpaid remainder or pay 85% of the unpaid remainder and audit the disputed portion of the claim.
The failure to meet the payment requirement may subject the noncomplying party to a $1,000 per day penalty for each unpaid clean claim. The noncomplying party is also liable to the physicians and providers for the full amount of the bill charges submitted on the clean claim or the amount payable under the contracted penalty rate amount for the clean claims not paid in compliance with the above requirements. If a clean claim is not submitted, then defendants are required to notify the physician or provider within 45 days that the claim is deficient. Plaintiff alleges defendants violated their obligation to pay claims promptly and properly as required. Plaintiff seeks payment for the clean claims not promptly and properly paid plus the $1,000 per day penalty.
Plaintiff explains, in its motion to remand, that in order for it to receive the protection of the Texas Prompt Payment statutes, it must have a contract with the insurance company/defendant. Plaintiff states that a cause of action under the Texas Prompt Payment statutes is essentially a claim that an insurance company failed to comply with the requirements of the contract with the provider as mandated by the Texas Insurance Code and as such, is not a derivative action. This lawsuit, therefore, is based on a direct cause of action for the defendants' failure to comply with the prompt payment statutes, and defendants' assertion that plaintiff is seeking to obtain plan benefits is without merit because the prompt payment statutes only permit plaintiff to recover the full contract price of the medical services provided to defendants' plan participants. Plaintiff notes that it has entered into contracts with each of the defendants that detail the relationship between them as provider and managed care company. Plaintiff states it has asserted a direct cause of action against the defendants which is not preempted by ERISA because plaintiff is suing in its own capacity under its contract with the defendants and not as an assignee of a plan beneficiary's interest.
Defendants maintain plaintiff is seeking the recovery of claims from employee health benefit plans and therefore, plaintiff's claims are preempted by ERISA despite plaintiff's assertion it is seeking payment based on an independent contractual agreement. The fact these agreements may contain provisions concerning payments due under the ERISA-based plans and may specifically refer to the Texas Insurance Code does not change or affect the underlying nature of the parties' agreements and the fact that all benefits are being paid from and under the provisions of an ERISA-based employee health benefit plan. Defendants argue the agreements/contracts on which plaintiff relies essentially constitute the equivalent of an assignment because through the agreement, plaintiff has agreed to accept payment of benefits from the ERISA plans as payment for its medical services. Moreover, to recover under the prompt payment statutes, the plaintiff must submit a clean claim and inherent in the definition of clean claim is the assignment by the patient and the plan member of their claims to the provider. Defendants also claim that because almost half of the plans at issue are self-funded, any benefits paid would necessarily come from funds provided by the employers-these claims are completed preempted by ERISA and provide this Court with federal question jurisdiction.
JURISDICTION OF FEDERAL COURTS
It is well settled that federal courts are courts of limited jurisdiction and unlike state courts, are not vested with "inherent" or "general" subject matter jurisdiction. Columbraria Ltd. v. Pimienta, 110 F. Supp.2d 542, 545 (S.D. Tex. 2000);see Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994) (federal courts are courts of limited jurisdiction; only possess power authorized by Constitution and statute); Turner v. Bank of North America, 4 U.S. (4 Dall.) 8 (1799) (federal courts are courts of limited jurisdiction; jurisdiction of state courts is general while jurisdiction of federal courts is special, "and in the nature of an exception from the general jurisdiction of the state courts"); Langley v. Jackson State Univ., 14 F.3d 1070, 1073 (5th Cir.) (federal court is court of limited jurisdiction), cert. denied, 513 U.S. 811 (1994). Because the limited jurisdiction of a federal court is not to be judicially expanded, the presumption is that "a cause lies outside this limited jurisdiction and the burden of establishing the contrary rests upon the party asserting jurisdiction." Kokkonen, 511 U.S. at 377 (citations omitted). Thus, defendants bear the burden of establishing its claims are federal in nature.ERISA PREEMPTION
Because there is no assertion that jurisdiction is based on diversity of citizenship, removal is proper only if a federal question exists. Ordinarily, removal is not allowed unless the plaintiff's well pleaded complaint asserts causes of action under federal law which support federal question jurisdiction.Rodriguez v. Pacificare of Texas, Inc., 980 F.2d 1014, 1017 (5th Cir.), cert. denied, 508 U.S. 956 (1993). Federal preemption raised as a defense to the asserted causes of action does not generally authorize removal to federal court because it "does not appear on the face of a well pleaded complaint." Id. (quoting Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63 (1987)). However, an exception to the well pleaded complaint rule exists where "Congress has so `completely pre-empt[ed] a particular area that any civil complaint raising this select group of claims is necessarily federal in character.' Such a niche has been carved out by Congress for claims for benefits brought by participants and beneficiaries of ERISA-regulated employee benefit plans." Id. (citations omitted).
