Opinion
Case No. 2:21-cv-02308-JTF-atc
2023-07-11
AMISUB (SFH), INC. d/b/a Saint Francis Hospital and Saint Francis Hospital - Bartlett Inc., Plaintiffs, v. CIGNA HEALTH AND LIFE INSURANCE COMPANY, Defendant.
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS
JOHN T. FOWLKES, JR., UNITED STATES DISTRICT JUDGE
Before the Court is Defendant Cigna Health and Life Insurance Company's ("Cigna") Motion to Dismiss, filed on July 27, 2021. (ECF No. 21.) Plaintiffs AMISUB (SFH), Inc., Saint Francis Hospital and Saint Francis Hospital - Bartlett Inc. (collectively, "Plaintiffs" or "Hospitals") filed their Response on September 7, 2021. (ECF No. 26.) Defendants filed a Reply on October 5, 2021. (ECF No. 54.) For the following reasons, Defendant's Motion to Dismiss is GRANTED and Plaintiffs' complaint is DISMISSED in its entirety with prejudice.
FACTUAL BACKGROUND
Plaintiffs filed this lawsuit against Cigna alleging underpayments in connection with emergency services they provided to Cigna's insured members. (ECF No. 1, ¶ 44.) Pursuant to federal and state law, all hospitals are required to provide emergency services to anyone who needs such, whether insured or not. This necessarily includes Cigna's insured members. (Id. at ¶¶ 36 & 47.) Cigna's insured members may seek treatment from in-network providers or out-of-network providers, although reimbursement rates may differ. (Id. ¶¶ 33 & 35.) In-network providers usually contract with insurers, such as Cigna, to provide services at discounted, pre-negotiated rates. (Id.) Out-of-network providers do not have contracts with insurers to provide services at discounted, pre-negotiated rates. (Id.)
The Hospitals were providers that at one time had an agreement with Cigna where Cigna would reimburse them for providing emergency services at 75% of the billed charges. (Id. at ¶ 41.) This type of agreement is typical between insurance companies and out-of-network providers. (Id. at ¶ 8.) However, the agreement between the parties expired in 2019. (Id.) Thereafter, Cigna began making reimbursements at a lower rate, which resulted in the Hospitals being underpaid for their services. (Id. at ¶¶ 42-45.) The Hospitals challenge the lower reimbursement rate as being well below the fair value of their services. (Id. at ¶ 42.)
Plaintiffs make clear that this lawsuit does not challenge whether payment was received, but solely the rate at which payments were made by Cigna after the parties' contract expired. (Id. at ¶ 11.) Specifically, the Hospitals seek damages of the difference between the amounts Cigna paid for the emergency services and what the reasonable values of those services were. (Id. at ¶ 9.) Plaintiffs bring claims for unjust enrichment, quantum meruit, breach of implied-in-fact contract, and declaratory judgment. (See id.)
LEGAL STANDARD
Rule 8Federal Rule of Civil Procedure 8(a)(2) sets forth a liberal pleading standard, requiring "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). While detailed factual allegations are not required, a party must provide "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Just as "a formulaic recitation of the elements of a cause of action will not" satisfy the Rule 8 pleading standard, neither will a complaint that "tenders 'naked assertion[s]' devoid of 'further factual enhancement.' " Id. (citing Twombly, 550 U.S. at 555, 557, 127 S.Ct. 1955). Rule 12(b)(6)
When evaluating a motion to dismiss under Fed. R. Civ. P. 12(b)(6), the Court must determine whether the complaint contains "sufficient factual matter, accepted as true, to 'state a claim that is plausible on its face.' " Ashcroft, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). A claim is plausible on its face "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. To put it plainly, although the complaint need not contain detailed facts, its "[f]actual allegations must be enough to raise a right to relief above a speculative level." Ass'n of Cleveland Fire Fighters v. City of Cleveland, 502 F.3d 545, 548 (6th Cir. 2007) (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). Determining whether a complaint states a plausible claim is "context-specific," requiring the Court to draw upon its experience and common sense. Ashcroft, 556 U.S. at 679, 129 S.Ct. 1937.
The Court's decision to grant or deny a motion to dismiss "rests primarily upon the allegations of the complaint," however, "matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint [ ] also may be taken into account." Barany-Snyder v. Weiner, 539 F.3d 327, 332 (6th Cir. 2008) (alterations in original) (quoting Amini v. Oberlin Coll., 259 F.3d 493, 502 (6th Cir. 2001)).
