United States District Court, E.D. Michigan, Northern Division
ORDER DENYING MOTION TO DISMISS AND DIRECTING
L. LUDINGTON, UNITED STATES DISTRICT JUDGE
January 29, 2016, Plaintiffs Saginaw Chippewa Indian Tribe of
Michigan and the Welfare Benefit Plan
(“Plaintiffs” or “the Tribe” or
“SCIT”) brought suit against Blue Cross Blue
Shield of Michigan (“BCBSM”). The next month,
Plaintiffs filed an amended complaint. ECF No. 7.
Plaintiffs' allegations arose from BCBSM's
administration of group health plans for employees of the
Tribe and members of the Tribe. Plaintiffs alleged that BCBSM
was charging hidden fees, overstating the cost of medical
services, and failing to apply Medicare Like Rates
(“MLR”) for medical services performed. See
generally ECF No. 7.
April 25, 2016, BCBSM filed a motion to dismiss
Plaintiffs' first amended complaint. ECF No. 14. The
Court granted the motion and dismissed all counts except
those allegations within Counts I and II claiming that BCBSM
utilized hidden access fees. ECF No. 22. The Court concluded
that because the MLR was a responsibility imposed by law
extrinsic to the text of ERISA, BCBSM's failure to charge
MLR was not a violation of its fiduciary duty under ERISA.
April 10, 2017, Plaintiffs and BCBSM each filed separate
motions for partial summary judgment. ECF No. 79, 81. The
Court granted both motions in part, finding that two plans
existed: a Member Plan and an Employee Plan. ECF No. 112.
Counts I and II were dismissed to the extent they alleged
claims related to payment of hidden access fees for the
Member Plan or the Physicians Group Incentive Program.
Id. at 32. Counts I and II were granted in favor of
Plaintiffs to the extent they alleged claims related to
payment of hidden access fees for the Employee Plan.
appealed the order to the Sixth Circuit. ECF No. 114. The
Sixth Circuit affirmed the Court's judgment with the
exception of the dismissal of Plaintiffs' MLR claims. The
Sixth Circuit found that
[T]he Tribe does not assert that the MLR regulations impose
an additional duty on fiduciaries beyond what ERISA
itself requires. Instead, the Tribe bases its claim on the
text of ERISA itself, which requires fiduciaries to act
prudently and solely in the interest of the plan's
participants and beneficiaries. See 29 U.S.C. §
1104(a)(1). The Tribe alleges that BCBSM violated these
duties by paying more than necessary for the Tribe's
medical claims by failing to take advantage of the MLR
regulations. That is enough to state a claim under ERISA.
BCBSM presents an alternative reason for affirming the
district court's dismissal, arguing that its
administration of the Tribe's plan simply is not subject
to the MLR regulations. These regulations, BCBSM contends,
apply only to the expenditure of IHS funds and do not limit
the payment that hospitals must accept from a third-party
payor, such as BCBSM, which is not expending IHS funds.
Although BCBSM asserts that the Tribe's MLR claim
therefore fails as a matter of law, BCBSM's argument is
better understood as contending that the Tribe cannot show,
as a factual matter, that the regulations apply to its ERISA
plan. But since the Tribe has alleged that the BCBSM was
aware of the MLR regulations, that BCBSM failed to ensure
that the Tribe paid no more than MLR for MLR-eligible
services, and that all other conditions precedent to the MLR
claim were met, the Tribe has sufficiently pleaded that the
MLR regulations are applicable to BCBSM's administration
of the Tribe's ERISA plan. We emphasize that we express
no opinion on the ultimate merits of the Tribe's MLR
claim, and we hold only that it would be premature to dismiss
the Tribe's claim at this stage of the proceedings.
135 at 14-13 (emphasis in original).
January 4, 2019, a stipulated order was filed reinstating
Counts I, IV, and VI of Plaintiffs' Amended Complaint
“insofar as those Counts assert[ed] claims related to
MedicareLike Rates (‘MLR').” ECF No. 141.
Specifically, Plaintiffs acknowledge that the federal law
requiring MLR intended to regulate
“Medicare-participating hospitals” in order to
benefit “Tribe[s] or Tribal organization[s] carrying
out a CHS program of the IHS.” ECF No. 7 at 29.
Plaintiffs imply, but do not allege, that
“Medicare-participating hospitals” charged
Plaintiffs' groups more than MLRs and that BCBSM did not
enforce the MLR pricing requirement imposed on the hospitals.
alleges that BCBSM was a fiduciary pursuant to ERISA because
“it exercised discretionary authority and control over
management” of the Employee Plan and its assets as well
as responsibility over its administration. ECF No. 7 at 31
(citations omitted). Plaintiffs contend that BCBSM breached
its fiduciary duty by “[p]aying excess claim amounts to
Medicare-participating hospitals for services authorized by a
tribe or tribal organization carrying out a CHS
program.” Id. at 30.
IV alleges that Plaintiffs are “health care
insurers” as defined by the Michigan Health Care False
Claims Act (“HCFCA”). Id. at 35.
