Opinion
Civil Action No. 01-1750
February 19, 2002
PAPERNICK GEFSKY, ATTN HOWARD MURPHY ESQ., MONROEVILLE PA, for PLAINTIFFS.
SPRINGER BUSH PERRY, ATTN JOHN F. PERRY ESQ., PITTSBURGH PA, for DEFENDANTS.
OPINION and ORDER OF COURT
Pending before the Court is a Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(6) by Defendant Highmark, Inc. For the reasons discussed below, the Motion is granted.
I. INTRODUCTION
Unless otherwise noted, the facts in this section are taken from Plaintiffs' Complaint.
Plaintiff William Sopcak was enrolled in an employee welfare benefit plan provided by the Bricklayers, Masons and Roofers Welfare Fund of Western Pennsylvania. (Defendant's Brief in Support of the Motion to Dismiss, "Def.'s Brief," Docket No. 4, at 2.) Healthcare insurance coverage incorporated therein was provided by Defendant Highmark, Inc., t/d/b/a Highmark Blue Cross/Blue Shield ("Highmark"). Under the terms of the Highmark insurance contract ("the Plan"), Mr. Sopcak received coverage for certain healthcare-related procedures.
On May 11, 2000, Mr. Sopcak visited his dentist for a root canal necessitated by an abscess on one of his teeth. The next day, when he developed facial swelling and a high temperature, his dentist advised him to go to the emergency room of a local hospital. After evaluation in the emergency room, Mr. Sopcak was admitted to the hospital for treatment of "cellulitis of the face" and released on May 14, 2000.
Sometime later, Plaintiffs were advised by Highmark that Mr. Sopcak's emergency room and hospital care would not be covered because the diagnosis referred to routine dental services not covered in the Plan. Mrs. Sopcak was also told, however, that Defendant did not have an exact diagnosis and that she should contact the hospital for more information. When she did, she was told that the hospital had not received notice that the claim had been denied and to wait until official denial was received. On February 12, 2001, some nine months later, the hospital advised Plaintiffs that Defendant had denied payment and that their only recourse was to appeal denial of the claim. When they promptly did so, Defendant informed them that it was too late to appeal the decision because the 60-day appeal period had lapsed.
The Sopcaks sued Highmark in the Court of Common Pleas of Allegheny County, prompting the insurer to pay the claim in full when notified of the suit.
B. Procedural History
The Sopcaks then filed a second suit in the Court of Common Pleas of Allegheny County on August 9, 2001, this time claiming that Defendant had violated the Pennsylvania Bad Faith Statute, 42 Pa. C.S.A., § 8371. The Complaint alleged that Highmark had acted in bad faith in regard to their claim because the insurer had:
Actions on insurance policies. In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions: (1) award interest on the amount of the claim from the date the claim was made by the insured in an amount equal to the prime rate of interest plus 3%; (2) award punitive damages against the insurer; (3) assess court costs and attorney fees against the insurer. 42 Pa. C.S.A. § 8371.
a. failed to consider all relevant factors and medical records to evaluate and determine the cause of the injury;
b. failed to properly consider the type of injury and to make the proper determination that his injury was medical, not dental;
c. had no reasonable basis to deny payment of benefits clearly related to a medical condition, not to routine dental services;
d. acted in conscious disregard and indifference to the rights of Plaintiffs to have the claim properly investigated and paid;
e. failed to attempt, in good faith, to arrive at a fair and equitable settlement of the claim;
f. failed to serve Plaintiffs according to the terms of the Plan by not promptly disclosing the diagnosis and by forcing them to seek the diagnosis from other sources;
g. failed to divulge information Highmark had in its possession, thus lessening the time available to Plaintiffs for appealing the denial;
h. knowingly or recklessly disregarded its lack of a reasonable basis for denying the claim;
i. compelled Plaintiffs to seek legal redress to force payment of a claim Defendant knew or should have known it was obliged to pay; and
j. failed to pay a claim it knew or should have known it had a duty to pay.
