Opinion
SA-22-CV-1201-OLG (HJB)
07-31-2024
WINDMILL WELLNESS RANCH, L.L.C. and USAA PLAN MEMBERS, A.H., ET AL., Plaintiffs, v. UNITED SERVICES AUTOMOBILE ASSOCIATION and USAA MEDICAL CARE PLAN, Defendants.
REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Henry J. Bemporad United States Magistrate Judge
To the Honorable United States District Judge Orlando L. Garcia:
This Report and Recommendation concerns Defendants' Motion to Dismiss Plaintiffs' Third Amended Complaint (Docket Entry 38). Pretrial matters have been referred to the undersigned for consideration. (See Docket Entry 8.) For the reasons that follow, I recommend that Defendants' motion (Docket Entry 38) be GRANTED IN PART, DENIED IN PART, and DENIED WITHOUT PREJUDICE IN PART.
I. Jurisdiction.
Plaintiffs assert two claims in their Third Amended Complaint: one for Defendants' failure to properly pay plan benefits in violation of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1132(a)(1)(B), and the other for Defendants' failure to properly pay plan benefits for mental health and substance-abuse services in violation of the Mental Health Parity and Addition Equity Act of 2008 (the “Parity Act”), 29 U.S.C. § 1185a. (See Docket Entry 37, at 39-46.) The Court has original jurisdiction over such claims arising under federal statutes pursuant to 28 U.S.C. § 1331. The undersigned issues this Report and Recommendation pursuant to 28 U.S.C. § 636(b)(1).
Plaintiffs also invoke the equivalent Texas law regarding parity. (See Docket Entry 37, at 44.) See TEX. INS. CODE. § 1355.254. The Texas and federal parity laws are effectively the same for purposes of the Court's ruling on Defendants' motion; thus, the undersigned will not treat them separately in this report, aside from offering a few minor clarifications in subsequent footnotes.
The Court has supplemental jurisdiction over the related state-law claims pursuant to 28 U.S.C. § 1367. See note 1, supra.
Because Defendants seek dismissal at the pleadings stage, the Court simply adopts the well-pleaded facts from Plaintiff's complaint. See Sewell v. Monroe City Sch. Bd., 974 F.3d 577, 581 (5th Cir. 2020).
Plaintiff Windmill Wellness Ranch, L.L.C. (“Windmill”) is a licensed substance abuse treatment facility in Texas that specializes in simultaneously treating substance abuse disorders and underlying mental health conditions. (Docket Entry 37, at 5.) Plaintiffs USAA Plan Members, A.H., et al. (“Plan Members”) were patients at Windmill's facility. (Id.) The Plan Members were also employees of Defendant United Services Automobile Association (“USAA”), and were enrolled as beneficiaries of USAA's Employee Benefit Plan (“the Plan”). (Id. at 2-3.) Aetna, which is not a party to this case, assisted USAA in administrating the Plan. (Id. at 7; 28.)
Windmill is an out-of-network facility under the Plan's terms. (Docket Entry 37, at 6.) Before admitting the Plan Members, Windmill contacted Defendants and confirmed that the Plan provided for out-of-network benefits for the mental health and substance abuse services Windmill provides. (Id. at 7.) Windmill verified that the Plan Members were enrolled in the Plan, and received preauthorization for services it offers-i.e., detoxification, residential treatment, partial hospitalization, and intensive outpatient treatment. (Id.) And prior to admitting any Plan Member to its facility, Windmill requested disclosure of the reimbursement rates Defendants would pay for its services. (Id.) The responses Windmill received from Defendants were not consistent. (Id. at 7-8.) Defendants' responses ranged from representing that the Plan would pay the “usual and customary rates,” an “allowable amount,” “some percentage of the Medicare Fee Schedule, or other known fee schedule,” or that they simply did not know what the Plan would pay. (Id. at 8.)
For each of the claims Windmill billed for its services-which it contends were either underpaid or not paid at all-it received an Explanation of Benefits form (“EOB”) from Aetna. (Docket Entry 37, at 15.) The EOBs made inconsistent representations for the same services. (Id.) Some of the EOBs stated:
Charge exceeds fee schedule/maximum allowable or contracted/legislated fee arrangement. Note: This adjustment amount cannot equal the total service or claim charge amount; and must not duplicate provider adjustment amounts (payments and contract reductions) that have resulted from the prior payer(s) adjudication.(Id.) Other EOBs stated:
[T]he member's plan provides benefits for covered expenses at what we find to be a recognized or reasonable share. The reasonable charge determination on the claim resulted in a reduction in payment and was calculated based on one of the following:
- Cost information submitted by hospitals to Center for Medicare and Medicaid services;
- Fair Health [percen]tile elected by Member's plan or required by state regulations(Id.) Still other EOBs stated either that the Plan “pays 120% of Medicare,” “140% of Medicare,” or simply that claims are reimbursed according to the terms of Defendants' contract with Windmill-even though no such contract existed. (Id. at 16.)
Confounded by Defendants' reimbursements and accompanying EOB representations, Windmill requested disclosure of the Plan's reimbursement methodologies. (Docket Entry 37, at 17.) In fact, Windmill repeatedly requested disclosure of this information over the course of several years. (Id. at 18.) Neither Defendants nor Aetna ever made the requested disclosures. (Id.)
Windmill also requested disclosure of Defendants' methodologies for reimbursing claims for medical and surgical services-so that they could be compared with the reimbursement practices for the mental health and substance abuse services provided by Windmill-but, again, neither Defendants nor Aetna made the requested disclosures. (Id. at 18-19.)
Windmill charged a total of $2,084,225 for the services it provided to the Plan Members and billed to Defendants between 2017 and 2020. (Docket Entry 37, at 20.) Windmill only received $307,254.45 in reimbursements from Defendants. (Id.) This lawsuit followed.