As set forth in Section 514(a) of ERISA, ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." Hook v. Morrison Milling Co., 38 F.3d 776, 780-81 (5th Cir. 1994). The "relate to" language is to be given a "broad yet common-sense meaning, and a state law claim only relates to a benefit plan `if it has a connection with or reference to' the ERISA plan." Westbrook v. Beverly Enters., 832 F. Supp. 188, 190 (W.D. Tex. 1993) (citingPilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45 (1987)). However, despite the broad language, ERISA's preemptive scope is not without limits. Hook, 38 F.3d at 781. As set forth by the Supreme Court in Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 100 n. 21 (1983), "[s]ome state actions may affect employee benefit plans in too tenuous, remote, or peripheral a manner to warrant a finding that the law `relates to' the plan." Hook, 38 F.3d at 781. This warning by the Supreme Court in Shaw concerning ERISA's limits has been explained as follows:
The Court's warning in Shaw on the limits of ERISA preemption stems from the Court's view that ERISA's scope, though comprehensive, remains subject to the traditional principle of federalism. In determining ERISA's preemptive scope, the Court has advised that we "must be guided by respect for the separate spheres of governmental authority preserved in our federalist system."Id. (citations omitted). Although cognizant of ERISA's broad preemptive scope, the court noted that ERISA does not "reach claims that do not involve the administration of plans, even though the plan may be a party to the suit or the claim relies on the details of the plan." Id. at 784.
The Fifth Circuit has provided additional guidance concerning preemption as follows:
It is clear that ERISA preempts a state law cause of action brought by an ERISA plan participant or beneficiary alleging improper processing of a claim for plan benefits. We have also held in this circuit that ERISA preempts state law claims, based on breach of contract, fraud, or negligent misrepresentation, that have the effect of orally modifying the express terms of an ERISA plan and increasing plan benefits for participants or beneficiaries who claim to have been mislead. Although finer discernments might be made, these and similar cases binding in this circuit, which have found preemption of a plaintiff's state law causes of action, have at least two unifying characteristics: (1) the state law claims address areas of exclusive federal concern, such as the right to receive benefits under the terms of an ERISA plan; and (2) the claims directly affect the relationship among the traditional ERISA entities — the employer, the plan and its fiduciaries, and the participants and beneficiaries.Memorial Hosp. Sys. v. Northbrook Life Ins., 904 F.2d 236, 245 (5th Cir. 1990) (citations omitted). State law is not preempted by ERISA, however, "when the state-law claim is brought by an independent, third-party health care provider (such as a hospital) against an insurer for its negligent misrepresentation regarding the existence of health care coverage." Transitional Hosps. Corp. v. Blue Cross Blue Shield, 164 F.3d 952, 954 (5th Cir. 1999). State law claims by a hospital for "breach of fiduciary duty, negligence, equitable estoppel, breach of contract, and fraud are preempted by ERISA when the hospital seeks to recover benefits owed under the plan to a plan participant who has assigned her right to benefits to the hospital." Id.