(Complaint, ¶ 18.)
Pursuant to 28 U.S.C. § 1441, Defendant timely removed the case from state court to federal court on September 18, 2001, on the grounds that the cause of action relates to an employee welfare benefit plan under the terms and conditions of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, et seq. Ten days later, on September 28, 2001, Highmark moved to dismiss the Complaint for failure to state a claim for which relief can be granted, arguing that the suit for bad faith in processing the Sopcaks' insurance claim was completely preempted by ERISA. (Motion to Dismiss, Docket No. 2.)
"Except as otherwise expressly provided by Act of congress, any civil action brought in a state court of which the district courts of the United States have original jurisdiction may be removed by the defendant or the defendants to the district court of the united States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441 (a).
Plaintiffs filed a Brief in Opposition to the Motion to Dismiss ("Plfs.' Brief in Opp.," Docket NO. 5), arguing that under the recent holdings of Pegram v. Herdrich, 530 U.S. 211 (2000), Pappas v. Asbel, 768 A.2d 1089 (Pa. 2001), and Pryzbowski v. U.S. Healthcare, Inc., 245 F.3d 266 (3d Cir. 2001), their claims brought under the Bad Faith Statute rest on Defendant's "mixed eligibility decisions," and give rise to a state law cause of action which is not preempted by ERISA. (Plfs.' Brief in Opp. at 5.)
II. LEGAL ANALYSIS
A. Subject Matter Jurisdiction
Both parties assume that this case was properly removed from the Court of Common Pleas of Allegheny County to the United States District Court of Western Pennsylvania. However, federal courts are courts of limited jurisdiction and thus, "a federal court has an obligation to address a question of subject matter jurisdiction sua sponte." Perazzo v. Reliance Std. Life Ins. Co., CA 00-3342, 2001 U.S. Dist. LEXIS 18733, *5 (E.D. Pa. Nov. 15, 2001), citing Meritcare v. St. Paul Mercury Ins. Co., 166 F.3d 214, 217 (3d Cir. 1999) (a district court may "address the question of jurisdiction, even if the parties do not raise the issue.") If I determine that I lack subject matter jurisdiction because, for instance, the case was not properly removed, I am required to remand it to state court. 28 U.S.C. § 1447 (c) ("If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded").
Defendant argues that this Court has jurisdiction pursuant to 28 U.S.C. § 1441, whereby a defendant may remove a claim from a state court to a federal district court if the civil cause of action is one "of which the district courts have original jurisdiction." 28 U.S.C. § 1441 (a) and (b); Metropolitan Life Insurance Co. v. Taylor, 481 U.S. 58, 63 (1987). While not citing to any particular section of the ERISA statute, Highmark states that this action "arises out of and relates to an employee welfare benefit plan under the terms and conditions of ERISA," in essence quoting the language of ERISA § 514, 29 U.S.C. § 1144. (Notice of Removal, ¶ 4.) Moreover, the Civil Cover Sheet prepared by Defendant as part of the removal process specifically cites to 29 U.S.C. § 1144.
Although, as discussed below, Defendant has attempted to remove this case under a section of the ERISA statute which provides only defensive preemption, I conclude that the end result would be the same if Highmark had cited the correct section under which removal is permitted, 29 U.S.C. § 1132 (a). I will therefore first address the distinctions between removal and preemption under ERISA and then address Defendant's Motion to Dismiss on the grounds that Plaintiffs' claims are expressly preempted by 29 U.S.C. § 1144.