Windmill filed the original complaint as the sole Plaintiff in this case on November 3, 2022. (Docket Entry 1.) Upon being admitted to Windmill's facility, the Plan Members had executed assignments of benefits to Windmill and authorizations for Windmill and its counsel to file suit on their behalf. (Docket Entry 37, at 12.) The Plan Members were later joined as Plaintiffs in the First Amended Complaint. (See Docket Entry 15.) Plaintiffs ultimately amended their complaint twice more (see Docket Entries 20 and 37).
Defendants now move to dismiss Plaintiffs' Third Amended Complaint on the grounds that (1) Windmill lacks derivative standing; (2) the Plan Members lack Article III standing; (3) Plaintiffs have failed to state a plausible ERISA claim; and (4) Plaintiffs have failed to state a plausible Parity Act claim. (See Docket Entry 38.)
III. Analysis.
Defendants moved to dismiss for lack of subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) and for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). (Docket Entry 38.) This Report and Recommendation addresses the jurisdictional challenge first. See Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001) (per curiam) (“When a Rule 12(b)(1) motion is filed in conjunction with other Rule 12 motions, the court should consider the Rule 12(b)(1) jurisdictional attack before addressing any attack on the merits.”).
A. Defendants' 12(b)(1) Motion.
Federal Rule of Civil Procedure 12(b)(1) permits a party to challenge the court's subjectmatter jurisdiction as a defense. Attridge v. Colonial Sav. F.A., No. SA-20-CV-00205-OLG, 2023 WL 6444894, at *2 (W.D. Tex. Sept. 28, 2023). “In considering a Rule 12(b)(1) motion to dismiss, a court must first determine whether the jurisdictional attack is facial or factual in nature.” Windmill Wellness Ranch, L.L.C. v. Meritain Health, Inc., No. SA-20-CV-01388-XR, 2021 WL 2635845, at *1 (W.D. Tex. June 25, 2021) (henceforth “Meritain”) (citing Cell Science Sys. Corp. v. La. Health Serv., 804 Fed.Appx. 260, 263 (5th Cir. 2020)). Here, because Defendants rely on documents outside Plaintiffs' Third Amended Complaint in challenging Plaintiffs' standing, their jurisdictional attack is factual in nature. See Meritain, 2021 WL 2635845, at *3 (citing Cell Science Sys. Corp., 804 Fed.Appx. at 263). A factual attack “challenges the existence of subjectmatter jurisdiction in fact, irrespective of the pleadings, and matters outside the pleadings, such as testimony and affidavits, are considered.” Attridge, 2023 WL 6444894, at *2 (quoting Menchaca v. Chrysler Credit Corp., 613 F.2d 507, 511 (5th Cir. 1980)). In ruling on a factual attack, “no presumptive truthfulness attaches to the [plaintiff's] jurisdictional allegations, and the court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case.” Meritain, 2021 WL 2635845, at *2 (quoting Evans v. Tubbe, 657 F.2d 661, 663 (5th Cir. Unit A Sept. 1981)).
“Healthcare providers do not have standing in their own right to sue under ERISA, but they may derivatively bring ERISA suits on behalf of their patients.” Meritain, 2021 WL 2635845, at *2 (citing N. Cypress Med. Ctr. Operating Co v. Cigna Healthcare, 781 F.3d 182, 191 (5th Cir. 2015)). “Whether a provider has third-party standing to bring a claim as an assignee is a jurisdictional issue that can be addressed under Rule 12(b)(1).” Meritain, 2021 WL 2635845, at *3 (citing LeTourneau Lifelike Orthotics & Prosthetics, Inc. v. Wal-Mart Stores, Inc., 298 F.3d 348, 351 (5th Cir. 2002)). “A federal court does not have jurisdiction to hear a case when a healthcare provider lacks standing under ERISA to bring that case due to a valid anti-assignment clause.” Meritain, 2021 WL 235845, at *3 (citing Dialysis Newco, Inc. v. Cmty. Health Sys. Grp. Health Plan, 938 F.3d 246, 250 (5th Cir. 2019)).
Windmill does not dispute that it does not have direct standing under ERISA. Rather, Windmill claims derivative standing under ERISA based on assignments and authorizations made by each of the Plan Members. (Docket Entry 37, at 12-13.) Defendants argue, however, that “derivative standing cannot be obtained through an assignment here because the USAA Plan contains a clear anti-assignment clause.” (Docket Entry 38, at 10.) Plaintiffs respond that Defendants have waived the anti-assignment provision by failing to invoke it sooner, and that they are estopped from attacking Windmill's standing on that basis. (Docket Entry 40, at 7-13.)
Defendants additionally argue that the Plan Members themselves lack Article III standing because “the USAA Plan . . . only covers losses that are actually incurred and requires a ‘written proof of loss.'” (Docket Entry 38, at 12.) In short, Defendants contend that Plaintiffs have failed to demonstrate that the Plan Members have suffered a concrete injury because “there are no allegations that the members have paid the amounts Windmill seeks,” that they “submitted the requisite proof of payment to USAA,” or even “that they have been billed by Windmill.” (Id. at 10.) Defendants infer that the Plan Members have not yet made any payments because, if they had, “then Windmill could not be a party to this suit since it would have already recovered all of its alleged damages.” (Id.) Plaintiffs respond that “every claim submitted by Windmill on behalf of each member constitutes a written proof of loss.” (Docket Entry 40, at 16.) The undersigned will begin by addressing whether the Plan Members have Article III standing, and then turn to the issue of the anti-assignment clause and derivative standing.