APPLICATION OF ERISA PREEMPTION
Whether this case is preempted by ERISA seems to hinge on the capacity in which plaintiff brings its case. Plaintiff agrees its claims would be preempted if plaintiff had asserted them as assignees of the plan participants, and although plaintiffs may be entitled to seek relief as assignees of the ERISA plan beneficiaries for payment of services, this lawsuit was not filed in that capacity. Instead, plaintiff maintains its cause of action is based on the Texas Prompt Payment statutes, and in order to fall under the protection of these statutes, a provider/plaintiff must have a contract with the insurance company/defendant. Plaintiff asserts it previously entered into contracts with each of the defendants that detail the relationship as provider and managed care company. Plaintiff's cause of action, therefore, is pursuant to the Texas Prompt Payment statutes and is essentially a claim that an insurance company failed to comply with the requirements of the contract with the provider as mandated by the Texas Insurance Code. Plaintiff denies it is seeking recovery of benefits under ERISA plans. Defendants contend plaintiff's claims are based on an assignment of benefits from the patients, and plaintiff is entitled to payment of its claims sent to the defendants only if it rendered services to a patient covered under an ERISA plan and the patient executed an assignment to plaintiff to receive direct payment of the claim for Plan medical benefits. Defendants argue the jurisdictional analysis is governed by the underlying facts and not the characterization plaintiff places on its claims.Both parties recognize that this Court dealt with a similar issue in Orthopaedic Surgery Assocs. v. Prudential Health Care Plan, Inc., 147 F. Supp.2d 595 (W.D. Tex. 2001). In that case, the plaintiffs were third-party health care providers asserting breach of contract claims based on their contracts with the defendant Prudential Health Care Plan. Id. at 599-600. Agreeing with the defendant, as plaintiff does in this case, that the claims would be preempted if asserted as assignees of the plan participants and recognizing that plaintiffs were entitled to seek relief as assignees of the ERISA plan beneficiaries, the plaintiffs maintained in Orthopaedic their lawsuit was not filed in that capacity. Id. at 600. The plaintiffs maintained, as does the plaintiff here, their "claims stem from a contractual relationship directly between them and the defendant, i.e., the Speciality Care Physicians Agreements, and are not relying, in whole or in part, upon their position as assignees of the benefits of any claimant under an ERISA plan." Id. Defendant argued, as do the defendants here, its belief that the plaintiffs' claims were "really claims for the recovery of benefits under the plans and as such, are derivative of the participants' rights to benefits under the plans which are properly recharacterized as federal claims arising under ERISA."Id. In deciding the claims in Orthopaedic were not preempted, this Court relied on two decisions, Blue Cross v. Anesthesia Care Assocs. Med. Group, Inc., 187 F.3d 1045 (9th Cir. 1999), and Lakeland Anesthesia, Inc. v. Louisiana Health Serv. Indemnity Co., NO. Civ.A.00-1151, 2000 WL 1801834 (E.D. La. Dec. 6, 2000). In both cases the courts found the claims were not preempted by ERISA because the plaintiffs were not suing as a participant or a beneficiary of an ERISA plan, were not suing as an assignee of an ERISA plan, but were pursuing claims under a separate provider agreement. Likewise, in this case, plaintiff alleges its claims arise by virtue of contracts entered between plaintiff and each of the defendants. The distinguishing factor in this case, however, is that plaintiff has chosen to invoke provisions of the Texas Prompt Payment statutes. Whether ERISA preempts these statutes has been addressed on separate occasions with different results. Compare Foley v. Southwest Texas HMO, Inc., 226 F. Supp.2d 886 (E.D. Tex. 2002) (finding statute did not "violate either prong of the Fifth Circuit's preemption test set out in Memorial Hospital" and therefore not preempted by ERISA), with Baptist Hosp. v. United Healthcare, 216 F. Supp.2d 625 (E.D. Tex. 2002) (finding statute used as alternative method to ERISA's civil enforcement provisions and preempted by ERISA).