"A Rule 12(b)(6) motion should not be granted unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007) (quoting Ricco v. Potter, 377 F.3d 599, 602 (6th Cir. 2004)). In evaluating a motion to dismiss, the complaint is reviewed in the light most favorable to the plaintiff drawing all reasonable inferences in favor of the plaintiff. Id. The burden lies upon the defendant seeking dismissal. Mediacom Southeast LLC v. BellSouth Telecommunications, Inc., 672 F.3d 396, 399 (6th Cir. 2012).
ANALYSIS
Defendant moves to dismiss Plaintiffs' claims on the grounds that: (1) Plaintiffs provide no details about their individual claims; (2) the Employee Retirement Income Security Act ("ERISA") preempts Plaintiffs' claims related to self-funded plans; (3) Plaintiffs' unjust enrichment and quantum meruit claims fail because no benefit was conferred upon Cigna; (4) Plaintiffs' breach of implied-in-fact contract claim fails for factual insufficiency with respect to assent; and (5) none of the declaratory judgment factors weigh in Plaintiffs' favor. (See ECF No. 21-1-4.)
Plaintiffs oppose dismissal by arguing that: (1) Rule 8(a) does not require Plaintiffs to individually plead more than 1000 claims for reimbursement that underlie their legal claims; (2) Plaintiffs' claims related to self-funded plans are not preempted by ERISA; (3) Plaintiffs have adequately stated claims for unjust enrichment and quantum meruit; (4) Plaintiffs have adequately stated a claim for breach of implied-in-fact contract and; (5) real and substantial justiciable controversies exist between Cigna and the Hospitals concerning the rates at which Cigna reimburses the Hospitals, making dismissal of declaratory judgment premature at this stage of the litigation. (See ECF No. 26.) Individual Claims
Cigna argues that Plaintiffs' complaint should be dismissed because they failed to disclose details on each of the individual claims they allege Cigna underpaid. (ECF No. 21-1, 6.) Cigna explains, "In cases where out-of-network providers allege underpayments, courts across the country have found that Plaintiffs must allege the basic facts about their individual claims to withstand a motion to dismiss." (Id.) Cigna contends that, at a minimum, each claim must include the patient's name, services provided, dates of treatment, the insurance policies covering those claims and which claims are governed by ERISA. (Id.)
On the other hand, Plaintiffs contend that Rule 8 requires only a short and plain statement showing they are entitled to relief instead of the degree of specificity that Cigna argues is required under these circumstances. (ECF No. 26, 4.) In addition, Plaintiffs identify key differences between the facts at hand and the facts of the cases Cigna heavily relied on in its Motion to Dismiss. (Id. at 5.) The Hospitals explain that in those cases, plaintiffs challenged the benefit determinations on specific claims resulting from care provided to patients insured under ERISA governed plans. (Id.) Here, however, Plaintiffs are challenging underpayments on claims Cigna has already determined to be covered, rather than claims involving outright denial of coverage. (Id. at 5-6.)
There are a limited number of cases within the Sixth Circuit analogous to the facts at hand, or that provide sufficient guidance on the issues before the Court. That being said, the Court considers the Southern District of Florida's decision in N. Shore Med. Ctr. Inc., et al. v. Cigna Health & Life Ins. Co. ("N. Shore") to be instructive on the specificity required for each individual claim that Cigna allegedly underpaid. No. 1:20-cv-24914-KMM, 2021 WL 3419356 at *4 (S.D. Fla. May 10, 2021). In N. Shore, the plaintiffs were "out-of-network" providers who rendered emergency and non-emergency services to patients insured by Cigna. Id. at *1. The providers in N. Shore alleged that Cigna applied an improper discount to its payments to them. Id. This resulted in underpayments on more than 500 individual insurance claims. Id. at *4. The providers explained that there was a contractual relationship between Cigna and themselves where the providers were reimbursed at 75% of their billed charges. Id. at *1. However, after that contract expired, the providers alleged that Cigna "paid rates less than the usual and customary charges." Id. Like Plaintiffs here, the providers in N. Shore sought reimbursement of the difference between the actual payments and the fair market value of the services rendered. Id. at *2. The only essential difference between the N. Shore case and this case before this Court is that the same defendant, Cigna, was sued by different healthcare providers. However, the claims and the facts are almost completely analogous.
In ruling on Cigna's motion to dismiss, the N. Shore court found, "Plaintiffs' failure to include basic and necessary facts, such as patient identification numbers, services performed, dates of service, and—more importantly in the context of multiple plaintiffs—which Hospital(s) provided the services, makes it impossible for Defendant to assess the validity of Plaintiffs' claims." Id. at *4. Following this reasoning, this Court finds that Plaintiffs' complaint fails to comply with the pleading standard in Rule 8 because it lacks basic patient information and details concerning each claim.