1. The Plan Members' Article III standing.
Article III standing requires that “the plaintiff must have suffered an injury in fact-an invasion of a legally protected interest which is (a) concrete and particularized, . . . and (b) actual or imminent.” Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992) (citations and internal marks omitted). The injuries alleged in this case-medical debt resulting from improper nonpayment or underpayment of insurance claims-are certainly concrete. See TransUnion LLC v. Ramirez, 594 U.S. 413, 425 (2021) (“[M]onetary harms ....readily qualify as concrete injuries under Article III.”). Defendants do not argue otherwise. Rather, they object that the Plan Members have not yet “suffered an actual loss by paying Windmill.” (Docket Entry 41, at 10 (emphasis added).) But Article III standing does not always require that a concrete injury be actual-imminence will do. See, e.g., Carney v. Adams, 592 U.S. 53, 65-66 (2020); Lujan, 504 U.S. at 560.
“To plead an imminent future harm, Plaintiffs must show that ‘there is a substantial risk that the injury will occur.'” Children's Health Def. v. Food & Drug Admin., 650 F.Supp.3d 547, 554 (W.D. Tex. 2023) (quoting Stringer v. Whitley, 942 F.3d 715, 721 (5th Cir. 2019)), aff'd, No. 23-50167, 2024 WL 244938 (5th Cir. Jan. 23, 2024), cert. denied sub nom. Children's Health Def. v. FDA, No. 23-1161, 2024 WL 3089568 (U.S. June 24, 2024). Plaintiffs explain that, based on Windmill's own billing practices, “the less the [P]lan pays, the more the [Plan M]ember owes to the provider as a result.” (Docket Entry 40, at 15.) In other words, Defendants' alleged improper nonpayment or underpayment of claims will predictably “lead[] to the [Plan Members] being fully responsible for the balance of the charges.” (Id.) As Windmill has represented that it will in fact recoup the costs of services rendered from the Plan Members themselves-if Defendants are not required to pay more-there is a substantial risk that the Plan Members will suffer a concrete injury. Accordingly, Plaintiffs have shown that the Plan Members' asserted injuries are imminent.
Imminence aside, Defendants also argue that absent documented proof of loss, specifying the exact dollar amounts of the Plan Members' imminent medical debts, the Plan Members' concrete injuries are too imprecise to satisfy Article III standing. (See Docket Entry 41, at 10.) The undersigned agrees that such proof of loss would be essential to calculating the appropriate amount of damages in the event that Plaintiffs prevail in this suit. But imprecision with respect to the exact dollar figures of the Plan Members' imminent monetary injuries is immaterial to whether they have standing. It is sufficient that some monetary injury-be it $10 or $10,000 in medical debt-is imminent for the Plan Members.
Based on the foregoing, Plaintiffs have alleged a sufficient injury to the Plan Members for purposes of Article III. The Plan Members therefore have standing and are proper plaintiffs in this case, unless they validly assigned their interests to Windmill-which Defendants contend is barred by the anti-assignment clause in the Plan. On the other hand, if there was a valid assignment, then Windmill has derivative standing and is the proper plaintiff in this case. This means that the District Court, as it has previously held, need not further consider Defendants' anti-assignmentclause argument and Windmill's derivative standing at this stage in the proceedings. The reasons for this, and for the Court's ruling in a closely similar case, are set out in the following section.
2. Windmill's derivative standing.
The District Court recently addressed Windmill's derivative standing in light of antiassignment clauses in another case where Windmill sued several insurance providers for ERISA violations. See Windmill Wellness Ranch, L.L.C. v. Blue Cross & Blue Shield of Tex., No. SA-19-CV-01211-OLG, 2022 WL 18585976 (W.D. Tex. Aug. 26, 2022) (henceforth “BCBS”). In BCBS, the Court permitted Windmill to amend its complaint to add BCBS plan beneficiaries as plaintiffs, stating:
It is undisputed that either Windmill or the plan beneficiaries can recover for the alleged nonpayment and underpayment of claims submitted to Defendants. Which of the two can recover, however, hinges on whether a valid assignment has been made to Windmill. If a valid assignment was made, Windmill has standing to pursue legal action and recover payment for the submitted claims. If a valid assignment was not made, the plan beneficiaries are proper plaintiffs and real parties in interest, even though Windmill will ultimately recover the proceeds.
With both Windmill and the plan beneficiaries as plaintiffs, the Court need not determine at this juncture the validity of any purported assignment, as at least one of them has standing to bring this action. See McAllen Grace Brethren Church v. Salazar, 764 F.3d 465, 471 (5th Cir. 2014) (“It is well settled that once we determine that at least one plaintiff has standing, we need not consider whether the remaining plaintiffs have standing to maintain the suit.”). To the extent Defendants still want to challenge the validity of the assignment, they can do so as the case proceeds.Id. at *2-3. The defendant insurance plan providers there-BCBS et al. -did challenge the validity of the assignment by filing a 12(b)(1) motion to dismiss for lack of standing. However, the undersigned recommended that the District Court deny the motion, explaining that:
[T]he District Court noted that either Windmill or the plan beneficiaries could recover for the alleged nonpayment and underpayment of claims submitted to Defendants. (Docket Entry 128, at 6.) Accordingly, once both Windmill and the Patients were joined as plaintiffs, at least one of them would have standing to bring this action. (Id. (citing McAllen Grace Brethren Church v. Salazar, 764 F.3d 465, 471 (5th Cir. 2014) (“It is well settled that once we determine that at least one plaintiff has standing, we need not consider whether the remaining plaintiffs have standing to maintain the suit.”).) The same holds true even in the face of antiassignment clauses asserted by a majority of Defendants. Even if a Patient could not assign a claim to Windmill, the Patient has standing to proceed. The undersigned will not reconsider the District Court's ruling. Patients have been properly added as plaintiffs to this case and either Patients or Windmill have standing to assert the claims. Accordingly, Defendants' motions to dismiss for lack of standing should be denied.Windmill Wellness Ranch, L.L.C. v. BCBS, No. SA-19-CV-1211-OLG (HJB), 2023 WL 4989282, at *5-6 (W.D. Tex. June 6, 2023), report and recommendation adopted sub nom. Windmill Wellness Ranch, LLC v. BCBS, No. SA-19-CV-1211-OLG, 2023 WL 4842453 (W.D. Tex. July 27, 2023).
