Archives September 2012

United States District Court Eastern District of Michigan,  Case No: 11-12557 Filed- 9/7/2012

Federal Court Rules Blue Cross Blue Shield Acted As ERISA Fiduciary & Engaged in Self Dealing

Borroughs v. BCBS Michigan

Ramifications of the Court Case

1. Court determined that Blue Cross acted as an ERISA fiduciary in its role as third-party administrator and engaged in self-dealing by unilaterally determining its administrative fees.
2. One aspect the Court relied upon in finding that the administrator exercised control over plan assets, and was therefore a fiduciary, is that it “allott[ed] to itself an administrative fee . . . .”

These cases are about certain “Access Fees” that Blue Cross Blue Shield Michigan (BCBS) allocated to itself as additional administrative compensation.  According to court documents, “in the late 1980s, BCBS was in poor financial shape. In order to increase revenue, it began charging its self-insured customers additional fees.”

Understandably, the self-insured customers were unhappy that these charges amounted to an add-on to their bill. They were also unhappy to be subsidizing insured customers. Many customers who stayed with Blue Cross simply refused to pay the fee because they did not believe it was fair.  Ultimately, BCBS remained in poor financial shape.

In 1993, according to court documents, “BCBS decided to hide the Disputed Fees by merging them with hospital claims on billing statements”

The court rules that:

Blue Cross is a plan fiduciary if it exercised “discretionary control over the disposition of plan assets” or “any authority or control over plan assets.” The U.S. Court of Appeals for the Sixth Circuit determines fiduciary status based on a functional test and applies ERISA fiduciary status to TPAs when they exercise “practical control over an ERISA plan’s money,” the court said, quoting Guyan International Inc. v. Professional Benefits Administrators Inc., No. 11-3126 (6th Cir. Aug. 20, 2012) (161 PBD, 8/21/12; 39 BPR 1635, 8/28/12).

The court relied upon the Sixth Circuit, in that it has treated TPAs as ERISA fiduciaries when they exercise authority and control over plan assets by depositing plan assets into accounts the TPA selects, writing checks from the accounts, advising contracting companies to deposit funds with the TPA, and determining when and how the funds are to be dispersed

In a third case in this district, with nearly identical facts, Judge Tarnow held that Blue Cross was a fiduciary when it assessed an “other than group” (“OTG”) fee, a type of cost-transfer subsidy. As quoted by the Sixth Circuit, Judge Tarnow ruled on the record:

I find that [BCBSM], in fact, exercised authority or control over the Plan assets, and under ERISA it was a fiduciary. That’s because the [Fund] had to advance funds to [BCBSM], which then paid the claims on the [Fund]’s behalf to the providers. Sometimes, as it has been mentioned here, [BCBSM] had to pay more than was advanced, but [the Fund] was responsible for making up the difference, which is an inherent nature of self-insuring arrangement.

….

This shows that [BCBSM] exercised control over Plan assets, and there’s really no factual dispute about this. The [Fund]’s knowledge of the OTG fee is not relevant or material to the question of whether [BCBSM] exercised control over the assets.

Accordingly, [BCBSM] was a fiduciary in assessing the OTG fee.

Pipefitters Local 636 Ins. Fund v. Blue Cross Blue Shield of Michigan, 654 F.3d

618, 626 (6th Cir. 2011).

Case No. 10–16840.

Argued and Submitted Dec. 8, 2011. Filed on September 12, 2012 United States Court of Appeals, Ninth Circuit

Stephan v. Unum [9th Cir]

Ramifications of Court Decision:

• Ninth Circuit Applies ERISA Fiduciary Privilege Exception to Insurer
• Evaluation of conflict of interest is not limited to administrative record
• The court held that because Unum was responsible both for evaluating benefits claims and paying them, it operated under a conflict of interest, which “ ‘must be weighed as a factor in determining whether there is an abuse of discretion

Ninth Circuit remands district court decision and also considers the Third Circuit’s holding in Wachtel v. Health Net, Inc., 482 F.3d 225 (3d Cir. 2007).  In the Wachtel case, the issue is whether the fiduciary exception to the attorney-client privilege applies to an insurer making claims decisions in a fiduciary capacity.  The Ninth Circuit, in an opinion, rejects the Third Circuit’s finding that the fiduciary exception does not apply to insured plans.

