Alaska Native Tribal Health Consortium v. Premera Blue Cross

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
ALASKA NATIVE TRIBAL HEALTH )
CONSORTIUM, )
)
Plaintiff, )
)
vs. )
)
PREMERA BLUE CROSS, )
)
Defendant. )
__________________________________________)
)
SOUTHCENTRAL FOUNDATION, )
)
Plaintiff, ) No. 3:12-cv-0065-HRH
) (Consolidated with
vs. ) No. 3:12-cv-0165-HRH)
)
PREMERA BLUE CROSS, )
)
Defendant. )
__________________________________________)
O R D E R
Cross-Motions for Partial Summary Judgment
Plaintiff Alaska Native Tribal Health Consortium (ANTHC) moves for partial
summary judgment.1 This motion is opposed and defendant cross moves for partial
summary judgment.2 The cross-motion is opposed.3 Defendant also moves, pursuant to
1Docket No. 78. In this consolidated action Southcentral Foundation is also a
plaintiff. Although the memorandum in support of the motion for partial summary
judgment is labeled “plaintiffs’ memorandum,” all of the references therein are to plaintiff
ANTHC. Thus, for purposes of this order, any reference to “plaintiff” means ANTHC.
2Docket No. 98.
3Docket No. 113.
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Local Rule 7.1, to submit supplemental factual information.4 This motion is opposed,5 and
plaintiff moves to strike defendants’ Rule 7.1(i)(2) pleadings.6 The motion to strike is
opposed.7 Oral argument has been heard.
Facts
Plaintiff is a tribal organization that provides health care services to Alaska Natives,
American Indians, and other eligible individuals pursuant to Titles I and V of the Indian
Self-Determination and Education Assistance Act, 25 U.S.C. §§ 450f-450n, 458aaa-458aaa-18;
the Alaska Tribal Health Compact; and plaintiff’s Funding Agreement with the Secretary
of Health and Human Services. Plaintiff co-manages the Alaska Native Medical Center
(ANMC) in Anchorage, Alaska, under this authority. Alaska Natives and American
Indians who receive health care services at ANMC are not personally responsible for
paying costs associated with their care.
Defendant is Premera Blue Cross. Defendant provides health insurance to some of
the individuals (sometimes referred to herein as “insureds” or “members”) who obtain
health care services at ANMC. From 2001 through 2011, plaintiff and defendant had a
contract which provided the rates which defendant agreed to pay for the health care
services that plaintiff provided to defendant’s insureds. That contract was terminated by
plaintiff April 15, 2011, as a consequence of a dispute between the parties over plaintiff’s
use of Guardian Flight for air ambulance services.
Plaintiff commenced this action on March 27, 2012. Plaintiff alleges that defendant
is not paying it in accordance with Section 206 of the Indian Health Care Improvement Act,
4Docket No. 117.
5Docket No. 121.
6Docket No. 127.
7Docket No. 128.
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25 U.S.C. § 1621e. The only remaining claim in this action8 is Count 3 of plaintiff’s first
amended complaint, which deals with defendant’s post-contract payments to plaintiff. In
Count 3, plaintiff seeks to
recover from [defendant] the difference between the actual
amounts it paid to [plaintiff] and [plaintiff’s] reasonable
charges billed for health care and services provided to
[defendant’s] insureds or, if [defendant] paid any other non-
governmental provider or reimbursed any individual at a
higher rate for similar health care and services, the difference
between that amount and the actual amounts [defendant]
actually paid [plaintiff], including all charges that [defendant]
refused or failed to pay entirely....[9]
In denying defendant’s earlier motion for summary judgment as to Count 3, the
court held that:
Section 206(a) provides that a tribal organization is entitled to
be paid either the higher of its reasonable billed charges or the
rate that any other nongovernmental provider would be eli-
gible to receive for providing the same service to the same
patient. In this case, the only rate that any other non-
governmental provider would be eligible to receive is the
Alaska UCR rate. In the absence of a contract with defendant,
plaintiff is entitled to be paid either its reasonable billed
charges or the Alaska UCR rate.[10]
Plaintiff contends that since its contract with defendant terminated, defendant has
not been paying plaintiff either its reasonable billed charges or the Alaska UCR rate.
Plaintiff contends that defendant takes the amount that plaintiff bills and first reduces it to
an “allowed amount,”11 which is anywhere from 14% to 60% less than the amount billed.