In adopting the recommendation, the Court held that:
Defendants do not challenge Article III standing; rather, they claim the provider (as assignee) cannot sue to recover benefits because the assignments (from patient to provider) are invalid in light of the anti-assignment clause in some of the plans. Defendants previously moved to dismiss on these grounds, and the Court permitted the joinder of the plan beneficiaries as indispensable parties....Defendants are not precluded from re-urging the issue of the provider's assignee status at the summary judgment stage of the proceedings after all administrative records have been produced in their entirety. The anti-assignment clauses in question should be examined in the context of the plan as a whole, and the plan as a whole cannot be examined until the administrative record is complete. At this juncture, the Court finds that either the provider (as assignee) or the plan beneficiaries (as identified in the complaint) have standing to sue for nonpayment or underpayment of benefits if due and owing under the terms of the policies.Windmill Wellness Ranch, LLC v BCBS, No. SA-19-CV-1211-OLG, 2023 WL 4842453, at *1-2 (W.D. Tex. July 27, 2023).
Defendants try to distinguish BCBS on a number of grounds. For example, unlike the defendants in BCBS, Defendants in this case have challenged the Plan Members' Article III standing. However, as explained supra, the Court should reject that challenge. Defendants also argue that this case is different inasmuch as BCBS “involved a large volume of distinct plans,” whereas the present case involves only “one Plan.” However, this Court was clear in BCBS that the validity of a plan's anti-assignment clause should be “examined in the context of the plan as a whole,” which cannot be done “until the administrative record is complete.” 2023 WL 4842453, at *2. Thus, it was the incompleteness of the administrative record-not the number of plans involved-that mattered to the BCBS Court.
Finally, Defendants stress that the “unambiguous anti-assignment clause” in the Plan is the same clause that led another court in this division “to dismiss Windmill on standing grounds.” (Docket Entry 38, at 14 (citing Meritain, 2021 WL 2635845).) However, several of the defendants in BCBS specifically cited Meritain in their objections to the undersigned's recommendation that the Court deny their jurisdictional challenge-making the exact same argument that Defendants are making here. (See 5:19-CV-1211, Docket Entry 170, at 6; Docket Entry 172, at 2-4.) Thus, the District Court was aware of Meritain and nevertheless adopted the undersigned's recommendation and denied the defendants' motion to dismiss.
Based on the foregoing, there is no reason to change course from that taken in BCBS; the undersigned “will not reconsider the District Court's ruling.” See BCBS, 2023 WL 4989282, at *6. Therefore, because either Windmill or the Plan Members have standing-and because the Court need not determine which at this juncture-Defendants' motion should be denied without prejudice to the extent that it challenges standing. See BCBS, 2023 WL 4842453, at *2; BCBS, 2023 WL 4989282, at *5; BCBS, 2022 WL 18585976, at *2-3.
B. Defendants' 12(b)(6) Motion.
The Court may dismiss a cause of action in a complaint when it fails “to state a claim upon which relief can be granted.” FED. R. CIV. P. 12(b)(6). Claims may be dismissed under Rule 12(b)(6) “on the basis of a dispositive issue of law,” Neitzke v. Williams, 490 U.S. 319, 326 (1989), or a plaintiff's failure to allege “enough facts to state a claim to relief that is plausible on its face,” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 555 (2007). When analyzing a motion to dismiss for failure to state a claim, the Court accepts “all well pleaded facts as true, viewing them in the light most favorable to the plaintiff.” United States ex rel. Vavra v. Kellogg Brown & Root, Inc., 727 F.3d 343, 344 (5th Cir. 2013). A motion to dismiss under Rule 12(b)(6) “is viewed with disfavor and rarely granted.” Leal v. McHugh, 731 F.3d 405, 410 (5th Cir. 2013).
To survive a motion to dismiss under Rule 12(b)(6), a complaint must contain “sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. In short, the factual allegations “must be enough to raise a right to relief above the speculative level on the assumption that all of the complaint's allegations are true.” Twombly, 550 U.S. at 545. This “does not impose a probability requirement at the pleading stage; it simply calls for enough facts to raise a reasonable expectation that discovery will reveal [pertinent] evidence....” Id.
Although facts alleged in the complaint are presumed to be true, the Court does not extend this presumption of veracity to “conclusory allegations, unwarranted factual inferences, or legal conclusions.” Arnold v. Williams, 979 F.3d 262, 266 (5th Cir. 2020) (citations omitted). Indeed, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Firefighters' Ret. Sys. v. Grant Thornton, L.L.P., 894 F.3d 665, 669 (5th Cir. 2018) (quoting Iqbal, 556 U.S. at 678). “But just as plaintiffs cannot state a claim using speculation, defendants cannot defeat plausible inferences using speculation.” Bryant v. Ditech Fin., L.L.C., No. 23-10416, 2024 WL 890122, at *3 (5th Cir. Mar. 1, 2024).
Generally, “[i]n determining whether to grant a motion to dismiss, the district court must not go outside the pleadings.” Bob Davis Paint & Drywall Inc. v. Valspar Corp., 452 F.Supp.3d 589, 596 (S.D. Tex. 2020) (quoting Scanlan v. Tex. A&M Univ., 343 F.3d 533, 536 (5th Cir. 2003)). However, the Court may consider (1) documents attached to the complaint; (2) matters of which judicial notice may be taken; and (3) documents attached to the motion to dismiss that are both (a) referred to in the complaint and (b) central to the plaintiff's claims. See Gomez v. Galman, 18 F.4th 769, 775 (5th Cir. 2021); Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir. 2004). But even when considering these additional materials, the Court “is still bound to draw all inferences in favor of the plaintiff.” Wood v. Bexar Cnty., Tex., No. 22-50888, 2023 WL 3563012, at *1 (5th Cir. May 19, 2023) (citing T.O. v. Fort Bend Indep. Sch. Dist., 2 F.4th 407, 413 (5th Cir. 2021)).