B. Removal vs. Preemption
As the Third Circuit Court of Appeals noted in Dukes v. U.S. Healthcare, "removal and preemption are two distinct concepts." Dukes v. U.S. Healthcare, 57 F.3d 350, 355 (3d Cir.), cert. denied, 516 U.S. 1009 (1995, quoting Warner v. Ford Motor Co., 46 F.3d 531, 535 (6th Cir. 1995) (en banc). A civil action filed in state court may be removed if the district court would have had "original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States." 28 U.S.C. § 1441; Metropolitan Life, 461 U.S. at 63. Under the "well-pleaded complaint rule," removal is generally proper only if a federal question is presented on the face of the plaintiff's complaint. Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 9-12 (1983); Dukes, 57 F.3d at 353; Rosenkrans v. Wetzel, 131 F. Supp.2d 609, 613 (M.D. Pa. 2001). Here, the Sopcaks' claim is based entirely on state law — violation of the Bad Faith Statute — and thus, under the general rule, would not be removable. Franchise Tax Bd., 463 U.S. at 10 ("Whether a case is one arising under the Constitution or a law or treaty of the United States . . . must be determined from what necessarily appears in the plaintiff's statement of his own claim in the bill of declaration.") Conversely, a defense raising a federal question is inadequate to confer federal jurisdiction. Louisville Nashville R. Co. v. Mottley, 211 U.S. 149 (1908). Thus, Defendant's argument that Plaintiffs' state law claims are preempted by federal law normally would not be sufficient to permit removal from state to federal court.
However, courts have recognized certain areas of law that fall under the "complete preemption exception" doctrine. That is,
Congress may so completely preempt a particular area that any civil complaint raising this select group of claims is necessarily federal in character. . . . The preemptive force of [the federal statutory provision] is so powerful as to displace entirely any state cause of action [addressed by the federal statute]. Any such suit is purely a creature of federal law, notwithstanding the fact that state law would provide a cause of action in the absence of the [federal provision].
Dukes, 57 F.3d at 354, quoting Franchise Tax Bd., 463 U.S. at 23.
The federal statute in question here, ERISA, provides for two types of preemption: "complete preemption" under section 502(a) and "express preemption" under section 514(a). Quarles v. Germantown Hosp. and Comm. Health Servs., 126 F. Supp.2d 878, 880 (E.D. Pa. 2000). Section 502(a), the civil enforcement provision of ERISA, empowers a plan participant or beneficiary to bring a civil action "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." 29 U.S.C. § 1132 (a)(1)(B). Complete preemption creates removal jurisdiction even though no federal question appears on the face of the plaintiff's complaint.
By contrast, although ERISA § 514(a) provides that "the provisions of this title . . . shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in [ 29 U.S.C. § 1003 (a)] and not exempt under [ 29 U.S.C. § 1003 (b)]," the express preemption created thereunder does not create removal jurisdiction but simply provides a substantive defense to claims brought under state law. Unlike the scope of § 502(a), "§ 514(a) merely governs the law that will apply to state law claims, regardless of whether the case is brought in state or federal court." Lazorko v. Pennsylvania Hospital, 237 F.3d 242, 248 (3d Cir. 2000). See also Berger v. Livengrin Found., CA 00-CV-501, 2000 U.S. Dist. LEXIS 3832, *13 (E.D. Pa. Mar. 28, 2000), rejecting the position that bad faith insurance claims are subject to removal by ERISA because "it confuses defensive preemption under ERISA § 514(a) with complete preemption under § 502(a)" and stating that "only the latter creates removal jurisdiction."
Causes of action which fall within the scope of § 502(a) of ERISA can be construed as providing a basis for removal jurisdiction. Metropolitan Life, 481 U.S. at 65 (noting that "Congress has clearly manifested an intent to make causes of action within the scope of the civil enforcement provisions of § 502(a) removable to federal court.") As the Third Circuit Court of Appeals has noted, however, this "by no means implies that all claims preempted by ERISA are subject to removal." Dukes, 57 F.3d at 355 (holding that because plaintiff's medical malpractice and negligence claims fell outside the scope of ERISA § 502(a), the complete preemption doctrine did not permit removal.) "State law claims which fall outside of the scope of § 502, even if preempted by § 514(a), are still governed by the well-pleaded complaint rule and, therefore, are not removable under the complete-preemption principles established in Metropolitan Life." Dukes, id.