Plaintiff contends that defendant then further reduces the “allowed amount” by subtracting
co-pays, deductibles, and coinsurance, collectively referred to here as “cost sharing.” For
8Defendant’s motion for summary judgment as to Counts 1, 2, and 4 of plaintiff’s
complaint was granted by order of January 24, 2013. Docket No. 52.
9First Amended Complaint at 7, ¶ 19, Docket No. 10.
10Order re Cross-Motions for Summary Judgment at 15, Docket No. 52.
11Plaintiff contends that defendant unilaterally determines what the “allowed
amount” is.
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example, in one instance, plaintiff billed $8,157.90; defendant reduced this to an allowed
amount of $6,999.48; and then deducted a 60% “out of network” coinsurance amount;
ultimately paying plaintiff only 34% of its billed charges, or $2,799.79.12 In another
example, plaintiff billed $4,705.01; defendant reduced the amount billed to an allowed
amount of $2,352.48 and then deducted a 50% out-of-network coinsurance amount,
ultimately paying 51% of plaintiff’s billed charges, or $2,352.48.13
Defendant contends that it is paying plaintiff based on the contracts that it has with
its members, which, according to defendant, is consistent with Section 206(a). Defendant
“incentivizes its members to use in-network providers. ...[M]embers who choose ‘out-of-
network’ providers may be responsible for higher coinsurance, deductible and other
copayments than if they use in-network providers.”14 Defendant contends that this
distinction between “in-network” and “out-of-network” is common in the healthcare
industry” and that other insurers such as Aetna and CIGNA also reduce what they pay
plaintiff by the patient’s deductible or co-pay amount.15
12Declaration of Paul Adams at 5-6, ¶ 15, and Exhibit B thereto, Exhibit D, Plaintiffs’
Memorandum in Support of Second Motion for Summary Judgment, Docket No. 79.
13Id. at 6, ¶ 15, and Exhibit C thereto.
14Declaration of Rich Maturi at 2, ¶ 3, Docket No. 99.
15See Deposition of Michael A. Banks at 142, lns. 2-13, Exhibit 4, Declaration of John
R. Neeleman, Docket No. 101. Defendant also moves for leave to submit the declaration
of Todd Menenberg, who evaluated EOBs from other insurance companies to see if other
insurers reduce their payments to plaintiff to account for co-insurance and deductibles.
Plaintiff opposes this motion because it argues that Menenberg’s evaluation is irrelevant
because he analyzed EOBs from insurance companies with which plaintiff has contracts
and the court has concluded that the right to recovery under Section 206(a) does not apply
to contracted rates. In support of its opposition, plaintiff offers a declaration from Paul
Adams, one of plaintiff’s expert, who summarizes 12 EOBs from other insurance companies
where plaintiff was paid 100% of its charges. We do not need the supplemental factual
information in Menenberg’s declaration. Plaintiff has made a statutory interpretation
argument here; so, the “facts” at this point are not very relevant. Defendant’s motion for
leave to submit supplemental factual material is denied. Plaintiff’s motion to strike
defendant’s Rule 7.1(i)(2) pleadings is denied as moot.
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Plaintiff now moves for partial summary judgment on Count 3, arguing that
Section 206(a) does not allow defendant to deduct cost sharing from the amount plaintiff
bills.16 Defendant cross moves for summary judgment, arguing that plaintiff is not entitled
to recover from defendant the cost sharing required by defendant’s contracts with its
members.
Discussion
Summary judgment is appropriate when there are no genuine issues of material fact
and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The
instant cross motions for partial summary judgment “turn on legal issues, making them
proper for resolution pursuant to” Rule 56. We Are Amer. v. Maricopa County Bd. of
Sup’rs, 297 F.R.D. 378, 381 (D. Ariz. 2013).
Defendant argues that plaintiff is barred from any recovery based upon Count 3 of
plaintiff’s complaint because plaintiff has “unclean hands” due to the way in which the
contract between plaintiff and defendant was terminated. “‘The doctrine [of unclean
hands] bars relief to a plaintiff who has violated conscience, good faith or other equitable
principles in his prior conduct, as well as to a plaintiff who has dirtied his hands in
acquiring the right presently asserted.’” Seller Agency Council, Inc. v. Kennedy Center for
Real Estate Educ., Inc., 621 F.3d 981, 986 (9th Cir. 2010) (quoting Dollar Sys., Inc. v. Avcar
Leasing Sys., Inc., 890 F.2d 165, 173 (9th Cir. 1989)). “‘It is fundamental to [the] operation
of the doctrine that the alleged misconduct by the [party] relate directly to the transaction
concerning which the complaint is made.’” Id. (quoting Dollar Sys., 890 F.2d at 173).