“We agree with the district court that the applicable standard of review is abuse of discretion. The district court also correctly held that because Unum was responsible both for evaluating benefits claims and paying them, it operated under a conflict of interest, which “ ‘must be weighed as a factor in determining whether there is an abuse of discretion’ “ (quoting Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 113, 128 S.Ct. 2343, 171 L.Ed.2d 299 (2008)). However, in determining what weight ought to be given the conflict, the district court erred in three ways: First, it failed to apply the traditional rules of summary judgment to its analysis of whether and to what extent a conflict of interest impacted Unum’s benefits determination. Second, it incorrectly held that certain internal memoranda between Unum’s claims analyst and its in-house counsel were not discoverable. Finally, it did not take into account substantial evidence that Unum’s conflict of interest “infiltrated the entire decision-making process” and therefore ought to be accorded “significant weight.” Montour v. Hartford Life & Accident Ins. Co., 588 F.3d 623, 634 (9th Cir.2009).

III. CONFLICT OF INTEREST

As we have explained, because the Plan grants discretionary authority to Unum, we review Unum’s benefits decision for an abuse of that discretion. See Glenn, 554 U.S. at 111; Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989); Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 673 (9th Cir.2011). Under this deferential standard, a plan administrator’s decision “will not be disturbed if reasonable.” Conkright v. Frommert, ––– U.S. ––––, ––––, 130 S.Ct. 1640, 1651, 176 L.Ed.2d 469 (2010) (internal quotation marks omitted); Salomaa, 642 F.3d at 675 (internal quotation marks omitted). This reasonableness standard requires deference to the administrator’s benefits decision unless it is “(1) illogical, (2) implausible, or (3) without support in inferences that may be drawn from the facts in the record.” Salomaa, 642 F.3d at 676 (internal quotation marks omitted).

“This abuse of discretion standard, however, is not the end of the story. Instead, the degree of skepticism with which we regard a plan administrator’s decision when determining whether the administrator abused its discretion varies based upon the extent to which the decision appears to have been affected by a conflict of interest. Id.”

In particular, [the district court] should, where relevant, permit the admission of evidence outside the administrative record. Although, for the most part, judicial review of benefits determinations is “limited to the administrative record”—that is, the record upon which the plan administrator relied in making its benefits decision—the evaluation of a conflict of interest is not so limited. Id. Evidence outside the administrative record is “properly considered” in determining the extent to which a conflict of interest affected an administrator’s decision. Id.

Aetna’s war against the California Medical Association (CMA) for patient’s right to choose provider versus Aetna’s right to save money has spurred the 10^th Patient Protection and Affordable Care Act (PPACA) Claims Specialists Certification Program.

The timing of the PPACA Program, scheduled for Sept 15, 2012 is appropriate in light of recent CMA Press and LA Times Report, allegedly confirmed by Aetna, that Aetna is terminating or kicking out all 35,000 members of CMA as a result of the on-going court battles.  The PPACA Ex-PPO Programs are designed to provide 35,000 California doctors with compliant solutions to patient’s right to choose and protections under the new federal health reform law.  On June 28, 2012, the Supreme Court upheld PPACA’s constitutionality.

Avym Corporation’s 10th Ex-PPO Program is a comprehensive PPACA & ERISA compliance program covering PPACA and ERISA patient protections, appeals regulations and Corporate Compliance – Fraud and Abuse Prevention in order to avoid allegations and litigations currently faced by many PPO and Ex-PPO providers.  The two-day Ex-PPO program is a turn-key operation in education, with one day devoted to PPACA & ERISA appeals and the other day focusing on fraud and abuse prevention.

“The California Aetna v. CMA Managed Earthquake appears to be a war on patient’s rights to choose versus Aetna’s right to save, but this is clearly evidence of the beginning of the end of the U.S. managed care business model when patient in-network deductibles are greater than their monthly salaries and the providers’ profits are less than the costs of doing business.  In an unprecedented fashion, PPACA is constitutionally transforming the old PPO model to the new ACO or ACA models.”, said Dr. Jin Zhou, president of ERISAclaim.com and a national expert on PPACA and ERISA appeals and compliance.

CMA Letter to Aetna

CMA Letter to Aetna Lawyers

According to a LA Times Report on 08-30-2012, “Dispute between Aetna, California Medical Assn. heats up: California Medical Assn. accuses insurer Aetna of refusing to negotiate with member doctors or kicking doctors out of its network as retaliation for a lawsuit.”
http://www.latimes.com/business/la-fi-aetna-doctors-feud-20120830,0,7996610.story

As reported on 08-30-2012 by a Press Release from CMA, California Medical Association, “California Medical Association calls on Aetna to stop retaliatory behavior against physicians”.   Dr. James T. Hay. M.D., CMA president, was quoted as saying: “Aetna is essentially saying that they will no longer do business with the 35,000 members of CMA.”  http://www.cmanet.org/news/press-detail/?article=california-medical-association-calls-on-aetna

“While we cannot pass any judgment on the merits of the court allegations from Aetna or the CMA, as that judgment is entrusted to the Courts, we can provide PPACA compliant solutions for providers to fully and properly disclose any self-referrals and/or out-of-network referrals in accordance with all applicable federal and state laws, and to act as the patient’s advocates for patient’s right to choose and to appeal all claim delays and denials under ERISA and PPACA.”, said Mark Flores, PPACA ERISA Claim Specialist, co-founder of AVYM Corporation in Los Angeles, California.