In sum, if a claim falls within Section 502, it is completely preempted and may be properly removed to federal court where the substantive issues can be addressed. If it falls under Section 514(a) and the defendant attempts to remove the claim to federal court, the district court, being without subject matter jurisdiction, can only remand the case to the state court where the preemption question can be addressed and resolved by applying federal law. Rosenkrans, 131 F. Supp.2d at 613.
As noted above, a claim falls within Section 502 if it is a suit to recover benefits due under the terms of the plan, to enforce a claimant's rights under the plan, or to clarify rights to future plan benefits. 29 U.S.C. § 1132 (a). To determine if a claim "falls within" the removal section, it is necessary to examine the text of the complaint to determine if it could have been the subject of a suit brought under Section 502(a). Pryzbowski v. U.S. Healthcare, Inc., 245 F.3d 266, 273 (3d Cir. 2001).
Plaintiffs' claims do not fall in the subcategory of a suit to recover benefits due under the terms of a benefit plan because they have been reimbursed, apparently to the extent of their coverage, for the costs of Mr. Sopcak's emergency room care and hospitalization. Furthermore, they state that their Complaint "is not based on a denial of benefits by the Defendant. To the contrary, it is founded upon the Defendant's decision making process and . . . . the Defendant's motives for initially denying the claim rather than the actual denial itself." (Plfs.' Brief in Opp. at 6.)
As to the third type of claim preempted under § 502(a), Plaintiffs are clearly concerned with their rights to future benefits as evidenced by their statement:
It is certainly possible that the Plaintiffs will discover information or evidence that the Defendant's decision-making process and/or motive with regard to this claim was to discourage the Plaintiffs from seeking this type of care and to discourage the Plaintiffs from seeking emergency care in the future.
(Plfs.' Brief in Opp. at 7.)
Thus, at least a portion of Plaintiffs' Complaint expresses a desire to clarify their rights to future emergency room and/or hospitalization benefits by having a court find that denial of their previous claims for those benefits was an act of bad faith.
I conclude that Plaintiffs' examples of bad faith fall most specifically in the second subcategory of § 502(a), that is, an attempt to enforce their perceived rights to expeditious and good faith processing of their health insurance claims under the Plan. They allege, in part, that Highmark failed to properly determine that his injury was medical, not dental; had no reasonable basis to deny payment of benefits; failed to attempt, in good faith, to fairly and equitably settle the claim; failed to adhere to the terms of the Plan by promptly disclosing the diagnosis and by forcing them to seek the diagnosis from other sources; failed to divulge information the insurance company had in its possession; and failed to pay a claim it had a duty to pay. (Complaint, ¶ 18.) All of these allegations relate directly to the way in which Highmark processed (or, more accurately, failed to process) their claim for benefits. In other words, they relate solely to administration of the Plan. "It is axiomatic that if a participant in a plan subject to ERISA is suing . . . based upon the improper processing of a claim under that plan, the claim is completely preempted by federal law." Pryzbowski v. U.S. Healthcare, Inc., 64 F. Supp.2d 361, 367 (D. N.J. 1999), aff'd in part, vacated in part, at 245 F.3d 266 (3d Cir. 2001), citing Pilot Life v. Dedeaux, 481 U.S. 41, 52-54 (1987) and ERISA § 502(a).
Plaintiffs at no point deny that the Bricklayers, Masons and Roofers Welfare Fund of Western Pennsylvania, including the Highmark insurance plan, was regulated by ERISA. Congress clearly intended that "all suits brought by beneficiaries or participants asserting improper processing of claims under ERISA-regulated plans be treated as federal questions governed by § 502(a)." Pilot Life, 481 U.S. at 56.
See Exh. A to Def.'s Brief, excerpts from the plan description and plan of benefits, at pages 6 through 8, providing information required by ERISA.