Plaintiff argues that defendant’s reliance on the unclean hands doctrine is misplaced
because the doctrine bars claims in equity but is not a defense against a claim for legal
16Defendant suggests that the “cost sharing” claim is a new claim. Plaintiff is not
making a new claim here. Rather, plaintiff is arguing that defendant is not paying it
according to Section 206(a) because defendant is deducting cost sharing amounts from
plaintiff’s billed charges.
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relief. Brooks v. Hollaar, 297 P.3d 125, 131 (Alaska 2013). Plaintiff’s Count 3 is a contact
claim by which plaintiff seeks declaratory and monetary relief, neither of which is equitable
relief. See FMC Medical Plan v. Owens, 122 F.3d 1258, 1261 (9th Cir. 1997) (“traditional
forms of equitable relief” include “injunction, mandamus, and restitution”). Defendant’s
unclean hands argument is not a defense to plaintiff’s contract action.
The current version of Section 206(a) provides:
Except as provided in subsection (f), the United States, an
Indian tribe, or tribal organization shall have the right to
recover from an insurance company, health maintenance
organization, employee benefit plan, third-party tortfeasor, or
any other responsible or liable third party (including a political
subdivision or local governmental entity of a State) the
reasonable charges billed by the Secretary, an Indian tribe, or
tribal organization in providing health services through the
Service, an Indian tribe, or tribal organization, or, if higher, the
highest amount the third party would pay for care and services
furnished by providers other than governmental entities, to
any individual to the same extent that such individual, or any
nongovernmental provider of such services, would be eligible
to receive damages, reimbursement, or indemnification for
such charges or expenses if –
(1) such services had been provided by a nongovernmental
provider; and
(2) such individual had been required to pay such charges or
expenses and did pay such charges or expenses.
25 U.S.C. § 1621e(a).
The court’s “starting point” when resolving a question of statutory interpretation
“is the plain language of the statute.” Wash. v. Chimei Innolux Corp., 659 F.3d 842, 847
(9th Cir. 2011). The court “‘examine[s] not only the specific provision at issue, but also the
structure of the statute as a whole, including its object and policy.’” Id. at 847-48 (quoting
Children’s Hosp. & Health Ctr. v. Belshe, 188 F.3d 1090, 1096 (9th Cir. 1999)). “If the plain
meaning of the statute is unambiguous, that meaning is controlling and [the court] need
not examine legislative history as an aid to interpretation unless ‘the legislative history
clearly indicates that Congress meant something other than what it said.’” Id. at 848
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(quoting Carson Harbor Village, Ltd. v. Unocal Corp., 270 F.3d 863, 877 (9th Cir. 2001)).
“If the statutory language is ambiguous, then [the court] consult[s] legislative history.” Id.
Plaintiff and defendant continue to disagree about the meaning of Section 206(a),
even though they both contend, and the court has agreed,17 that Section 206(a) is
unambiguous. The court has held that Section 206(a) unambiguously gives a tribal
organization the right to recover the higher of its “reasonable charges billed” or the Alaska
UCR rate. Plaintiff aptly contends that the term “reasonable charges billed” is not
ambiguous, and that it means the amount on the bill plaintiff sends to the defendant subject
to a reasonableness upper limit. However, plaintiff sometimes appears to argue, as it has
before, that Section 206(a) entitles it to recover either its billed charges or, if higher, the
Alaska UCR rate. Not so. It is reasonable charges billed or, if higher, the Alaska UCR rate
which plaintiff is entitled to recover.