Plaintiff attaches copies of the various contracts to its motion to remand These contracts are labeled as Specialist Physician Agreements, Speciality Care Provider Point of Service Agreements, Physician Managed Care Agreements, Preferred Professional Agreements, and PPO and Specialist Contracts.
In Baptist Hosp. v. United Healthcare, 216 F. Supp.2d 625, 626 (E.D. Tex. 2002), the issue before the court was the "extent of ERISA preemption when there are claims under both the Texas Insurance Code and for breach of contract." Baptist Hospital brought suit against United Healthcare claiming United Healthcare "failed to pay the full amount of the medical services rendered in accord with a contract between the parties." Id. In addition to the contractual claims, Baptist Hospital alleged United Healthcare violated section 3A of article 3.70-3C of the Texas Insurance Code by failing to pay benefit claims within forty-five days as required by the Code. In finding the statute preempted the court explained:
Baptist Hospital seeks to use the Texas Insurance Code as an alternative method of recovering benefits. If the plaintiff is entitled to payment under this claim, it will be because of their position as assignees of benefits owed under employer-sponsored benefits plans that are governed by ERISA. Baptist Hospital is thereby trying to use the Texas Insurance Code as an alternative method to ERISA's civil enforcement provisions. The savings clause may not be allowed to circumvent the remedy framework established by Congress under ERISA, thus, the savings clause does not rescue the Texas Insurance Code claim from ERISA.Id. at 627.
Approximately two and a half months later, Judge Cobb again had the honor of revisiting the ERISA preemption issue in conjunction with the Texas Insurance Code. Foley v. Southwest Texas HMO, Inc., 226 F. Supp.2d 886 (E.D. Tex. 2002). Although the court had previously denied plaintiffs' request for remand, the court found, after reviewing the briefing and hearing oral arguments, that ruling was in error and had incorrectly concluded that "the plaintiffs were attempting to recover from the HMOs as assignees of their enrollees' benefits." Id. at 891. Instead, the court found, after the benefit of oral argument, "the plaintiffs were not seeking payment as assignees of the enrollees' benefits," but that the "Texas Statutes . . . provided the plaintiffs with an independent cause of action against the HMOs that is separate and distinct from any position they may occupy as assignees of the enrollees' benefits." Id. Because of this new view, the court decided to re-analyze the preemption issue. Id. at 892.
In the first decision denying the motion to remand, the court found:
The claims brought by the plaintiffs are not "run-of-the-mill" types of state law claims. The plaintiffs have failed to establish the existence of any independent contractual relationship between themselves and the defendants. As such, the plaintiff can only recover from the defendants based on the plaintiffs' positions as assignees of the enrollees' benefits. Since a number of the defendants' enrollees are covered under employer-sponsored benefit plans, the plaintiffs'/assignees' attempts to recover payments allegedly owed them under these plans are deemed to relate to an ERISA plan and are preempted. Because ERISA preempts these claims of the plaintiffs, this court may properly exercise jurisdiction over them.Foley v. Southwest Texas HMO, Inc., 193 F. Supp.2d 903, 907 (E.D. Tex. 2001) (footnote omitted). With respect to the use of the savings clause the court explained:
As discussed previously, the plaintiffs seek to use Texas Insurance Code Article 20A.18B to recover payments they claim are due them for services provided by them to the defendants or the defendants' enrollees. If the plaintiffs are entitled to payment, it will be because of their position as assignees of benefits owed under employee-sponsored benefit plans that are governed by ERISA. The plaintiffs, therefore, seek to recover under the Texas Insurance Code as an alternative mode to ERISA's civil enforcement provisions. The savings clause may not be used to circumvent the remedy framework established by Congress under ERISA.Id. It appears the court followed its rationale in the firstFoley decision in deciding Baptist Hosp. but revisited that rational in its second Foley decision.