The Third Circuit recently had an opportunity to reinforce this conclusion. In In re U.S. Healthcare, Inc., 193 F.3d 151, 162 (3d Cir. 1999), cert. denied sub nom U.S. Healthcare, Inc. v. Bauman, 530 U.S. 1242 (2000), the Court was confronted with the distinction between the two concurrent roles of a health maintenance organization ("HMO") which is both provider of medical services and administrator of the ERISA plan which provides those benefits. The Court noted that
As an administrator, . . . an HMO will have administrative responsibilities over the elements of the plan, including determining eligibility for benefits, calculating those benefits, disbursing them to the participant, monitoring available funds and keeping records. As we held in Dukes, claims that fall within the essence of the administrator's activities in this regard fall within section 502(a)(1)(B) and are completely preempted.
U.S. Healthcare, 193 F.3d at 162; see also, Tucker v. Ogden Corp., CA 96-8302, 1997 U.S. Dist. LEXIS 8356, * 7 (E.D. Pa. June 6, 1997) (claims that defendants improperly processed the claim, failed to reconsider the claim on remand and refused to settle the case are "precisely the type of claims which § 502(a) was designed to pre-empt.")
Based on the specific failures alleged by Plaintiffs in regard to processing of their claim, it is clear that they arise from the administration of the Plan by Highmark and are therefore completely preempted by § 502(a) as explained by Pilot Life, Dukes and U.S. Healthcare. Despite Defendant's incorrect identification of § 514 as the basis of removal, the case was properly removed under § 502(a). Since I have determined that this Court consequently has subject matter jurisdiction over the claim, I will address Highmark's argument that the Complaint must be dismissed inasmuch as it is based entirely on a state law which has been preempted by ERISA.
C. ERISA Preemption and the Bad Faith Statute
In deciding a motion to dismiss under Fed.R.Civ.P. 12(b)(6), all factual allegations and all reasonable inferences therefrom must be accepted as true and viewed in a light most favorable to the plaintiff. Colburn v. Upper Darby Twp., 838 F.2d 663, 665-666 (3d Cir. 1988). In ruling on a motion to dismiss, the court must decide whether there are sufficient facts pled to determine that the complaint is not frivolous, and to provide the defendants with adequate notice to frame an answer. Id. at 666. A motion to dismiss will be granted only if it appears that the plaintiff can prove no set of facts in support of his claims which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45 (1957).
The heart of a claim under the Bad Faith Statute is the denial of coverage by an insurer when there is no reasonable basis to do so. Jung v. Nationwide Mut. Fire Ins. Co., 949 F. Supp. 353, 356 (E.D. Pa. 1997), quoting Terletsky v. Prudential Property Casualty Insur. Co., 649 A.2d 680, 688 (Pa.Super. 1994) for the definition of bad faith on the part of an insurer as "any frivolous or unfounded refusal to pay proceeds of a policy." Defendant claims that "it has been conclusively decided that Pennsylvania's bad faith law is preempted by ERISA [§ 514] and is not exempted from preemption as a law that regulates insurance." (Def.'s Brief at 2.) Plaintiffs counter with an argument that "as a result of recent Supreme Court and Third Circuit decisions regarding ERISA preemption and, based upon an examination of how the Pennsylvania state courts have actually interpreted and applied § 8371," their action is not preempted by ERISA. (Plfs.' Brief in Opp. at 2-3.)
