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George v. Cnh Health & Welfare Benefit Plan

United States District Court, E.D. Wisconsin

May 22, 2017

BRENTEN GEORGE and DENISE VALENTE-MCGEE, Plaintiffs,
v.
CNH HEALTH & WELFARE BENEFIT PLAN, CNH EMPLOYEE GROUP INSURANCE PLAN, NEW HOLLAND, INC., and BLUE CROSS BLUE SHIELD OF WISCONSIN, Defendants.

          ORDER

          J.P. Stadtmueller U.S. District Judge

         1. INTRODUCTION

         In this action, Plaintiffs allege that Defendants used improper payment methodology in processing health insurance claims on the employee benefit plans they manage, in violation of the Employee Retirement Income Security Act (“ERISA”). (Docket #1). On March 13, 2017, Defendants collectively moved for judgment on the pleadings. (Docket #22). Plaintiffs opposed the motion on March 31, 2017, and Defendants replied in support on April 14, 2017. (Docket #26 and #27). For the reasons explained below, the motion must be granted in part and denied in part.

         2. STANDARD OF REVIEW

         Federal Rule of Civil Procedure 12(c) permits a party to seek judgment once each side has filed its pleadings. Fed.R.Civ.P. 12(c). The Court reviews such motions

by employing the same standard that applies when reviewing a motion to dismiss for failure to state a claim under [Fed. R. Civ. P.] 12(b)(6)[.] . . . Thus, we view the facts in the complaint in the light most favorable to the nonmoving party and will grant the motion only if it appears beyond doubt that the plaintiff cannot prove any facts that would support his claim for relief.

Buchanan-Moore v. County of Milwaukee, 570 F.3d 824, 827 (7th Cir. 2009) (citations and quotations omitted). The Court must “draw all reasonable inferences and facts in favor of the nonmovant, but need not accept as true any legal assertions.” Wagner v. Teva Pharm. USA, Inc., 840 F.3d 355, 358 (7th Cir. 2016).

         3. RELEVANT FACTS

         The following facts are gleaned from viewing the factual allegations of the amended complaint in a light most favorable to Plaintiffs.[1] Plaintiff Brenten George (“George”) is an employee of Defendant Case New Holland, Inc. (“CNH”). Plaintiff Denise Valente-McGee (“Valente-McGee”) is the spouse of a retired CNH employee. Each is a beneficiary of Defendants CNH Health & Welfare Benefit Plan and the CNH Employee Group Insurance Plan, respectively (collectively, the “Plans”). CNH is the ERISA fiduciary for the Plans and Defendant Blue Cross Blue Shield of Wisconsin (“Anthem”) is the claims administrator.

         The Plans provide health insurance coverage to many participants, including Plaintiffs. The benefits provided depend on whether the participants seek coverage for services from an in-network medical provider or an out-of-network provider. If a provider is out-of-network, individual participants are personally responsible for paying any amounts not paid by the Plans. Thus, if a Plan improperly underpays claims for out-of-network services, the participant suffers because they must make up the difference.

         For out-of-network providers, the Plans state that they will reimburse the participant for a percentage of “reasonable” charges. A “reasonable” charge is “[t]he charge for a service or a supply which is the lower of the provider's usual charge or the prevailing charge in the geographic area where it is furnished-as determined by the claims administrator. The claims administrator takes into account the complexity, degree of skill needed, type or specialty of the provider, range of services provided by a facility, and the prevailing charge in other areas.” (Docket #21 at 5) (emphasis in original). Plaintiffs both claimed coverage for surgeries conducted by out-of-network providers. The Plans paid only about twenty percent of the total charges in each case because that was the amount they determined was “reasonable.” FAIR Health, Inc. (“FAIR”) is a company that maintains a database on healthcare provider charges “to support the adjudication of healthcare claims and to promote sound decision-making by all participants in the healthcare industry.” Id. at 6. FAIR was created as a result of the settlement of a lawsuit in 2009 involving Ingenix, a company which previously maintained a similar database. Ingenix was shut down because its database led to systematic underpayments on out-of-network claims. FAIR's database, by contrast, is an objective, third-party source for determining average provider charges. Using FAIR's data, the prevailing charges for Plaintiffs' surgeries were more than double the amounts paid by the Plans.

         Plaintiffs appealed their claims with Anthem. Anthem told Plaintiffs that CNH had directed it to use a methodology for out-of-network claims that was different than the above-quoted “prevailing charge” language. CNH had asked Anthem to set payments on out-of-network claims using a percentage of Medicare reimbursement rates.

         Plaintiffs then appealed directly to the CNH and cited the FAIR data. CNH responded that with the shutdown of the old Ingenix database, it needed a new system to assess reasonable charges. Anthem had offered CNH two options: 1) use local network fees, or 2) use a percentage of the Medicare fee schedule. CNH chose the latter “because it most closely approximated the level of ‘reasonable charges' as determined under the Ingenix database.” Id. at 8.

         Plaintiffs allege that this approach is contrary to the Plans' language. The Medicare reimbursement rates have no relationship to the prevailing charges by providers. The definition of “reasonable” charges quoted above was never amended to reflect CNH's new methodology. Further, despite the elimination of Ingenix's flawed database, CNH nevertheless tried to approximate the reasonable charges determinations that had been founded on that database. Rather than using the Medicare reimbursement rates, CNH could have simply used the new FAIR database.

         Plaintiffs informed CNH that they believed its out-of-network payment methodology was improper. CNH nevertheless issued a final determination upholding its payments on Plaintiffs' claims. Plaintiffs allege that CNH and Anthem knowingly and systematically used their improper methodology to the detriment of all Plan participants who sought out-of-network services. Plaintiffs seek certification of a class of these persons.

         Plaintiffs' claims are presented in three counts. The first count is for “violation of fiduciary obligations” pursuant to 29 U.S.C. § 1132(a)(2) and (3). Id. at 12. Count One states that CNH and Anthem violated their duties as ERISA fiduciaries by implementing their improper claim payment scheme, which attempted to save them money by underpaying out-of-network claims. Plaintiffs' second count is for “improper denial of benefits” pursuant to Section 1132(a)(1)(B). Id. at 13. Count Two asserts the straightforward claim that Defendants wrongfully denied Plaintiffs the full benefits to which they were entitled under the Plans. The final count is for injunctive and declaratory relief pursuant to Section 1132(a)(3) to stop Defendants' allegedly unlawful payment practices. Plaintiffs pray for, inter alia, “an award of benefits due, ” an injunction against CNH and Anthem to cease their current ...


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