1. ERISA Claim.
ERISA authorizes a civil action by a participant “to recover benefits due to him under the terms of his plan.” McCall v. Burlington N./Santa Fe Co., 237 F.3d 506, 512 (5th Cir. 2000) (quoting 29 U.S.C. § 1132(a)(1)(B)). “[B]enefits payable under an ERISA plan are limited to the benefits specified in the plan.” Paragon Off. Servs., LLC v. UnitedHealthcare Ins. Co., No. 3:11-CV-2205-D, 2012 WL 5868249, at *2 (N.D. Tex. Nov. 20, 2012) (quoting Clair v. Harris Tr. & Sav. Bank, 190 F.3d 495, 497 (7th Cir. 1999)). “A plaintiff who brings a claim for benefits under ERISA must identify a specific plan term that confers the benefit in question.” Paragon Off. Servs., LLC, 2012 WL 5868249, at *2 (quoting Stewart v. Nat'l Educ. Ass'n, 404 F.Supp.2d 122, 130 (D.D.C. 2005)). Thus, to survive a motion to dismiss for failure to state an ERISA claim, Plaintiffs must “provide the court with enough factual information to determine whether the [services] were indeed covered services under the plan.” Windmill Wellness Ranch, L.L.C. v. BCBS, No. SA-19-CV-01211-OLG, 2020 WL 7017739, at *5 (W.D. Tex. Apr. 22, 2020) (quoting Paragon Off. Servs. LLC, 2012 WL 5868249, at *2). An ERISA claim should be dismissed if it fails to plead “enough facts about an ERISA plan's provisions to make . . . [the] claim plausible and give the defendant notice as to which provisions it allegedly breached.” Sky Toxicology, Ltd. v. UnitedHealthcare Ins. Co., No. 5-16-CV-01094-FB-RBF, 2018 WL 4211741, at *4 (W.D. Tex. Sept. 4, 2018) (collecting cases), report and recommendation adopted, No. 5-16-CV-1094-FB-RBF, Docket Entry 55 (W.D. Tex. Dec. 27, 2018).
Defendants argue that Plaintiffs have failed to state a plausible ERISA claim because they seek payment of Windmill's “usual and customary” charges-which Defendants contend are not benefits due under the Plan. (Docket Entry 38, at 15.) Defendants argue that this dooms Plaintiffs' ERISA claim because the Plan makes no mention of “usual and customary” charges in calculating what it pays for claims made by out-of-network providers, like Windmill. (Id.) Rather, “the Plan makes clear that it pays based upon the ‘recognized charge.'” (Id. (citing Docket Entry 22-3, at 176).)
The Plan itself is not attached to Plaintiffs' Third Amended Complaint. However, Defendants attached it to their original motion to dismiss (see Docket Entry 22-3) and incorporate it into the present motion; and the Plan is referred to in, and incorporated into, Plaintiffs' Third Amended Complaint and it is central to their claims. See Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308, 322 (2007) (holding that courts ruling on 12(b)(6) motions must consider documents incorporated into the complaint by reference); Heimeshoff v. Hartford Life & Acc. Ins. Co., 571 U.S. 99, 108 (2013) (“The plan, in short, as at the center of ERISA.”); Causey, 394 F.3d at 288 (“Documents that a defendant attaches to a motion to dismiss are considered part of the pleadings if they are referred to in the plaintiff's complaint and are central to [their] claim.”).
While the Plan does appear to rely on the “Recognized Charge” to determine reimbursement, to call it “clear” is being generous, if not specious. For claims prior to 2019, the Plan provides that the Recognized Charge:
[A]s determined by the Claims Administrators, is generally the lower of the (1) amount the provider bills or submits for the service, procedure, or supply, and (2) the amount that reflects the prevailing rates for the relevant service, procedure, or supply charged by providers of similar training or experience in the same geographic area, as determined by the Claims Administrators.(Docket Entry 22-3, at 60.) For those pre-2019 claims, the Plan further provides that, “[w]hen you use an Out-of-Network provider,” such as Windmill, the Plan “pays only 70% of the Recognized Charge for eligible expenses after you meet your deductible.” (Id. at 62.) For claims file in 2019 or thereafter, the Plan provides that:
The Recognized Charge is determined within the sole discretion of the Claims Administrator.... [and may] be based on charges by healthcare providers with similar training and experience within the same geographical area where services are obtained; a percentage of Medicare reimbursement rates; a set fee schedule, or other methodology as determined to be appropriate by the Claims Administrator.(Docket Entry 22-3, at 176.) Based on these provisions, Defendants assert that the Recognized Charge in this case “is defined as Fair Health 80 for claims prior to 2019 and Medicare for claims after 2019.” (Docket Entry 38, at 15.) Defendants argue that Plaintiffs have failed to state a plausible ERISA claim because “they are not seeking payment pursuant to those terms,” (Id.), and because they admit that “the ‘usual and customary charges' they claim should have been paid are different than the Fair Health 80 rates required by the Plan before 2019,” (Docket Entry 41, at 11).
Notably, the Plan itself contains no mention of the phrase “Fair Health 80,” and Defendants never clarify in their motion or reply what the phrase means, despite arguing that they used this metric in calculating the rate of reimbursement for all of Windmill's pre-2019 claims. Nor, for that matter, does the Plan anywhere mention how claims submitted in and post-2019 will be paid with reference to Medicare's reimbursement rates. Plaintiffs allege that, despite their requests for clarification, “reimbursement methodologies of the Plan have never been disclosed to [the] [Plan Members] or Windmill.” (Docket Entry 37, at 17-18.) Nevertheless, since Defendants aver that pre-2019 claims are subject to a different methodology for determining the Recognized Charge than later claims, this Report and Recommendation first considers arguments regarding the pre-2019 claims before turning to the arguments concerning claims from 2019 onward.
a. Pre-2019 - Fair Health 80.