The question of preemption under § 514(a) focuses on whether the claim "relates to" an employee benefit plan. If so, the state law claim is preempted by the federal statute. Independent research has failed to discover any Third Circuit case which disagrees with Defendant's conclusion, at least in the context of employee benefit plan administration. See, e.g., Tutolo v. Independence Blue Cross, CA 98-CV-5928, 1999 U.S. Dist. LEXIS 6335, *7-*8 (E.D.Pa. May 6, 1999) (listing cases); Garner v. Capital Blue Cross, 859 F. Supp. 145, 148-49 (M.D. Pa.), aff'd, 52 F.3d 314 (3d Cir.), cert. denied, 516 U.S. 870 (1995); Zimnoch v. ITT Hartford, CA 99-6594, 2000 U.S. Dist. LEXIS 2846, *17-*19 (E.D. Pa. Mar. 6, 2000) (bad faith claim expressly preempted by § 514(a)); Cecchanecchio v. Continental Cas. CO., CA 00-4925, 2001 U.S. Dist. LEXIS 356, *12 (E.D. Pa. Jan. 19, 2001) (same); Ginsberg v. Independence Blue Cross, CA 01-66, 2001 U.S. Dist. LEXIS 2845, *11 (E.D. Pa. Mar. 16, 2001) (same); Murphy v. Metropolitan Life Ins. Co., 152 F. Supp.2d 755, 758 (E.D. Pa. 2001) ("Both plaintiff's statutory state law bad faith and consumer protection claims" relate to "an employee benefit plan and are expressly preempted by § 514(a).")
I note that several of the cases relied upon by Defendant to support its position that § 514 provides a basis for removal very carefully distinguish between removal under § 502 and preemption under § 514. As stated in Berger, "courts in this district have only interpreted the bad faith statute to be subject to section 514(a) preemption, not complete preemption." Berger, 2001 U.S. Dist. LEXIS at *14, refusing to address plaintiff's bad faith claim and remanding; case was improperly removed from state court because it rested on a quality of care claim.
Nor is the Third Circuit unique in considering bad faith claims preempted under ERISA § 514(a). See, e.g., Bast v. Prudential Ins. Co. of America, 150 F.3d 1003, 1007-08 (9th Cir. 1998) (holding that § 514(a) preempted a claim alleging bad faith brought under the Washington state insurance code); Tolton v. American Biodyne, Inc., 48 F.3d 937, 941-43 (6th Cir. 1995) (holding that § 514(a) preempted claims for wrongful death, medical malpractice, and insurance bad faith.)
Moreover, I disagree that any of the three cases cited by Plaintiffs will save their Complaint from dismissal as a result of ERISA preemption.
In Pegram v. Herd rich, Cynthia Herdrich sued her physician and the HMO Dr. Pegram and her partners owned after Herdrich was forced to wait eight days to undergo an ultrasound examination at a facility staffed by HMO doctors. Pegram, 530 U.S. at 215. Before the ultrasound could be performed, Herdrich's appendix burst, causing peritonitis. She brought suit in state court, alleging medical malpractice and two counts of state law fraud. The defendants removed the case to federal district court, arguing ERISA preemption. Herdrich later amended her Complaint, alleging that the policies of the HMO (which offered financial incentives for doctors to limit medical care) resulted in physicians making decisions which violated their ERISA fiduciary obligations under 29 U.S.C. § 1109 (a) to administer the plan with the exclusive interest of plan participants in mind. Pegram, id. The district court concluded that the HMO was not acting as an ERISA fiduciary under 29 U.S.C. § 1109 (a) and dismissed the claim. After the Court of Appeals for the Seventh Circuit reversed, the Supreme Court granted certiorari to determine if treatment decisions made by an HMO, acting through its physicians, were fiduciary acts within the meaning of ERISA. Id. at 217-18.
The Court held that they are not. First, the Court recognized that HMO physicians function as plan administrators when they determine whether a specific medical condition is covered by the terms of the plan and as health care providers when they determine the appropriate medical treatment. Pegram, 530 U.S. at 228. Secondly, HMO physicians make three types of decisions: (1) pure eligibility decisions which "turn on the plan's coverage of a particular condition or medical procedure for its treatment;" (2) treatment decisions which are "choices about how to go about diagnosing and treating a patient's condition;" and (3) mixed eligibility and treatment decisions, i.e., decisions in which coverage and medical judgment are inextricably intertwined. Id. The Court explained that decisions in the last category are "when-and-how" questions. "Although coverage for many conditions will be clear and various treatment options will be indisputably compensable, physicians still must decide what to do in particular cases . . . In practical terms, these eligibility decisions cannot be untangled from physicians' judgments about reasonable medical treatment." The Court concluded that Congress did not intend for an HMO, acting through its physicians, to be treated as an ERISA fiduciary when making mixed decisions. Pegram, id. at 231.