Although the requirements of Rule 8 were not met, the N. Shore court dismissed Count I of the complaint without prejudice, "with leave to amend to include an exhibit providing more claim-specific information." Count I in N. Shore was brought pursuant to a Florida state statute that allowed for recovery of payments from insurance companies for emergency services rendered by out-of-network providers. All other counts — quantum meruit, promissory estoppel, and unjust enrichment — were dismissed with prejudice. Id. at *7. These counts dismissed with prejudice are akin to those brought against Cigna in the current matter.
The Plaintiffs also attempt to discredit two cases cited by Cigna by claiming that they are factually distinguishable; they argue that in those cases, the plaintiffs challenged the benefit determinations on specific claims resulting from care provided to patients insured under ERISA governed plans. (ECF No. 26, 5.) However, the Court notes that in the first case, RMP, Ctr. for Reconstructive Breast Surgery, LLC v. Blue Cross Blue Shield of La., the facts are analogous to the facts in the case at hand. In RMP, the plaintiffs alleged that several health insurance plans failed to provide appropriate reimbursement rates for hundreds of their patients. No. 11-806, 2013 WL 5519320, *1 (E.D. La. Sept. 30, 2013). The court nevertheless found that the complaint failed to satisfy pleading standards because the complaint failed to identify details on the individual claims. Id. In the other case, Productive MD, LLC v. Aetna Health, Inc., out-of-network providers alleged that the health insurer initially refused to pay on the claims, intending to coerce the provider into accepting payment at an unreasonably low reimbursement rate. 857 F. Supp. 2d 690, 692 (M.D. Tenn. 2012). Defendants filed a Rule 12(e) motion for more definite statement, as opposed to a Rule 8 and Rule 12(b)(6) motion to dismiss. The court ordered plaintiffs to present the necessary identifying information. Id. at 698.
The Court finds that even at this stage of the litigation, some level of specificity is required. Without such, and following the logic of RMP, Productive MD and N. Shore, it is impossible for Cigna to determine the validity of each claim and whether Plaintiffs are entitled to the relief they seek, because Plaintiffs failed to include basic and necessary identifying information to support each individual claim. Thus, the Court finds that the complaint fails to satisfy the pleading standard of Rule 8. Therefore, Defendant's Motion to Dismiss should be GRANTED. Implied-in-Law Contract: Unjust Enrichment & Quantum Meruit
Plaintiffs bring claims for unjust enrichment and quantum meruit. (See ECF No. 1.) Cigna moves for dismissal because, although the Hospitals were statutorily required to provide emergency services under the Emergency Medical Treatment and Labor Act ("EMTLA") and T.C.A. § 56-7-2355, any duties imposed by these statutes do not create an implied-in-law contractual relationship with Cigna. (ECF No. 21-1, 13.) Also, the Hospitals did not confer a benefit to Cigna by providing services to its members. Any benefits provided by Plaintiffs were to individual members, from whom the Hospitals can still seek payment on balances Cigna does not cover. (Id. at 13-14.)
Plaintiffs oppose dismissal by arguing that: (1) the case that Cigna primarily relied on is unpersuasive because it contains no explanation as to why a benefit is not conferred upon a patient's insurer; and (2) courts across the country have held that a benefit is conferred upon the insurer for which equity requires them to pay fair value. (ECF No. 26, 15 & 18.) The Hospitals also rely on statutes — the EMTLA and Tenn. Code Ann. § 56-7-2355 — which they argue creates an implied contractual obligation between the parties that requires Cigna to reimburse the Hospitals on underpaid claims. (ECF No. 1, 12 & 17-20.)
Cigna relied on the Tennessee Court of Appeals' decision in HCA Health Services of Tennessee, Inc. v. Bluecross Blueshield of Tennessee, Inc., No. M2014-01869-COA-R9-CV, 2016 WL 3357180 (Tenn. Ct. App. 2016) ("HCA Health Services"); see also (ECF No. 21-1, 12).
"Tennessee recognizes two distinct types of implied contracts; namely, contracts implied in fact and contracts implied in law, commonly referred to as quasi contracts." Thompson v. Hensley, 136 S.W.3d 925, 930 (Tenn. Ct. App. 2003) (quoting Angus v. City of Jackson, 968 S.W.2d 804, 808 (Tenn. Ct. App. 1997)). Tennessee law provides, "Actions brought upon theories of unjust enrichment, quasi contract, contracts implied in law, and quantum meruit are essentially the same. Courts frequently employ the various terminology interchangeably to describe that class of implied obligations where, on the basis of justice and equity, the law will impose a contractual relationship between the parties, regardless of their assent thereto." HCA Health Services of Tennessee, Inc. v. Bluecross Blueshield of Tennessee, Inc., No. M2014-01869-COA-R9-CV, 2016 WL 3357180 at *11 (Tenn. Ct. App. June 9, 2016) ("HCA Health Services") (quoting Paschall's, Inc. v. Dozier, 219 Tenn. 45, 407 S.W.2d 150, 154 (1966)). Although listed as separate counts in Plaintiffs' complaint, they are recognized as the same claim under Tennessee law. See Paschall's, Inc., 407 S.W.2d at 154. Thus, the Court will address them contemporaneously.
