United States District Court, E.D. Wisconsin
Stadtmueller U.S. District Judge
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.
STANDARD OF REVIEW
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).
following facts are gleaned from viewing the factual
allegations of the amended complaint in a light most
favorable to Plaintiffs. 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.
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.
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.
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.
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
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.
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
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 ...