Defendant contends that Section 206(a) unambiguously allows it to deduct from all
reimbursements due plaintiff any amount it would deduct if the member had received
health care services from a nongovernmental provider. Defendant points out that the
Ninth Circuit has explained that “subsection (a),” of Section 206, “which defines the scope
of the right of recovery, allows the provider to recover ‘to the same extent that [the Native
American] individual ... would be eligible to receive reimbursement or indemnification for
such expenses.’ That wording presupposes that the provider stands in the shoes of the
individual....” Blatchford v. Alaska Native Tribal Health Consortium, 645 F.3d 1089, 1092
(9th Cir. 2011) (quoting 25 U.S.C. § 1621e(a) (emphasis added)). Defendant argues that
because plaintiff “stands in the shoes” of individual plan members, plaintiff’s right to
recovery is subject to the same deductible, coinsurance and other co-payment requirements
such as out-of-network differentials (cost sharing) as defendant’s members. Defendant
insists that Section 206(a) provides that whether reimbursement is made based on the
17Order re Cross-Motions for Summary Judgment at 11, Docket No. 52.
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“reasonable billed charges” or on “the highest amount the third party would pay for care
and services furnished by providers other than governmental entities”, reimbursement is
required only “to the same extent that ... any nongovernmental provider of such services,
would be eligible to receive ... reimbursement ... for such charges or expenses....” 25 U.S.C.
§ 1621e(a). Defendant argues that because it reduces payments to “providers other than
governmental entities” by cost-sharing amounts, it is entitled to deduct cost-sharing
amounts from what it pays plaintiff. Defendant argues that there is no rational reason why
the “reasonable billed charges” clause would prohibit cost sharing deductions while the
“highest amount the third party would pay for care and services” clause would allow such
deductions.
Defendant is half right. As already held, there are two avenues of reimbursement
under Section 206(a): “reasonable charges billed” or, if higher, the UCR rate. Section 206(a)
contains no language permitting defendant to reduce plaintiff’s reasonably billed charges
by any form of cost sharing. However, Section 206(a) unambiguously qualifies the amount
which plaintiff may recover if it is higher than plaintiff’s reasonably billed rates by the “to
the same extent” language. The “to the same extent” language does not modify the
“reasonable billed charges” language, but rather only modifies the alternative “highest
amount the third party would pay” measure of recovery. The “if higher” clause is
separated from the “reasonable billed charges” clause with a comma and an “or.” “[T]erms
connected by a disjunctive [are to] be given separate meanings, unless the context dictates
otherwise." See Simpson v. Hegstrom, 873 F.2d 1294, 1298 (9th Cir. 1989) (citation omitted).
Here, the context does not require an unusual construction of the alternative payment
clauses.
Thus, if defendant is reimbursing plaintiff pursuant to the “reasonable billed
charges” payment clause, defendant is not permitted to deduct cost sharing amounts from
what it pays plaintiff. If plaintiff’s billed charges are determined to be reasonable, a
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determination that has not yet been made, then Section 206(a) does not contemplate that
the amount that plaintiff is entitled to be reimbursed will be reduced by the cost-sharing
amounts. Rather, the focus under the first payment clause in Section 206(a) is on whether
the amount billed is reasonable.
But if defendant is reimbursing plaintiff pursuant to the “if higher” payment clause,
defendant may be permitted to deduct cost sharing amounts if it is established that (apart
from any contracts that defendant may have with health care providers) a non-
governmental provider of health services would be eligible to receive reimbursement only
after cost-sharing adjustments. Section 206(a) expressly provides that when the “if higher”
clause applies, the insurance company’s obligation is to reimburse a health care provider
“to the same extent [an] individual or any non-government provider of services would be
eligible to receive ... reimbursement.” Because the insurance company’s reimbursement
obligation is based upon what a nongovernmental health care provider would be eligible
to receive, defendant’s reimbursement obligation under the “if higher” payment clause
must necessarily take into account cost-sharing items such as co-pays and deductibles.
Defendant argues that the court cannot adopt plaintiff’s interpretation of
Section 206(a) because Congress did not evince an intent to abrogate defendant’s
preexisting contract rights in clear and unmistakable language. Defendant also argues that
plaintiff’s interpretation of Section 206(a) would constitute a violation of defendant’s
substantive due process rights based upon contract. There is no abrogation or due process
problem if reimbursement is made under the “if higher” clause of Section 206(a) because
plaintiff’s reimbursement may be reduced by applicable cost sharing to the same extent
such cost sharing would be deducted from the amount that defendant reimburses any
nongovernmental health care provider. But if reimbursement is made based on plaintiff’s
reasonable billed charges, then defendant may have to reimburse plaintiff more than it
would pay a nongovernmental health care provider. In such event, defendant’s filings
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with the Alaska Department of Insurance come into play. Defendant’s “member
agreement” forms on file with the State of Alaska contain a savings clause stating that the
contracts will be construed in accordance with the law and will be amended by any
changes in applicable law.18 There is no abrogation or due process issue when a contract
specifically provides that it will be changed to comply with applicable law.
