Summary: The plaintiff healthcare insurance administrator acts in various roles including administering some plans that expressly assume the risk of medical costs and establish their own benefit plans, including employer self-funded plans, state government plans, and claims arising under the BlueCard program allowing out-of-state patients to obtain care in Texas. Plaintiff also services benefit plans for federal employees in Texas under the Federal Employee Health Benefits Program (“FEHBP”).
Health Care Service Corp. v. Methodist Hospitals of Dallas
The defendant healthcare provider has a preferred provider agreement with the plaintiff to provide medical services to patients who have health plans either insured or administered by the plaintiff.
Chapter 1301 of the Texas Insurance Code, requires healthcare insurers to make coverage determinations and pay claims made by preferred healthcare providers within a specified time or face statutory penalties. Anticipating that the defendant would seek relief against the plaintiff under Chapter 1301, the plaintiff filed a declaratory judgment action seeking a declaration that (1) Chapter 1301 does not apply to the plaintiff as the administrator of particular health plans, and (2) the Federal Employee Health Benefits Act (“FEHBA”) preempts application of Chapter 1301 to its administration of claims under the FEHBP. The defendant counterclaimed for over $31 million in penalties, interest, and attorneys’ fees under Chapter 1301 attributable to the plaintiff’s alleged late payment of approved claims.
The plaintiff moved for summary judgment on all claims and counterclaims. The district court granted the plaintiff’s motion holding that (1) Chapter 1301 does not apply to the plaintiff’s administration of the plans and (2) the FEHBA preempts application of Chapter 1301 to the defendant’s claims arising from the FEHBA-governed plans. The defendant appealed.
On appeal, the Fifth Circuit first held that the plaintiff neither provided for coverage through its “health insurance policy” when it administered the plans, nor is it a “person” with whom an “insurer” contracts to perform administrative services, both required triggers for Chapter 1301 to apply. Therefore, the Fifth Circuit held that Chapter 1301 did not apply to the plaintiff’s activities as an administrator of the self-funded plans or the state government plans, nor to those activities that it performs as administrator of claims under the BlueCard program.
The Fifth Circuit also found that because Chapter 1301 would directly affect the operation of plans and expand FEHBP carriers’ duties under the plans, Chapter 1301 does relate to FEHBP plans. As a result, the FEHBA preempted Chapter 1301’s application to the claims processed by the plaintiff under the FEHBP plans.
The Fifth Circuit affirmed the district court’s judgment declaring that Chapter 1301 does not apply to the plaintiff’s administration of the plans at issue here and that FEHBA preempts application of Chapter 1301 to claims administered by the plaintiff under the FEHBP.