Although two provisions of the Texas Insurance Code were in issue in Foley, the case here focuses on article 20A.18B of the Texas Insurance Code. With respect to that provision, the court in Foley agreed with the plaintiffs' analysis that 20A.18B(f) allowed the plaintiffs to "bring suit against the defendants for the defendants' alleged violation of 20A.18B(c)(1)." Id. at 895. In interpreting this provision, the court explained:
Article 20A.18B(f) states that an HMO "that violates Subsection (c) or (e) of this section is liable to a physician or provider for the full amount of billed charges submitted on the claim." Thus, the plain language of the statute allows either a physician or provider to bring suit against an HMO for violating 20A.18B(c)(1). Nothing in subsection (f) requires contractual privity between a physician and the HMO to exist before the physician may bring suit against the HMO for violating subsection (c). Thus, according to 20A.18B(f), a physician could sue an HMO for the HMO's failure to pay in accordance with the contract between the HMO and a provider.Id. Despite defendants' contention that 20A.18B has a connection with an ERISA plan and therefore relates to an ERISA plan, the court found to the contrary. Id. at 895. The court also found the claim did not fall within ERISA's civil enforcement provisions and held "the plaintiffs' Texas Insurance Code claim is not preempted by ERISA." Id.
The court went on to recognize that if the plaintiffs had sued to enforce a contract between themselves and the defendants no one would argue the claim was preempted. Id. at 896. The court found that article 20A.18B allows plaintiffs to "sue on their own behalf for the defendants' breach of a contract between the defendants and a third party." Id. The court held a state law allowing such a cause of action did not have an impermissible connection with an ERISA plan. Id. The court's analysis is instructive:
Under either scenario-the plaintiffs being in contractual privity or, through the use of 20A.18B, not-the plaintiffs are merely attempting to hold the defendants liable for the obligations they undertook in a contract. These plaintiffs are not attempting to stand in the shoes of their patients to collect benefits promised to the defendants' enrollees. This court has not been confronted with any reason why a state law allowing another party that lacks an ERISA relationship with the defendants to sue to enforce the contract between an HMO and a third party, like NAMM, should be preempted. Such a provision merely recognizes the practical situation that managed care often involves multiple contractual relationships entered into by various parties, and that such contracts regularly envision benefits being passed along to parties not privy to a specific contract. (Citations omitted).
The Fifth Circuit has stated that health care providers were not a party to the ERISA bargain struck between plans and plan participants by Congress. As such, in their role as doctors or health care providers, the plaintiffs are not parties to any health insurance plan formed under ERISA, and therefore the plaintiffs have no relationship with the defendants that would be governed by ERISA. In fact, in the Fifth Circuit, a health care provider has no independent cause of action under ERISA against a plan that would enable the provider to recover ERISA benefits. Instead, these parties' relationships flow from and are governed by a series of contracts entered into amongst them. In other roles, say as assignee or plan participant, the plaintiffs may be governed by ERISA, but this is not the situation presently before the court. As the Fifth Circuit wrote in Memorial Hospital: "We cannot believe that Congress intended the preemptive scope of ERISA to shield welfare plan fiduciaries from the consequences of their acts toward non-ERISA health care providers when a cause of action based on such conduct would not relate to the terms or conditions of a welfare plan, nor affect — or affect only tangentially — the ongoing administration of the plan. (Citations omitted).
Thus, it is not surprising that Article 20A.18B(f) does not violate either prong of the Fifth Circuit's preemption test set out in Memorial Hospital. First, such a statue does not address an area of exclusive federal concern, but rather it allows a party that has not received payment to bring suit to make another party pay in accordance with a contract that party has with a third party. The enforcement of contracts can hardly be said to be an exclusive area of federal concern. Second, this statute has no effect on the relationship between traditional ERISA entities (i.e., plan administrators/fiduciaries and plan participants/beneficiaries). In this case, the plaintiffs are neither plan participants, nor beneficiaries. Further, there is no claim that this statute will prevent beneficiaries from receiving benefits or change beneficiaries' entitlement to benefits. In sum, this claim does not encroach upon the relationship between plan participants and the plan, and this combined with the fact that the claim does not infringe upon an area of exclusive federal concern, leads to the conclusion that it is not the type of state law that the Fifth Circuit stated would be preempted in Memorial Hospital. (Citations omitted).