Plaintiffs contend that BCBSM violated this act by not
applying the MLR discount rate for medical services received
by Plaintiffs under the Member Plan. Id. Plaintiffs
reason that BCBSM's presentation of the illegal claim for
services by the Medicare-participating hospital also
constitutes BCBSM's presentation of a false claim.
VI alleges that BCBSM was in a fiduciary relationship with
Plaintiffs as defined by common law. Id. at 38.
Plaintiffs contend that BCBSM violated its fiduciary duty by
charging rates in excess of MLR. Plaintiffs reason that doing
so was not in the best interest of Plaintiffs under the
Member Plan. Id. at 38-39.
has now filed a motion to dismiss Plaintiffs' Amended
Complaint. ECF No. 142. It contends that Count I should be
dismissed because the statute of limitations for a claim of
breach of fiduciary duty under ERISA is six years.
Id. at 1-2. BCBSM asserts that any alleged fiduciary
duty would have arisen on the date the MLR regulations were
enacted, July 5, 2007. It reasons that the claims under Count
I (which it does not identify factually) are time-barred
because Plaintiffs did not file their complaint until 2016.
BCBSM next argues that Count IV should be dismissed because
Plaintiffs are not health care insurers as defined by the
Michigan Health Care False Claims Act. Id. at 2. It
also contends that BCBSM did not “present or cause to
be presented” any claims regulated by the HCFCA.
Id. It further argues that holding BCBSM liable
would be contrary to the intent of the HCFCA because
“the Legislature enacted the HCFCA to protect
BCBSM (a health care corporation) from unscrupulous
providers, not to impose liability upon BCBSM.”
Id. at 14 (emphasis in original). Lastly, BCBSM
argues that Count VI should be dismissed because the
Parties' Administrative Services Contract expressly
authorized BCBSM to charge Plaintiffs health care rates
“in accordance with BCBSM's standard operating
procedures” and does not address MLR. Id. at
address the Tribe's MLR claim and BCBSM's immediate
motion requires a more focused review of “…the
ultimate merits of the Tribe's MLR claim.”
Saginaw Chippewa Indian Tribe of Mich. v. Blue Cross Blue
Shield of Mich., 748 Fed.Appx. 12, 22 (6th Cir. 2018).
An overview of the Federal Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 and Michigan's
Health Care False Claims Act is also necessary.
Tribe “is a federally recognized Indian tribe, pursuant
to 25 U.S.C. [§] 1300k, with its Tribal Government
headquarters located in Mt. Pleasant, Michigan.” Am.
Compl. ¶ 3, ECF No. 7. BCBSM is a large health insurance
provider. BCBSM has provided insurance for the Tribe since
the 1990s. Sprague Decl. at 2, ECF No. 81, Ex. 12.
Tribe has two separate health insurance group policies
associated with BCBSM. In the 1990s, the Tribe purchased a
comprehensive health care benefits plan from BCBSM for its
employees. Sprague Decl. at 2. This arrangement was
fully-insured, meaning the Tribe paid a premium to BCBSM for
coverage and BCBSM in return had sole responsibility for
paying claims from the plan's participants. That Group
was identified as Group No. 52885. Id. When first
created, Group No. 52885 was limited to Tribal employees, and
the members of the group included individuals who were not
members of the Tribe. Id.
2002, the Tribe decided to provide health insurance coverage
for all members of the Tribe. Sprague Decl. at 2. Rather than
purchasing a fully-insured plan, like the plan for Tribe
employees, the Tribe chose a self-funded plan. This meant
that instead of paying insurance to BCBSM in return for
coverage, the Tribe directly paid the cost of health care
benefits and paid BCBSM a fee for administering the
program. To initiate the program, the Tribe and
BCBSM entered into an Administrative Services Contract
(“ASC”). See Employee Plan Sch. A, ECF
No. 81, Ex. 16. The ASC identified the group for tribal
members as Group No. 61672. BCBSM asserts that, during the
timeframe in question, the Member Plan contained between 91%
and 95% non-employee members. See Anal. Mem. Plan
Part., ECF No. 91, Ex. 2 (finding that the number of
non-employee members in the member plan ranged from 1858 to
2152 and the number of employee member participants ranged
from 100 to 218).
2004, the Tribe's contract with BCBSM for the
fully-insured employee plan expired. Sprague Decl. at 3.
Instead of renewing the fully-insured plan, the Tribe opted
to convert the Employee Plan to a self-funded arrangement by
signing an ASC. Id. The group continued to be
identified as Group No. 52885. See Member Plan Sch.
A, ECF No. 79, Ex. 6.
the Employee Plan and the Member Plan have existed during the
entire timeframe in question. Besides having different group
numbers, both plans were assigned different BCBSM customer
numbers. See Plan Profiles, ECF Nos. 79, Ex. 11, 12.
The two plans were created by different ASCs, have their own
Enrollment and Coverage Agreements, and issue separate
Quarterly and Annual Settlements. See Member Plan
Enrollment Agreement, ECF No. 79, Ex. 15; Employee Plan
Enrollment Agreement, ECF No. 79, Ex. 16; Sample Quarterly
and Annual Settlements, ECF No. 79, Ex. 17-20. The Tribe
purchased different levels of stop-loss insurance for each
plan. See Employee Plan Sch. A at 3 & Member
Plan Sch. A at 3. Both plans had different eligibility
requirements, benefits, co-pays, and deductibles.