Unjust enrichment is "a quasi-contractual theory under which a court may impose a contractual obligation on the parties where one does not otherwise exist." Angus, 968 S.W.2d at 808. "In order to establish a claim based on this type of contract, the plaintiff must show that (1) a benefit has been conferred upon the defendant; (2) the defendant appreciated the benefit; and (3) acceptance of the benefit under the circumstances would make it inequitable for the defendant to retain the benefit without paying the value of the benefit." Id.
The facts as plead in Plaintiffs' complaint are similar to those found in HCA Health Services, where plaintiffs were eight Tennessee hospitals that claimed BlueCross BlueShield of Tennessee ("BCBST") did not reasonably reimburse them for emergency services rendered. See 2016 WL 3357180, *1-2. Like the Plaintiffs in this case, the HCA Health Services plaintiffs brought claims for quantum meruit, implied contract, and unjust enrichment. (Id. at *3, n.3.) Also, like Plaintiffs in this case, the plaintiffs in HCA Health Services relied on the EMTLA and T.C.A. § 56-7-2355 to support their attempt to create and enforce an implied-in-law contract in order to recover in quantum meruit. Id. at *9.
For context, the EMTLA requires hospitals to "provide for an appropriate medical screening examination" when an individual comes to the emergency department and, if "the individual has an emergency medical condition," to "stabilize the medical condition" without inquiry into "the individual's method of payment or insurance status." 42 U.S.C. §§ 1395dd (a)-(b). Similarly, Tenn. Code Ann. § 56-7-2355 requires:
A health benefit plan shall not deny coverage for emergency services if the symptoms presented by an enrollee of a health benefit plan and recorded by the attending provider indicate that an emergency medical condition could exist, regardless of whether prior authorization was obtained to provide those services and regardless of whether the provider furnishing the services has a contractual agreement with the health benefit plan for the provision of the services to the enrollee.
The HCA Health Services court applied the elements of unjust enrichment, considered the EMTLA and Tenn. Code Ann. § 56-7-2355 and reasoned that even though the hospitals provided care as required, their actions did not confer a benefit on the insurer, and the statutory obligations did not create an implied-in-law contractual relationship. No. M2014-01869-COA-R9-CV, 2016 WL 3357180 at *12. Instead, "services were rendered to the patients, none of whom are a party to this suit, and they are the ones who received the benefits of medical care provided in HCA's emergency rooms and are obligated to pay for the services." Id. Ultimately, the court held that "the duty imposed on HCA by the EMTLA, and the prohibition imposed on BCBST by Tenn. Code Ann. § 56-7-2355 do not create an implied-in-law contractual relationship upon which to sustain" the hospital's cause of action against the insurance company. Id.
After review of the record, it is obvious that when emergency services are provided, the patient directly benefits. The Court does not find that a benefit was conferred upon Cigna. Federal and state law require the Hospitals to render emergency services to anyone appearing at their doors in need of such service. This includes Cigna's insured members. However, when emergency services are provided to Cigna insured members, it is those members who directly benefit, not Cigna. Thus, it does not follow that an implied-in-law contractual relationship under unjust enrichment or quantum meruit exists. See No. M2014-01869-COA-R9-CV, 2016 WL 3357180 at *12. Because of this, the Court concludes that Plaintiffs have failed to establish an implied-in-law contractual relationship that would support a claim for quantum meruit, or unjust enrichment. As a result, the Court finds that Plaintiffs' claims for breach of implied-in-law contract based on quantum meruit and unjust enrichment should be DISMISSED. Implied-in-Fact Contract
Cigna moves for dismissal of the claim for breach of implied-in-fact contract on the grounds that:
Plaintiffs put forth no allegations showing that (1) Cigna agreed to reimburse Plaintiffs for emergency services provided to Cigna members (rather than simply providing coverage to its members), let alone at a reasonable rate; (2) Cigna knew about the emergency services provided before being billed for them; or (3) the requirements for when, how, or for how long Cigna would supply such reimbursement.(ECF No. 21-1, 16.) Cigna further argues that their obligation to cover the emergency services rendered by the Hospitals flows from federal and state statutes that do not contractually bind either party. (Id. at 17.) Lastly, Cigna points out that just because the parties had an agreement that has since terminated does not mean that a contract exists now. (Id.)