The foregoing brings the court to a final question: when applicable, does the Alaska
UCR rate permit cost sharing? The court concludes that 3 AAC 26.110 does permit cost
sharing.
The Alaska UCR rate is established by regulation. 3 AAC 26.110 provides:
A person that provides coverage in this state for health care
services or supplies on an expense incurred basis for which
benefits are based on an amount that is less than the actual
amount billed for the health care services or supplies shall
(1) maintain or use a statistically credible profile of covered
health care services and supplies on which to base payment;
the profile must
(A) be updated at least every six months;
(B) contain billed charges for services performed not more
than one year before the date of the most recent profile; and
(C) contain billed charges for each geographical area in which
a claimant might receive treatment or, if statistically credible
data for a particular service or supply item in a certain
geographical area is unavailable, contain a sufficient number
of billed charges for that service or supply item from another
geographical area so that a reliable basis is established;
(2) determine the final payment for a covered service or
supply based on an amount that
(A) reflects the general cost differences between the geo-
graphical area where the service was performed and the other
geographical areas used in establishing the statistically credible
profile under (1) of this subsection; the adjustment may be
based on the Consumer Price Index, the medical care compon-
18Exhibit B, Reply in Support of Second Motion for Summary Judgment, Docket No.
114.
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ent of the Consumer Price Index, or another reasonable basis
stated in writing; and
(B) is equal to or greater than the 80th percentile of charges
under (1) of this subsection for the health care services or
supplies;
(3) provide with any claim payment an explanation of the
basis of payments in clear and simple terms, including
explanation of any adjustments made under (2)(A) of this
subsection, and document the explanation provided in the
claim file; and
(4) provide an explanation in the health insurance policy of
the basis of payments, including any payments for which a
covered individual may be responsible and include on any
schedule or summary of benefits page accompanying the
policy
(A) the percentile used to determine final payment under
(2)(B) of this subsection; and
(B) a statement regarding whether the covered individual is
responsible for any amount billed for a health care service or
supply item that exceeds the amount of final payment.
When the “if higher” clause of Section 206(a) is applicable, the reimbursement to
which plaintiff is entitled is determined by the Alaska UCR rate. In making that
determination, Section 26.110 requires that defendant provide “an explanation of the basis
for payments” ... and “(4) provide an explanation in the health insurance policy of the basis
of payments, including any payments for which a covered individual may be
responsible....” Subsection 26.110(2)(B)(4)(B) continues to require, among other things, “a
statement regarding whether the covered individual is responsible for any amount billed
for a health care service or supply item that exceeds the amount of final payment.”
Section 26.110 sets the minimum rate that an insurer such as defendant can pay a
service provider such as plaintiff; and if that minimum UCR rate is higher than plaintiff’s
reasonably billed charges, then plaintiff is entitled to that UCR payment. Section 26.110
does not require that final payment must be equal to the 80th percentile. Rather, final
payment must be based upon an amount that is equal to or greater than the 80th percentile
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of charges. Section 26.110 unambiguously contemplates that the final payment amount to
which a provider is entitled may be reduced by “payments for which a covered individual
may be responsible.” It is the insurance policy issued by defendant in favor of an
individual to which reference must be made to determine what, if any, cost sharing may
be deducted in the determination of the final payment to a health care provider.
Depending on the actual terms of insurance policies held by defendant’s members, it is
possible that defendant may take into account co-payments, deductibles, co-insurance, and
out-of-network differentials when computing Alaska UCR rates, as long as none of these
cost-sharing amounts are derived from defendant’s health care services contracts with
other health care providers or employers. The court’s construction of Section 206(a) does
not permit an insurance company such as defendant to qualify or reduce reimbursement
otherwise due a health care provider or individual member/beneficiary based upon
contracts with employers or other health care providers. But, exactly what types of cost
sharing will apply under Section 206(a) and 3 AAC 26.110 when UCR rates are the basis for
reimbursement to plaintiff has yet to be determined by the parties or the court.
Conclusion
The cross-motions for summary judgment are granted in part and denied in part
as set out above.
DATED at Anchorage, Alaska, this 15th day of October, 2014.
s/ H. Russel Holland
United States District Judge
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