As noted above, although Defendants' motion to dismiss relies on “Fair Health 80” to define the methodology for determining appropriate reimbursement for Windmill's services, Defendants neither define the meaning of the phrase nor point to a definition anywhere in the record. However, the Plan defines the Recognized Charge for medical expenses as the lesser of what the provider bills or “the 80th percentile of the Prevailing Charge Rate for the Geographic Area where the service is furnished.” (Docket Entry 22-3, at 146.) The Plan further defines Prevailing Charge Rates as the “rates reported by FAIR Health” and defines Geographic Area as those sharing “the first three digits of the U.S. Postal Code.” (Id.) This is the only place in the Plan where “Fair Health” and “80” are mentioned in the context of reimbursement rates. And the Plan includes “[t]reatment of [m]ental [d]isorders and [s]ubstance [a]buse” in its list of covered “medical expenses.” (Id. at 89, 114-116.) Thus, presumably this is what Defendants mean when they contend that the Recognized Charge for the pre-2019 claims is calculated using “Fair Health 80.”
However, even assuming that “Fair Health 80” denotes a methodology whereby the Recognized Charge tracks what the 80th percentile of providers in the nearby postal codes charge for the same services, Plaintiffs have pleaded a plausible ERISA claim. Plaintiffs allege in their Third Amended Complaint that Defendants' reimbursement rates for their claims were well below the usual and customary rates charged by the 80th percentile of providers in their area. (Docket Entry 37, at 10-11; Docket Entry 40, at 4-5.) For instance, Plaintiffs allege that Windmill charges $4,800 per day for detoxification services, and that FAIR Health data identifies the Prevailing Charge Rate for the 80th percentile of providers in the area as $3,913. (Docket Entry 37, at 1011.) Assuming the allegations in the complaint to be true, if the Plan reimburses pre-2019 claims for out-of-network mental health or substance abuse services by paying 70% of the Recognized Charge-i.e., 70% of what the 80th percentile of other providers in the area charge for the same services-then Windmill presumably should have received 70% of $3,913 in reimbursements for each detoxification claim it submitted prior to 2019: viz., $2,739.10. According to their Third Amended complaint, they did not. To the contrary, Plaintiffs attach a table to their Third Amended Complaint that plausibly shows that Defendants calculated the Recognized Charges inconsistently, paying 70% of either (a) Windmill's total bill (i.e., $4,800 X .70 = $3,360), or (b) 62% of Windmill's total bill (i.e., ($4,800 X .62) X .70 = $2,083.20). (Docket Entry 37-1, at 2-3.).
In another example, Plaintiffs allege that Windmill charges $4,200 per day for residential care, and that the 80th percentile of providers in the relevant area charge $3,425 per day for the same service. (Docket Entry 37, at 10-11.) If so, then presumably each of Windmill's pre-2019 claims for residential care should have been reimbursed in the amount of $2,397.50-i.e., 70% of the Recognized Charge. But again, the table attached to Plaintiffs' Third Amended Complaint plausibly shows that Windmill typically received only $298.65 for any pre-2019 residential care claims it submitted, with occasional spikes as high as $2,507.12, and dips as low as $234.05. (Docket Entry 37-1, at 2, 6-8.)
Given the apparent inconsistency in Defendants' calculations of the Recognized Charges for Windmill's pre-2019 claims, and given that Defendants' reimbursements for at least some of those claims do not comport with the best guess as to what is meant by “Fair Health 80,” the Court should find that Plaintiffs have plausibly alleged underpayment of their pre-2019 claims, in violation of ERISA. Plaintiffs have pleaded enough facts about Defendants' reimbursement methodology-or lack thereof-to state a plausible ERISA claim and give Defendants notice of the Plan provision they allegedly breached. See Sky Toxicology, Ltd., 2018 WL 4211741, at *4. Whether, ultimately, the methodology was unsound or the claims were underpaid is a question of fact better suited for resolution on a motion for summary judgment or at trial.
b. 2019 Onward - Medicare.
As previously mentioned, Defendants now aver that the Recognized Charge for claims submitted from 2019 onward were based, in some sense, on Medicare. (Docket Entry 38, at 15; Docket Entry 41, at 11-12.) Again, the Plan itself makes no mention of this methodology-other than to say that the claims administrator, in its sole discretion, may determine the Recognized Charge based on “a percentage of Medicare reimbursement rates.” (Docket Entry 22-3, at 176, 270.) Defendants do not contend that the claims administrator could exercise that discretion arbitrarily-paying whatever it wanted on a claim-by-claim basis. Rather Defendants aver that the Recognized Charge, in some unexplained way, was methodically defined in relation to the reimbursement rates used by Medicare. (Docket Entry 38, at 15; Docket Entry 41, at 11-12.) But Plaintiffs allege that Defendants “never disclosed . . . [t]he reimbursement methodologies of the Plan,” notwithstanding their requests for such disclosures. (Docket Entry 37, at 17-18.) Ultimately, Defendants' reliance on an unknown Medicare-based methodology for determining the Recognized Charge fails to provide a sound foundation upon which dismissal could be based.
In any event, Plaintiffs contend that Defendants' “Medicare-based reimbursement methodology” is “illusory,” because “there are no established Medicare rates for the level of care and types of services that are provided by Windmill.” (Docket Entry 37, at 9.) Absent any schedule for identifying precisely what Medicare reimbursed for services like those Windmill provided to the Plan Members in 2019 onward, Defendants' reimbursement rates for such claims appear indeterminate at best (and arbitrary at worst). Plaintiffs further allege that, even if Defendants used the Medicare service codes that best approximate the levels and types of services Windmill provided, Medicare's reimbursement rates for those services far exceed what Defendants paid Windmill. (Docket Entry 37, at 9.) Finally, the table attached to Plaintiffs' Third Amended Complaint also shows that Defendants flatly refused to pay anything at all for at least eight claims in 2019 and 2020-despite having reimbursed claims for the same services on several other occasions, albeit for inconsistent amounts. (See Docket Entry 37-1, at 3-4; 8-9.)