Plaintiffs oppose dismissal due to "a longstanding course of dealing whereby the Hospitals treated Cigna's members in an environment in which Cigna was legally obligated to pay fair value for the treatment, Cigna reimbursed the Hospitals at rates equaling fair value, and the Hospitals accepted those rates." (ECF No. 26. 20.) Based on this reasoning, Plaintiffs allege that Cigna breached an implicit agreement to continue using the reimbursement rates under its prior express contract.
As noted above, "Tennessee recognizes two distinct types of implied contracts; namely, contracts implied in fact and contracts implied in law, commonly referred to as quasi contracts." Thompson v. Hensley, 136 S.W.3d 925, 930 (Tenn. Ct. App. 2003) (quoting Angus v. City of Jackson, 968 S.W.2d 804, 808 (Tenn. Ct. App. 1997)). "A contract implied in fact is one that 'arises under circumstances which show mutual intent of assent to contract.' " Thompson, 136 S.W.3d at 930. "However, in order for a contract implied-in-fact to be enforceable, it must be supported by mutual assent, consideration, and lawful purpose." Thompson, 136 S.W.3d at 930. Mutual assent may be shown by the conduct of the parties and the surrounding circumstances which, according to the ordinary course of dealing and understanding of men, show a mutual intention to contract. Id.
Upon the Court's review, Plaintiffs have failed to put forth sufficient facts to show that there was an agreement between the parties after the express contract expired. It has not been alleged that Cigna agreed to continue to reimburse the Hospitals at the same rate as the express contract. Plaintiffs attempt to establish the implied-in-fact contract on a "longstanding course of dealing." (ECF No. 26, 20.) Yet, the long-standing course of dealing between the parties was the result of reliance upon the express contract terms where Cigna agreed to reimburse Plaintiffs at a specific rate — 75% of the billed services. (See ECF No. 1, ¶¶ 41-42.) After the contract expired, Cigna was no longer under a contractual obligation to reimburse the Hospitals at the agreed upon rate or any other rate.
Plaintiffs' efforts to create and impose an implied-in-fact contract rests on Cigna's legal obligations under federal and state statutes. (See ECF No. 1, ¶ 91; No. 26, 20.) This Court has already determined that neither the EMTLA nor T.C.A. § 56-7-2355 create implied in law contractual obligations. To be clear, Cigna did have an obligation under federal law to cover the emergency services provided by the Hospitals to the insured. See 45 C.F.R.§ 147.138(b)(2). However, this does not create an implied-in-law contract to enforce the terms of an expired contract, nor does it create an implied-in-fact contract. Imposing an implied-in-fact contract requires both parties to take some action showing assent to the terms of what amounts to a new agreement. Based on the court's review, there are no facts indicating that after the initial contract expired, the parties behaved in a way that created an implicit agreement for a certain reimbursement rate. Cigna continued to reimburse the Hospitals out of legal obligation, but at a rate Cigna unilaterally applied because they were no longer in a contract with the Hospitals.
As a result, the Court finds that Plaintiffs' claim for breach of implied-in-fact contract should be DISMISSED. ERISA Preemption
The Employee Retirement Income Security Act of 1974 ("ERISA") was established to protect the interests of participants in employee benefit plans and their beneficiaries by providing a "uniform regulatory regime over employee benefit plans." Aetna Health Inc. v. Davila, 542 U.S. 200, 208, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004). ERISA makes the benefits promised by an employer more secure by mandating certain oversight systems and other standard procedures. Rutledge v. Pharm. Care Mgmt. Ass'n, 592 U.S. 80, 141 S.Ct. 474, 480, 208 L.Ed.2d 327 (2020). An employer's self-insured or self-funded health plan qualifies as an "employee welfare benefit plan" under ERISA. Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312, 317, 136 S.Ct. 936, 194 L.Ed.2d 20 (2016). A welfare benefit plan is defined as any plan established or maintained by an employer for the purposes of providing its employees or their beneficiaries benefits through the purchase of insurance. 29 U.S.C. § 1002(1). Self-funded healthcare plans covered under ERISA are those where the employer pays for their employees' healthcare costs out of pocket. Employers with self-funded plans usually hire third-party administrators that create a benefit plan that employees can access through their employer. These third-party administrators process healthcare claims as they occur and pay for them using the employer's own funds. This is different from fully insured plans where employers purchase insurance policies from an insurance company and pay a monthly premium.
