United States District Court, E.D. Michigan, Northern Division
ALMA PRODUCTS I, INC., and ALMA PRODUCTS I, INC. MEDICAL INSURANCE PLAN, Plaintiffs,
BLUE CROSS AND BLUE SHIELD OF MICHIGAN, Defendant.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS AND DENYING PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT
THOMAS L. LUDINGTON, District Judge.
This case is one of over thirty pending in this district in which Defendant Blue Cross & Blue Shield of Michigan (BCBSM) is being sued by various businesses seeking to recover funds BCBM allegedly billed and retained in violation of its third-party administrator (TPA) agreements and in breach of its fiduciary duty under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. In this case, Plaintiffs Alma Products I and Alma Products I Medical Insurance Plan ("Alma Products") claim that BCBSM inflated the amounts it reported hospitals charged for claims. BCBSM would then allegedly keep the difference between what it was actually paying to hospitals and the amounts it reported it was paying. Similar cases have referred to this difference as "disputed fees."
This case was stayed while BCBSM appealed the judgment entered against it in another case, Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of Michigan, because BCBSM predicted that the outcome of the appeal would determine the fate of the instant litigation. 751 F.3d 740 (6th Cir. 2014). The Sixth Circuit affirmed the judgment against BCBSM, and this Court subsequently lifted the stay in the current proceedings.
BCBSAM then moved to dismiss this case in its entirety, asserting that the statute of limitations had already expired on all of Alma Products' claims. Alma Products, in turn, filed a motion for partial summary judgment, relying on the Sixth Circuit's ruling in Hi-Lex Controls. Because ERISA's statute of limitations does not bar Alma Products' claims, BCBSM's motion to dismiss will be granted in part. The motion will also be granted in part because ERISA preempts Alma Products' state-law claims. Finally, Alma Products' motion for partial summary judgment on its ERISA claims will be granted.
Alma Products is a "self-funded" customer of BCBSM, meaning that Alma Products pays the medical care costs of its employees from its own revenue (up to a stop-loss limit), instead of purchasing health insurance for them. Alma Products signed a contract with BCBSM in 1989, renewed annually, for BCBSM to act as third-party administrator for health care claims. The parties refer to their contract as the Administrative Services Contract (ASC). Under the ASC, BCBSM receives, processes, and pays health care claims from Alma Products' employees; provides Alma Products with stop-loss insurance coverage; and allows Alma Products' employees access to BCBSM's provider networks and their discounted rates. BCBSM submitted regular statements to Alma Products stating the amount paid for healthcare and charging various fees authorized by the ASC. Alma Products remitted payment based on those statements. Alma Products alleges that BCBSM substantially overstated the amounts owing by adding administrative charges that were never disclosed and that it never agreed to pay.
According to BCBSM, the "disputed fees" originated in the following manner. Starting in 1994, BCBSM was authorized to retain a portion of the discounts it negotiated with large hospitals to pay for maintenance of BCBSM's networks and to cover regulatory expenses. BCBSM developed and implemented this pricing arrangement for its entire ASC line of businesses.
Through the ASC, BCBSM provided companies (including Alma Products) with a bundle of services. The ASC informed the companies that their hospital claims cost would include these expenses. Accordingly, the companies paid hospital claims and all other ASC costs from its general assets.
BCBSM is uniquely able to negotiate these significant discounts with healthcare providers. Through these agreements with providers, BCBSM passes on substantial savings to its self-funded companies, although the ASCs do not entitle the companies to a particular discount.
The disputed fees are the difference between the cost of the claim and the amount BCBSM actually paid-which is generally the amount of the discount that BCBSM was able to negotiate.
According to Alma Products, those disputed fees were secretly added to the disclosed "Administrative Service Fee" that was specified in the Schedule A documents, which were executed annually. Alma Products asserts that the disputed fees were not disclosed in any of the period statements, reporting forms, or settlement reports that BCBSM supplied, but instead were buried within the number reported as "Amounts Bill" by health care providers, rather than itemized in areas reserved for reporting "costs" or "fees." In essence, Alma Products claims that BCBSM unilaterally decided how much extra ...