A statute that allows both physicians and providers to bring suit against an HMO for the HMO's failure to make payments in accordance with the contract between the HMO and only one of these parties may raise the cost for an HMO to do business in Texas. In practice, however, this provision only raises the cost of doing business in Texas if the HMO breaches contracts it entered into with other parties. If the HMO meets all contractual obligations, this provision should have little effect on its costs of doing business in Texas. Furthermore, HMOs, in Texas, are still free to set up their ERISA-governed plans in any manner they choose. Article 20A.18B does not limit or allow for challenges to any substantive coverage decision that an ERISA plan might make. Further, it does not require an ERISA plan to maintain any specific coverages. In total, Article 20A.18B has very little impact on the administration of the defendants' ERISA-governed plans.Id. at 896-98. In finding the Article 20A.18B(f) claim not preempted, the court relied on the fact that the plaintiffs' claims were not based on the existence of an ERISA plan and plaintiffs were not seeking to enforce rights protected by ERISA's civil enforcement provisions. Id. at 901. The court found plaintiffs were seeking to enforce obligations which were "independent of any of the defendants' enrollees' rights." Id. Based on the plain language of the provision in issue, the court noted an enrollee would not be allowed to bring a claim and recovery is based on agreements which are made outside of the plan documents. Id. Recognizing an ERISA plan may provide "factual background" for the plaintiff's claims, the court found the plans were not the "source of the obligation the plaintiffs seek to enforce" and as such not completely preempted by ERISA.Id.
More recently, another district court was asked to determine whether claims for Texas Insurance Code violations were preempted by ERISA. Baylor Univ. Med. Ctr. v. Arkansas Blue Cross Blue Shield, No. Civ.A.3:03-CV-2084-., 2004 WL 62682, at *1 (N.D. Tex. Jan. 9, 2004). Baylor sought recovery for violations of Article 20.18B and Article 3.70-3C, § 3A of the Texas Insurance Code which "requires insurers, including health maintenance organizations (HMOs) and preferred provider organizations (PPOs), to promptly pay the claims of physicians and other health care providers." Id. at *6. Baylor alleged violations of the prompt payment provisions set forth in Article 20.18B(c)(1) which requires the "HMO to `pay the total amount of the claim in accordance with the contract between the physician or provider and the [HMO]' within forty-five days of receiving a clean claim from a physician or provider." Id. (quoting TEX. INS. CODE ANN. art. 20A.18(b) (c0(1) replaced by TEX. INS. CODE ANN. § 843.338-.3385 (Vernon Supp. 2004)), and Article 3.70-3C, § 3A, the same statutes at issue herein.
In finding that neither of the prompt payment statutes were preempted by ERISA, the court in Baylor explained:
In this case, both state statutes require insurers to promptly pay the claims of physicians and other health care providers. Wall's ERISA plan provides only factual background for Baylor's statutory claims; the plan is peripheral to the statutory obligation Baylor seeks to enforce in this case, namely, prompt payment of Baylor for services rendered. The court will not, in the name of ERISA, insulate an insurer from liability against a third-party health care provider seeking to enforce its rights under a state statute that requires prompt payment of claims.
The substance of Baylor's statutory claims are governed by state laws that enforce the prompt payment of claims by insurers-not to plan participants or beneficiaries, but to independent health care providers. Nothing in ERISA prevents the Texas legislature from making this determination. By enforcing the Texas statutes at issue, plan participants' actual obligations under the terms of their various plans would remain constant and the plans' terms would be unmodified. See Memorial Hospital, 904 F.2d at 250. Baylor's statutory claims, thus, do not directly affect the relationship between traditional ERISA entities.