What is Self-Funding?, HEALTH CARE ADMINISTRATORS ASSOCIATION, https://www.hcaa.org/page/selffunding (last visited June 27, 2023) (Explaining how employers assume the financial risks in self-funded plans).
Id.; see also What is Self-Funding?; see also Glossary of Employee Benefit Terms, U.S. BUREAU OF LABOR STATISTICS, https://www.bls.gov/ebs/publications/national-compensation-survey-glossary-of-employee-benefit-terms-2009-2010.htm (last visited June 27, 2023) (Defining "self-insured" plan).
What is Self-Funding, HEALTH CARE ADMINISTRATORS ASSOCIATION, https://www.hcaa.org/page/selffunding.
See Dina Jordan, Self-Funded vs. Fully Insured Health Plans: What's The Difference?, MAGNACARE, https://www.magnacare.com/self-funded-vs-fully-insured-health-plans-whats-the-difference/ (May 19, 2023) (Explaining the difference between self-funded plans where employers directly collect premiums from enrollees and fully-insured plans where employers purchase coverage from an insurance company and pay a monthly premium).
ERISA includes "expansive preemption provisions." Aetna Health Inc., 542 U.S. at 208, 124 S.Ct. 2488; see also 29 U.S.C. § 1144. "ERISA preempts state law and state law claims that 'relate to' any employee benefit plan." Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d 1272, 1275 (6th Cir. 1991). This means that a party cannot bring a state-law claim relating to a self-funded plan governed by ERISA. See id. There are two categories of state law that ERISA preempts: (1) state law that has a "reference" to ERISA plans and (2) state law that has an 'impermissible connection with' ERISA plans. Gobeille, 577 U.S. at 319-20, 136 S.Ct. 936 (citing California Div. of Labor Standards Enforcement v. Dillingham Const., N.A., Inc., 519 U.S. 316, 325, 117 S.Ct. 832, 136 L.Ed.2d 791 (1997)). "Where a state's law acts immediately and exclusively upon ERISA plans . . . or where the existence of ERISA plans is essential to the law's operation . . . that 'reference' will result in preemption" Id. An impermissible connection is present when a state law governs a central matter of plan administration or interferes with nationally uniform plan administration. Id.
Although there are two defined categories of preemption, ERISA was created to "completely preempt the area of employee benefit plans and to make regulation of benefit plans solely a federal concern." Cromwell, 944 F.2d at 1276. As a result, the Sixth Circuit has recognized that "virtually all state law claims relating to an employee benefit plan are preempted by ERISA." Id. Furthermore, Sixth Circuit courts agree that "it is not the label placed on a state law claim that determines whether it is preempted." Mazur v. UNUM Ins. Co., 590 F. App'x 518, 520 (6th Cir. 2014) (quoting Cromwell, 944 F.2d at 1275.) Rather, the test is to determine whether the claim is for recovery of an ERISA plan benefit. Id. If so, the state law claim is preempted. For example, in Cromwell v. Equicor-Equitable HCA Corp., the Sixth Circuit found that a healthcare provider's state law claims against an administrator of an employee benefit plan for breach of contract and promissory estoppel were preempted by ERISA. Id. The Cromwell court reasoned that the claims were seeking recovery for services rendered to an employee who was insured under a self-funded plan covered by ERISA. Id. at 1276. Thus, the state law claim related to an ERISA governed plan and was preempted. Id.
Cigna was also sued by a group of healthcare providers for recovery of allegedly unpaid or underpaid claims in the Middle District of Tennessee. Cole v. Am. Specialty Health Network, Inc., No. 3:14-cv-02022, 2015 WL 1734926, at *1 & 3 (M.D. Tenn. Apr. 16, 2015). In Cole, plaintiffs alleged that Cigna "failed to properly compensate Plaintiffs for the services rendered to participants in Cigna's insurance plans." Id. at *2. The plaintiffs' claims included breach of contract and unjust enrichment. Id. The Cole court explained that "Cigna is a healthcare company that administers healthcare benefit plans for its clients, many of which are employers who provide health benefits to their employees through self-funded plans." Id. at *1. The court ultimately determined that Plaintiffs' claims for breach of contract/unjust enrichment were preempted by ERISA. Id. at *3. In doing so, the court relied on the reasoning in Cromwell where the court explained that any state law claim for failure to pay for services rendered to an ERISA plan participant is "at the very heart of issues within the scope of ERISA's exclusive regulation." Id. Thus, those claims are preempted. Id.