See Sprague Dep. at 12, 17-18, ECF No. 79, Ex. 4;
Rangi Dep. at 118-19, ECF No. 79, Ex. 13; Pelcher Dep. at 11,
ECF No. 79, Ex. 14. The two plans were negotiated, reviewed,
and renewed separately by the Tribe. See Sprague
Dep. at 19, 86, 151, Luke Dep. at 114, ECF No. 79, Ex. 4,
Harvey Dep. at 105, ECF No. 79, Ex. 10.
groups are also funded from different sources. The Member
Plan was originally funded by the Tribe's Government
Trust and is currently funded by the Gaming Trust. Reger Dep.
at 11, ECF No. 79, Ex. 21. When in use, the Government Trust
funded all government programs aimed at tribal members and
was financed by revenues from the Tribe's casino.
Id. at 12. The Gaming Trust is also “generated
from the revenue from the resort.” Id. at 16.
As explained by a tribe employer, “[i]t's the cash
excess of flow in regards to depreciation.”
Id. Interest on that money is used, among other
things, to pay for the Member Plan expenses. Id. The
Employee Plan, by contrast, is funded by the Fringe Trust,
which is used for employee expenses. Id. at 9,
The two plans are funded from different trusts expressly
because one is for employees of the Tribe who are not all
members of the Tribe and the other is solely for members of
the Tribe. Id. at 17.
these differences between the plans, both the Tribe and BCBSM
treated the plans identically in a number of ways. Both
groups were primarily administered for the Tribe by the same
person: Connie Sprague. Sprague Dep. at 9. Sprague treated
the two plans as one for most administrative purposes.
See Id. at 12-16, 151. When the Tribe sought bids
for medical coverage, it solicited bids for the two groups
simultaneously. Id. at 42-43. BCBSM's account
representatives and managers always conducted meetings with
the Tribe and executed documents regarding the groups at the
same time. Cronkright Dep. at 26-27, 55-57, ECF No. 81, Ex.
13; Luke Dep. at 43- 44; Harvey Dep. at 94. Cameron
Cronkright, BCBSM's account representative for the Tribe,
testified that he never remembered a meeting where only one
of the plans was discussed. Cronkright Dep. at 57-58.
plan is memorialized in its own ASC. The ASCs are nearly
identical. The ASCs explain the Parties' general
responsibilities and provide:
BCBSM shall administer Enrollees' health care Coverage(s)
in accordance with BCBSM's standard operating procedures
for comparable coverage(s) offered under a BCBSM underwritten
program, any operating manual provided to the Group, and this
Contract. In the event of any conflict between this Contract
and such standard operating procedures, this Contract
The responsibilities of BCBSM pursuant to this Contract are
limited to providing administrative services for the
processing and payment of claims. BCBSM shall have no
responsibility for: the failure of the Group to meet its
financial obligations: to advise Enrollees of the benefits
provided; and to advise Enrollees that Coverage has been
terminated for any reason, including the failure to make any
payments when due.
If the Group's health care program is subject to the
Employee Retirement Income Security Act of 1974 (ERISA), it
is understood and agreed that BCBSM is neither the Plan
Administrator, the Plan Sponsor, nor a named fiduciary of the
Group's health care program under ERISA. The provisions
of this paragraph, however, shall not release BCBSM from any
other responsibilities it may have under ERISA.
Services Contract at 2-3, ECF No. 79-2, 79-3.
The ASCs also address resolution of the disputes between the
The Group will, within sixty (60) days of receipt of a claims
listing, notify BCBSM in writing with appropriate
documentation of any Disputed Claim(s) and will, upon
request, execute any documents required for collection of
amounts that third parties owe. BCBSM will investigate and
within a reasonable time, respond to such Claim(s).
1. following the recovery of an amount from a third party,
due to Worker's Compensation or other
provider/program/party responsibility or
2. following BCBSM's determination that any other
disputed amount is not the Group's liability or that an
amount shown on a claims listing and invoice is incorrect,
credit the recovered or corrected amount, reduced by any Stop
Loss payments relating to such Claim(s) or any amounts
currently overdue, on a subsequent monthly invoice.
BCBSM, as administrator under this Contract, is subrogated to
all rights of the Group/Enrollees relating to Disputed
Claim(s) but is not obligated to institute or become involved
in any litigation concerning such Claim(s).
Id. at 3-4.
ASCs also contain a section entitled “Group
Audits” which granted the Tribe the option to conduct
an audit once every twelve months of the expenses charged by
BCBSM. Id. The ASCs specifically state that
“[b]oth parties acknowledge that claims with incurred
dates over two (2) years old may be more costly to retrieve
and that it may not be possible to recover overpayments for
these claims.” Id. It later states that
“BCBSM shall have no obligation to make any payments to
the Group unless there has been a recovery from the provider,
Enrollee, or third-party carrier as applicable.”