Plaintiffs' reliance on Pegram is somewhat puzzling inasmuch as they have not claimed either that Highmark was acting as a fiduciary in regard to the decision-making process associated with processing their claim or stated any of their specific examples in terms of a breach of fiduciary duty. Plaintiffs' Complaint appears to rest on a pure eligibility decision with which they disagreed: that the Plan did not cover a particular condition because it was a dental, rather than medical, condition. At no point in their Complaint do Plaintiffs assert that they were denied any treatment in connection with Mr. Sopcak's emergency room or hospital treatment or that Highmark participated in making decisions that affected the quality of the treatment he received. In fact, the Court specifically stated in Pegram that it had "no occasion" to address the issue of a claim by a patient to receive particular benefits, e.g., whether he was entitled to reimbursement for emergency care for which the HMO refused to pay on the ground that emergency care was not needed. Id. at 229, n. 9.
The second case on which Plaintiffs rely is Pappas v. Asbel, 768 A.2d 1089 (Pa. 2001). In Pappas, an emergency room physician at Haverford Community Hospital determined that Basil Pappas was suffering from an epidural abscess pressing on his spinal column. After consulting with neuro-specialists, the physician concluded that Pappas should be treated at Jefferson University Hospital. U.S. Healthcare, the plaintiff's HMO, denied treatment at Jefferson and required the plaintiff to be transferred to one of its participating hospitals. Before the plaintiff could be transferred, he experienced such severe compression of his spine by the abscess that he became a permanent quadriplegic. Pappas, 768 A.2d at 1091.
Pappas then filed suit in state court against his physician and Haverford for medical malpractice and negligence; the defendants filed a cross-claim against U.S. Healthcare, joining it as a party-defendant for its refusal to authorize the transfer of Pappas to a hospital selected by Haverford. Id. The trial court granted U.S. Healthcare's motion for summary judgment on all the third-party claims, concluding that they were preempted by § 514(a) of ERISA. Id. at 1092. The Superior Court determined, however, that ERISA did not preempt the state law claims because Congress could not have intended to preempt the cost containment considerations that drive HMOs when enacting ERISA since legislation authorizing such organizations was not passed until a year after ERISA. Id. at 1091, n. 1. The Supreme Court affirmed, albeit on the grounds that the negligence claims in the complaint were not preempted because they did not relate to an ERISA plan within the meaning of § 514(a). Id. at 1092. The U.S. Supreme Court granted certiorari, vacated and remanded for further consideration in light of Pegram. 530 U.S. 1241 (2000).
On remand, the Pennsylvania Supreme Court concluded, based on the undisputed facts of the case and the inferences that could be drawn from them, that the decision preventing Pappas' immediate transfer to Jefferson Hospital was "the sort of mixed eligibility and treatment decision" discussed in Pegram. Pappas, 768 A.2d at 1096. The HMO physician who refused to authorize the transfer had decided not only if Pappas' condition was covered (i.e., an eligibility decision) but also where and how his abscess would be treated. The Court concluded that the adverse consequences of that decision were to be properly redressed, according to Pegram, through state medical malpractice law not preempted by ERISA. Id.
Again, Plaintiffs' unexplained reliance on this case is surprising because their suit shares almost nothing in common with the facts of Pappas. Mr. Sopcak was not denied or forced to postpone care; no treatment decisions were made by the insurer who also determined his eligibility for coverage; Pappas did not address bad faith claims; and Plaintiffs here have not attempted to state a medical malpractice or negligence cause of action.