As with the pre-2019 claims, Plaintiffs have pleaded enough facts about Defendants' methodology for determining the Recognized Charge under the Plan to state a plausible ERISA claim for nonpayment and underpayment, and to provide Defendants with notice of the Plan provision they allegedly breached. See Sky Toxicology, Ltd., 2018 WL 4211741, at *4.
2. Parity Act Claim
“Congress enacted the [Parity Act] . . . to end discrimination in the provision of insurance coverage for mental health and substance use disorders as compared to coverage for medical and surgical conditions in employer-sponsored group health plans.” Am. Psychiatric Ass'n v. Anthem Health Plans, Inc., 821 F.3d 352, 356 (2d Cir. 2016) (citing Coal. for Parity, Inc. v. Sebelius, 709 F.Supp.2d 10, 13 (D.D.C. 2010)). “Although there is no private right of action under the Parity Act, portions of the law are incorporated into ERISA and may be enforced using the civil enforcement provisions in ERISA § 502.” Munnelly v. Fordham Univ. Fac., 316 F.Supp.3d 714, 728 (S.D.N.Y. 2018) (quoting Am. Psychiatric Ass'n v. Anthem Health Plans, Inc., 50 F.Supp.3d 157, 161 (D. Conn. 2014), aff'd, 821 F.3d 352 (2d Cir. (2016))).
The Parity Act “requires group health plans and health insurance issuers to ensure that the financial requirements (deductibles, copays, etc.) and treatment limitations applied to mental health benefits . . . [are] no more restrictive than the predominant financial requirements and treatment limitations applied to substantially all medical and surgical benefits covered by the plan or insurance.” N.Y. State Psychiatric Ass'n, Inc. v. UnitedHealth Grp., 798 F.3d 125, 128 (2d Cir. 2015) (citing 29 U.S.C. § 1185a(a)(3)(A)). The Parity Act also prohibits “separate cost sharing requirements” and “separate treatment limitations that are only applicable with respect to mental health or substance use disorder benefits.” 29 U.S.C. § 1185a(a)(3)(A)(i)-(ii). In short, “the Parity Act prevents insurance providers from writing or enforcing group health plans in a way that treats mental and medical health claims differently.” M.N. v. United Healthcare Ins., No. 2-18-CV-710-DBB-CMR, 2020 WL 1644199, at *3 (D. Utah Apr. 2, 2020) (citation omitted).
Insurance providers can commit a Parity Act violation in two ways: “facially, by writing an offending treatment limitation into the plan; and in application, by applying an offending treatment limitation to deny coverage.” David S. v. United Healthcare Ins. Co., No. 2:18-CV-803, 2019 WL 4393341, at *3 (D. Utah Sept. 13, 2019). In this case, the Court should assume that Plaintiffs' Third Amended Complaint makes an as-applied Parity Act challenge, as there are no allegations in the Third Amended Complaint that any provision written into the Plan itself is facially discriminatory.
“Like other claims involving discrimination, Parity Act claims are necessarily comparative.” M.N., 2020 WL 1644199, at *5.Thus, to state a Parity Act claim, a plaintiff must plausibly allege that an insurance plan imposed “limitations that discriminate against mental health and substance treatments in comparison to medical or surgical treatments.” Welp v. Cigna Health & Life Ins. Co., No. 17-80237-CIV, 2017 WL 3263138, at *6 (S.D. Fla. July 20, 2017) (dismissing Parity Act claim where complaint was “virtually devoid of any comparisons between the limitations imposed on mental health/substance treatments and those on medical/surgical treatments”). In other words, “a plaintiff must allege a medical or surgical analogue that the Plan treats differently than the disputed mental health or substance abuse services.” David S., 2019 WL 4393341, at *3 (collecting cases).
This is also true of Texas's parity law. See TEX. INS. CODE. § 1355.254 (prohibiting “treatment limitations on benefits for a mental health condition or substance use disorder that are generally more restrictive than . . . treatment limitations imposed on coverage of benefits for medical or surgical expenses”) (emphasis added).
In alleging a comparator, plaintiffs need not “spell out the particular medical/surgical criteria which ‘demonstrates disparity.'” Welp, 2017 WL 3263138, at *6 (citing V. v. Health Care Serv. Corp., No. 15 C 09174, 2016 WL 4765709, at *8 (N.D. Ill. Sept. 13, 2016), and Craft v. Health Care Serv. Corp., No. 14 CV 5853, 2016 WL 1270433, at *11 (N.D. Ill. Mar. 31, 2016)). However, at the very least, “a plaintiff must identify the treatments in the medical/surgical arena that are analogous to the sought-after mental health/substance abuse benefits and allege that there is a disparity in their limitation criteria.” Welp, 2017 WL 3263138, at *6 (citation omitted).
Here, Defendants argue that the Third Amended Complaint “does not mention any medical/surgical services or payment metrics,” analogous or otherwise. (Docket Entry 38, at 18.) Instead, they argue, “Plaintiffs' entire claim is based solely upon the fact it received ‘low levels of reimbursement.'” (Id.) Defendants contend that Plaintiff's Third Amended Complaint is therefore devoid of the comparative allegations necessary for the Court to reasonably infer that Defendants violated the Parity Act.
Defendant's argument is well taken. Plaintiffs' Third Amended Complaint does not identify analogous medical or surgical services, let alone compare the Plan's limitations for such services with the Plan's limitations for the mental health and substance abuse services Windmill provided to the Plan Members. (See Docket Entry 37, at 43-47.) Rather, Plaintiffs simply infer from what they allege to be “unusually low levels of reimbursement to Windmill for out of network mental health and substance abuse care,” that the Plan necessarily imposes “more restrictive financial requirement[s]” on such services “than for corresponding medical/surgical benefits.” (Id. at 46.) Such “conclusory statements or legal conclusions about alleged analogous medical/surgical comparators” are insufficient to state a plausible Parity Act claim. M.N., 2020 WL 1644199, at *6.