The claims in the matter before this Court are analogous to the state law claims that were preempted in the Cromwell and Cole cases. Here, Cigna alleges that ERISA preempts Plaintiffs' claims for increased reimbursement because they relate to self-funded plans. (ECF No. 21-1, 9.) Specifically, Cigna avers that "Plaintiffs' state-law claims critically interfere with plan administration and cannot survive without relying upon the terms of the Self-Funded Plans." (Id. at 11.) In an effort to demonstrate a clear connection between the self-funded plans that Cigna administers and Plaintiffs' state law claims, Cigna summarizes Plaintiff's theory as follows:
(1) the Self-Funded Plans are statutorily required to provide coverage to members for emergency services (2) Plaintiffs are statutorily required to provide such services to anyone presenting at the emergency room; (3) the interplay of these statutory duties requires the Self-Funded Plans to reimburse Plaintiffs at a reasonable rate; and (4) the coverage proscribed within the Self-Funded Plans falls below a reasonable rate(Id. at 10.) Cigna argues that Plaintiffs' state law claims relate to the self-funded plans because the claims are seeking recovery for services rendered to participants covered by those self-funded plans. Thus, Cigna argues the state law claims are preempted by ERISA and should be dismissed. (Id.)
Plaintiffs maintain that the claims in this action do not fall within either of the two preemption categories defined by ERISA. (ECF No. 26, 7-9.) The Hospitals argue their claims only indirectly impose costs upon ERISA plans, without mandating a particular scheme of coverage. (Id. at 8.) The Hospitals argue that their state law claims are not preempted because the state laws such as unjust enrichment and quantum meruit would impose contractual obligations on Cigna itself, rather than imposing any obligations on the self-funded plans. (Id. at 7-8.) Thus, the Hospitals argue that their state law claims do not relate to any ERISA plan and should not be preempted. (Id.)
Plaintiffs attempt to circumvent ERISA preemption in their complaint by alleging, "this lawsuit does not challenge any coverage determination under any health plan that may be subject to ERISA." (ECF No. 1, ¶ 13.) However, by seeking redress for underpayments by Cigna on self-funded plans, the Court has to determine whether the Hospitals' claims relate to self-funded plans to the extent they are preempted by ERISA. Here, Plaintiffs are seeking recovery for underpaid claims by Cigna on behalf of emergency services that were rendered to patients who are insured under self-funded plans that Cigna administers. The Sixth Circuit has recognized that state law claims that seek recovery for services rendered to patients insured under self-funded plans are preempted under ERISA. In fact, state law claims for failure to pay are considered to be "at the heart of issues exclusively under the regulation of ERISA." See Cromwell, 944 F.2d at 1276.
It could be argued that in this case, the issue is not whether the hospitals bills were paid, but rather the rate at which they were paid and thus the state law claims attacking the rate should not be preempted. The Middle District of Tennessee addressed this very issue involving allegedly underpaid claims by Cigna on behalf of self-funded plans. The Cole court reasoned that in order to determine whether plaintiffs should be reimbursed for alleged underpaid benefits, the Court would have to examine the terms of Cigna's reimbursement policy under the self-funded plans they administer. See Cole, No. 3:14-cv-02022, 2015 WL 1734926, at *3. Thus, the state law claims seeking recovery for underpaid benefits relate to these self-funded plans and are ultimately preempted. Id. Following the Cole court's reasoning, this Court finds that the Hospitals' claims in this matter are preempted as well.
To assess whether Cigna's reimbursement rates led to underpaid claims under self-funded plans, the Court would have to look at the terms and reimbursement policies under the self-funded plans that Cigna administers. The purpose behind the creation of ERISA was to make the regulation of these plans solely an area of federal concern, and not an area that can be regulated through state laws or state law claims. Thus, to the extent that any of the Hospitals' state law claims seek recovery for payments of services rendered to patients covered under self-funded plans, they are preempted under ERISA.
Plaintiffs also rely on Rutledge v. Pharmaceutical Care Mgmt. Ass'n, where the Supreme Court found that ERISA did not preempt a state law regulation that set a floor on reimbursement rates between pharmacy benefit managers and pharmacies. 592 U.S. 80, 141 S. Ct. 474, 482, 208 L.Ed.2d 327 (2020). This Court does not find Rutledge persuasive. There is a clear distinction between the issues in Rutledge and the issues before the court in this matter. Rutledge involved pharmacy benefit managers who act as intermediaries and reimburse pharmacies for the costs of drugs covered by prescription-drug plans. Id. at 478. A state law was passed that regulated pharmacy benefit managers' reimbursement rates for pharmacies, specifically requiring them to reimburse pharmacies at a price equal to or higher than their wholesale costs. Id. at 476. The Rutledge court found that the state law was not preempted because it applied to pharmacy benefit managers' rates regardless of whether they were reimbursing on an ERISA plan or not. The state law that regulated the reimbursement rate in Rutledge affected non-ERISA plans in the same way it affected ERISA plans. In that way, the state law did not have an impermissible connection with an ERISA plan. Id. at 481. Therefore, ERISA did not preempt that law.