In sum, Baylor's statutory claims against ABCBS for violating Texas' prompt pay statutes do not enforce rights protected by ERISA's civil enforcement provision. See Foley, 226 F. Supp.2d at 901 (concluding that ERISA did not preempt the plaintiff's claims under Tex. Ins. Code Ann. Art. 20A.18B). The Texas Insurance Code-rather than Wall's employee benefit plan-is the basis of the claim that Baylor seeks to enforce. Baylor's right of recovery under the Texas statutes exists, therefore, independently of Wall's rights as a plan participant and is not completely preempted by ERISA.Id. at *7.
Here, as in Foley and Baylor, plaintiff claims it is not seeking recovery as an assignee of a plan participant's rights to benefits but is suing in its own capacity under the Texas Insurance Code because of the contracts it entered into with the various defendants. Based upon the court's analysis in the second Foley opinion and in Baylor, this Court agrees that plaintiff's claims are not preempted by ERISA. Having so found, the Court need not consider the applicability of the ERISA savings clause.
Defendants argue the Insurance Code imposes additional penalties which are not provided for under ERISA. With respect to the $1,000 per day penalty which plaintiff refers to in its petition, the Court is inclined to agree with defendant United Healthcare that plaintiff cannot recover any "administrative" penalty under the prompt payment statutes. According to TEX. INS. CODE ANN. art. 20A.18C(h) (Vernon Supp. 2003), a HMO that violates subsection (c) is subject to an administrative penalty under Article 1.10E of the Insurance Code, and an administrative penalty may not exceed $1,000 for each day the claim remains unpaid. Article 1.10E has been repealed and is now found in TEX. INS. CODE ANN. § 84,001-.051 (Vernon's Pamph. 2003). Section 84.021 provides that the "commissioner may impose an administrative penalty on a person [defined in § 84.001 as "individual, corporation, trust, partnership, association, or any other legal entity"] licensed or regulated under this code or another insurance law of this state which violates: (1) this code; (2) another insurance law of this state; or (3) a rule or order adopted under this code or another insurance law of this state."
The Court recognizes that the plaintiffs in Foley used an entity called the North American Medical Management (NAMM) to negotiate contracts on their behalf with the HMO defendants, and NAMM acted as the third-party administrator in processing medical claims and paying the various doctors and physician groups. The plaintiffs filed their suit against the defendant HMOs when they had not received payment from either party. While plaintiff in this case apparently negotiated the contracts directly with the defendants, the Court sees this as a difference without distinction.
Both parties discussed the applicability of the ERISA savings clause and the McCarran-Ferguson factors. As set forth inKentucky Assoc. v. Miller, 123 S.Ct. 1471, 1479 (2003), the United States Supreme Court has "never held that the McCarran-Ferguson factors are an essential component of the § 1144(b)(2)(A) [savings clause] inquiry." The Court stated:
Today we make a clean break from the McCarran-Ferguson factors and hold that for a state law to be deemed a "law . . . which regulates insurance' under § 1144(b)(2)(A), it must satisfy two requirements. First, the state law must be specifically directed toward entities engaged in insurance. Second, as explained above, the state law must substantially affect the risk pooling arrangement between the insurer and the insured.Id. (citations omitted).
Accordingly, IT IS HEREBY ORDERED that Plaintiff's Motion to Remand (docket #17) is GRANTED and this case is REMANDED to the 225th Judicial District Court of Bexar County, Texas. It is further ORDERED that the Clerk of the Court send a certified copy of this order to the clerk of the state court. Plaintiff's request for costs are DENIED.
On March 8, 2004, defendant Fortis Insurance gave notice that all matters in controversy with the plaintiff in this case had been settled (docket #61). Fortis advised that unless otherwise ordered by the Court, the parties would submit dismissal documents within thirty days of the filing of the notice. Given the remand, the parties are ordered to submit these documents to the state court. In addition, on March 15, 2004, plaintiff and defendant Group Pension Plan Administrators, Inc. filed a Stipulation of Dismissal (docket #63) indicating an agreement to dismiss all claims between them with prejudice. The Court hereby DISMISSES with prejudice all claims against defendant Group Pension Administrators, Inc.
It is so ORDERED.