The result is the same under equivalent state law, which imposes no absolute requirements but, rather, requires that treatment limitations for mental health and substance abuse benefits not be “generally more restrictive” than limitations on comparable medical and surgical benefits. See TEX. INS. CODE. § 1355.254.
Plaintiffs argue that their inability to identify any medical or surgical analogues to support their Parity Act claim was due to Defendants' refusal to comply with Plaintiffs' requests for pertinent information about comparable medical or surgical benefits. (Docket Entry 40, at 19.) However, as Defendants point out, Plaintiffs had access to the Plan since at least March 2023- six months before they filed their Third Amended Complaint-during which time they should have been able to identify a relevant medical/surgical analogue. (Docket Entry 41, at 13; Docket Entry 22-3.) And the Plan includes provisions describing limitations and covered benefits for what appear to be comparable medical benefits-such stays at skilled nursing facilities, at rehabilitation facilities, and for inpatient hospice care. (See, e.g., Docket Entry 22-3, at 64; 100; 107; 140.) Thus, Defendants correctly argue that this precludes Plaintiffs from claiming they could not identify any relevant medical or surgical analogues with which to compare the Plan's treatment of mental health and substance-abuse services. Cf. Joseph F. v. Sinclair Servs. Co., 158 F.Supp.3d 1239, 1261 (D. Utah 2016) (“[I]f the . . . Plan is going to cover treatment received at a skilled nursing facility, which provides only medical and surgical treatment, then the [Parity] Act requires that it also cover treatment received at a residential treatment facility, which provides only mental health and substance use disorder treatment.”); David S., 2019 WL 4393341, at *4 (denying motion to dismiss Parity Act claim where plaintiffs “identifie[d] the medical analogue that the Plan treat[ed] differently than the disputed mental health treatments: skilled nursing facilities”); Timothy D. v. Aetna Health & Life Ins. Co., No. 2:18CV753DAK, 2019 WL 2493449, at *4 (D. Utah June 14, 2019) (“Plaintiffs' allegations that skilled nursing facilities, inpatient hospice care, and rehabilitation facilities are analogous to levels of care for which Aetna excluded benefits to M.D. for mental health treatment are sufficient.”); B.D. v. BCBS of Ga., No. 1:16-CV-00099-DN, 2018 WL 671213, at *10 (D. Utah Jan. 31, 2018) (“[A] skilled nursing facility is analogous to a residential treatment facility....”).
Based on the foregoing, Plaintiffs' Parity Act claims should be dismissed.Furthermore, that dismissal should be with prejudice. Defendants attached a certificate of conference to their motion which certifies that, “[a]fter USAA notified counsel for Plaintiffs of the grounds for the instant Motion, Plaintiffs' counsel advised that it did not intend to amend further.” (Docket Entry 38, at 20.) As “Plaintiff[s] ha[ve] already been provided notice of the proposed deficiencies and the opportunity to amend,” they should “not be allowed an additional opportunity to amend.” Court Facts Sheet for U.S. District Judge Orlando L. Garcia (June 3, 2024) (uscourts.gov).
As noted supra, allegations of a medical or surgical analogue is also necessary to state a claim under Texas's parity law. See TEX. INS. CODE. § 1355.254. Accordingly, Plaintiffs have also failed to state a plausible parity claim under state law and those claims should be dismissed.
IV. Conclusion and Recommendation.
Based on the foregoing, i recommend that Defendants' Motion to Dismiss Plaintiffs' Third Amended complaint (Docket Entry 38) be GRANTED IN PART, DENIED IN PART, and DENIED WITHOUT PREJUDICE IN PART. Defendant's motion should be DENIED as to Defendants' challenge to the Plan Members' Article iii standing, but DENIED WITHOUT PREJUDICE to determining, at a later date, whether Windmill or the Plan Members have standing in light of the Plan's anti-assignment clause. Defendant's motion should be GRANTED as to Plaintiffs' Parity Act claims (and related state-law claims), and those claims should be DISMISSED WITH PREJUDICE. Finally, Defendant's motion should be DENIED as to Plaintiffs' ERISA claims.
V. Notice of Right to Object.
The United States District Clerk shall serve a copy of this Report and Recommendation on all parties by either (1) electronic transmittal to all parties represented by attorneys registered as a “filing user” with the Clerk of Court, or (2) by mailing a copy to those not registered by certified mail, return receipt requested. Written objections to this Report and Recommendation must be filed within fourteen (14) days after being served with a copy of the same, unless this time period is modified by the District Court. 28 U.S.C. § 636(b)(1); FED. R. CIV. P. 72(b).
The parties shall file any objections with the Clerk of the Court and serve the objections on all other parties. Absent leave of Court, objections are limited to twenty (20) pages in length. An objecting party must specifically identify those findings, conclusions, or recommendations to which objections are being made and the basis for such objections; the district court need not consider frivolous, conclusory, or general objections. Battle v. U.S. Parole Comm'n, 834 F.2d 419, 421 (5th Cir. 1987).
A party's failure to file written objections to the proposed findings, conclusions, and recommendations contained in this Report and Recommendation shall bar the party from a de novo review by the District Court. Thomas v. Arn, 474 U.S. 140, 149-52 (1985); Acuna v. Brown & Root, Inc., 200 F.3d 335, 340 (5th Cir. 2000). Additionally, failure to file timely written objections to the proposed findings, conclusions, and recommendations contained in this Report and Recommendation shall bar the aggrieved party, except upon grounds of plain error, from attacking on appeal the unobjected-to, proposed findings and conclusions accepted by the district court. Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1428-29 (5th Cir. 1996) (en banc).