The final case to which Plaintiffs refer, again without analysis, is directly inapposite to their position that their bad faith claim is not preempted by ERISA § 514(a). In Pryzbowski v. U.S. Healthcare, Inc., the plaintiff had undergone numerous back surgeries at Jefferson University Hospital. After her health care coverage changed, she sought additional treatment at Jefferson with the same doctor. U.S. Healthcare, her new HMO, refused for several months to allow the surgery at Jefferson, even after its own providers recommended that Pryzbowski's former neurosurgeon would be the best specialist to perform the intricate surgery. Pryzbowski, 245 F.3d at 269. Eventually, the plaintiff was operated on by her physician at Jefferson, but continued to experience severe back pain which was blamed in part on "the significant delay that occurred between the onset of the symptomatology and the surgical intervention." Id. at 269-70. Pryzbowski brought suit in New Jersey Superior Court, alleging six counts under state law against U.S. Healthcare, including a claim that the delay in approving her surgery constituted bad faith. Id. at 270. U.S. Healthcare removed the case to federal court and successfully moved to have the counts against it dismissed.
On appeal, the Third Circuit declined to accept the plaintiff's argument that the counts against the HMO were improperly removed to federal court because they did not fit within § 502(a). Id. at 271. Citing Dukes, supra, the Court reaffirmed its prior conclusion that claims which challenge the quantum of benefits due under an ERISA-regulated plan are completely preempted under § 502(a)'s civil enforcement scheme, whereas claims which attack the quality of benefits provided do not fall within the scope of § 502(a) and are not completely preempted. Id. at 272. The Court also reviewed the holdings of In re U.S. Healthcare, Inc., supra, and Lazorko, supra, which had applied the same quality-quantity distinction and found that these analyses were totally harmonious with the recent Supreme Court decision in Pegram, even though that case concerned fiduciary acts and not preemption. Pryzbowski, 245 F.3d at 272-73. The Court of Appeals found that the state claims against U.S. Healthcare, including the claim of bad faith arising from the delay in processing her request for specific treatment, fell "within the realm of administration of benefits" and thus within the scope of § 502(a). Id. at 273. In the second stage of the analysis, the Court of Appeals upheld the district court's dismissal of the bad faith claim under § 514. "We conclude that the District Court did not err in holding that the claims Pryzbowski asserts against U.S. Healthcare are completely preempted. It follows that the District Court properly exercised subject matter jurisdiction over the case and dismissed the claims against U.S. Healthcare." Id. at 275.
Again, I find Plaintiffs' reliance on Pryzbowski puzzling inasmuch as the case stands, in part, for the proposition that a bad faith claim related to administrative delays is expressly preempted by ERISA § 514(a), a position directly antithetical to that espoused by Plaintiffs.
Plaintiffs have cited to these three cases without analysis, other than to state that "at issue is whether the decision made by the insurer is purely an administrative one or, rather, is a decision which would effect [sic] the quality of benefits received" and that "the Defendant's alleged bad faith results from `mixed eligibility' decisions made by the Defendant regarding Mr. Sopcak's medical condition." (Plfs.' Brief in Opp. at 6-7.) Plaintiffs have failed, however, to allege any involvement by Highmark in Mr. Sopcak's treatment, a necessary prerequisite to concluding that Defendant made a "mixed decision" as discussed in Pegram or affected the quality of the medical benefits he received as discussed in Pappas and Pryzbowski. To the contrary, the cases on which Plaintiffs seek to rely instead support the position of Defendant that their bad faith claims under 42 Pa. C.S.A. § 8371 should be dismissed.
ORDER OF COURT
And now, this 19th day of February, 2002, after careful consideration and for the reasons set forth in the Opinion accompanying this Order, it is ordered that the Motion to Dismiss by Defendant Highmark, Inc., t/d/b/a Highmark Blue Cross/Blue Shield (Docket No. 2) is granted. The Clerk is directed to mark this case "Closed" forthwith.