As reported by an American Medical Association news report on June 26, 2012, according to the Kaiser’s Health Security Report in June 2012: “Insured, High-Income Patients Delay Medical Care, Too: Even among people who make $90,000 or more per year, nearly 40% skipped or delayed care because of cost”.  http://www.ama-assn.org/amednews/2012/06/25/bise0626.htm

“About 77% of insured Americans pay higher premiums for first-class out-of-network coverage, but only about less than 5% of out-of-network claims are filed each year,” says Vincent Flores, a certified PPACA and PPACA ERISA Claim Specialist, co-founder of AVYM Corporation in Los Angeles, California. http://avym.com/

The 10th PPACA Claims Appeals Specialists Certification Programs were announced today in Los Angeles by AVYM, in order to assist 35,000 soon to be Ex-PPO CMA member doctors from Aetna PPO Networks.  AVYM’s 10th PPACA Ex-PPO Program will cover the following topics:

1. DOL Affordable Care Act Regulations and Guidance: http://www.dol.gov/ebsa/healthreform/
2. DOL: About 77% of Insured Americans Purchased Out-Of-Network Coverage under Private Industry (DOL, BLS, NBS 2010, page 11 of 67):   http://stats.bls.gov/ncs/ebs/detailedprovisions/2010/ebbl0047.pdf
3. Congressional GAO Reports: 39% to 59% denial reversal with valid appeals, only 0.5% appeals in Ohio –http://www.gao.gov/new.items/d11268.pdf
4. ACA Indigency Discount v. PPO discount: http://archive.hhs.gov/news/press/2004pres/20040219.html
5. Disclosures on estimated charge for each and all services, network participation status, billing and collection policies.
6. Guaranteed Patient Satisfaction (GPS) for total disclosure and transparency on referring provider affiliation and remuneration arrangement, if any.
7. PPACA/ERISA appeal assistance for both in-network and out of network claim delays and denials.
8. OIG HEALTH CARE COMPLIANCE PROGRAM TIPS: http://oig.hhs.gov/compliance/provider-compliance-training/files/Compliance101tips508.pdf

To find out more about PPACA Claims and Appeals Compliance Services from AVYM please click here.

Located in Los Angeles, CA, AVYM is a leading provider of services focusing entirely on the resolution of denied or disputed medical insurance claims by participating in the nation’s first ERISA PPACA Claims Appeals Certification program.  AVYM also offers free Webinars, basic and advanced educational seminars and on-site claims specialist certification programs for doctors, hospitals and commercial companies, as well as numerous pending national ERISA class action litigation support.

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT-Nos. 11-3126/3640

TPA Is A Fiduciary of the Plan Subject To Suit By Plan Sponsors

GUYAN INTERN’L, INC v. PROFESSIONAL BENEFITS ADMINISTRATORS, INC.

Ramifications of Court Decision:

1. What is a Fiduciary? The court reasons: ERISA provides that “a person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets.” 29 U.S.C. § 1002(21)(A) The term person is defined broadly to include a corporation
2. An entity that exercises any authority or control over disposition of a plan’s assets becomes a fiduciary. Id.at 490-91. So the threshold for becoming a fiduciary is lower for entities handling plan assets than for entities managing the plan. Id.at 491. An entity such as a third-party administrator becomes an ERISA fiduciary when it exercises “practical control over an ERISA plan’s money.” Id.at 494.
3. What does this mean to TPA’s that handle “plan assets”?

“In light of these principles, PBA was a fiduciary under ERISA because it exercised authority or control over Plan assets. PBA had the authority to write checks on the Plan account and exercised that authority. Moreover, PBA had control over where Plan funds were deposited and how and when they were disbursed. PBA commingled Plan assets by depositing these funds into its general account rather than into the Plaintiffs’ separate accounts as the Agreement required. And then PBA used these Plan funds for its own purposes, again contrary to the dictates of the Agreement. The fact that PBA used Plan funds in ways contrary to how it had agreed to use them demonstrates that PBA had practical control over Plan funds once it received them from the Plaintiffs. “