By contrast, the state law claims in this matter would affect self-funded plans directly. Plaintiffs are questioning Cigna's reimbursement rate. If Plaintiffs' claims were allowed to move forward, they would ultimately be allowed to recover from an entity that directly administers self-funded plans. The facts in this case do not involve a state law or claim that would indirectly affect ERISA plans. Here, the state law claims would require the Court to interpret reimbursement procedures and rates of the self-funded plans themselves rather than the policy of an intermediary, as was the case in Rutledge. Thus, the Court finds that Plaintiffs' claims directly relate to self-funded plans governed by ERISA, and such claims shall be DISMISSED. Declaratory Judgment
Cigna moves the Court to dismiss the Hospitals' request for declaratory relief for four reasons: (1) Plaintiffs request a general declaration that Cigna must pay for "all future emergency services" at a specific rate, without regard to claim or patient-specific factors that may impact the "fair market" rate; (2) Plaintiffs request that the Court issue a sweeping declaration as to how every payor — not just Cigna — must pay for emergency services, and such a declaration would not "serve a useful purpose" or "settle the controversy"; (3) Plaintiffs do not allege that the "reasonable value" of their services are the same as the "fair market value", leaving the Court to guess what declaration Plaintiffs actually seek; and (4) there is clearly a better and more effective alternative remedy — seeking monetary damages. (ECF No. 21-1, 19-20.)
The Hospitals seek declaratory relief from the Court to create a methodology that Cigna would be forced to use to calculate the rates it pays. (ECF No. 26, 21.) This methodology would apply to claims covered by Cigna for past and future services provided to Cigna members. (Id. at 23.) In the absence of declaratory relief, the Hospitals fear Cigna will continue to reimburse the Hospitals for emergency services claims at unreasonably low rates. (Id.) In addition, the Hospitals argue that dismissal of their prayer for declaratory relief would be premature at this stage of the litigation. (Id.)
Declaratory judgment actions allow a court in cases of actual controversy within its jurisdiction to "declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is, or could be sought." 28 U.S.C. § 2201. The Declaratory Judgment Act confers upon federal courts "unique and substantial discretion in deciding whether to declare the rights of litigants." Mass. Bay Ins. Co. v. Christian Funeral Dirs., Inc., 759 F. App'x 431, 435 (6th Cir. 2018). Sixth Circuit precedent provides that when a court is faced with whether to grant relief in a declaratory judgment action, the question is "whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Galluzzo v. Champaign County Court of Common Pleas, 168 F. App'x 21, 24 (6th Cir. 2006) Courts in the Sixth Circuit consider five factors when determining whether declaratory relief should be rendered:
(1) whether the declaratory action would settle the controversy; (2) whether the declaratory action would serve a useful purpose in clarifying the legal relations in issue; (3) whether the declaratory remedy is being used merely for the purpose of "procedural fencing" or "to provide an arena for a race for res judicata"; (4) whether the use of a declaratory action would increase friction between our federal and state courts and improperly encroach upon state jurisdiction; and (5) whether there is an alternative remedy which is better or more effective.Savoie v. Martin, 673 F.3d 488, 496 (6th Cir. 2012).
Like the plaintiffs in N. Shore, Plaintiffs here request the Court to determine the "proper methodology for calculating the fair market value of emergency services rendered, an issue on which the Hospitals will present evidence including expert testimony." (ECF No. 1, 18-19.) The N. Shore court characterized this request as inherently overbroad, and this Court agrees. 2021 WL 3419356 at *7. Not only are Plaintiffs requesting that the fair market value be declared for all past services provided for the underlying claims, but also for "all future claims resulting from the Hospitals' provision of emergency medical services to Cigna Members." (ECF No. 1, 19.) As the N. Shore court explained, a declaration such as the one sought by Plaintiffs would require a fact-intensive, case-by-case assessment to include the type of service provided and patient-specific factors such as age, diagnosis, and treatment history. Id. The Court will not employ the Declaratory Judgment Act to broadly and creatively define a methodology for determining the fair market value of emergency services provided by the Hospitals to Cigna employees.
As a result, the Court finds that Plaintiffs' request for declaratory judgment should be DISMISSED.
CONCLUSION
Accordingly, Defendant's Motion to Dismiss Plaintiffs' Complaint is GRANTED, and Plaintiffs' Complaint is DISMISSED with prejudice pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim.
IT IS SO ORDERED this 11th day of July, 2023.