J.P. v. BCBSM, Inc.

Background

J.P. and M.K. sued BCBSM, Inc., doing business as Blue Cross and Blue Shield of Minnesota, under the Employee Retirement Income Security Act (ERISA). Their amended complaint asserted a claim to enforce the plan under 29 U.S.C. § 1132(a)(1)(B) and a claim for failure to provide a full and fair review under 29 U.S.C. § 1132(a)(3).

J.P. was covered by an ERISA health-benefit plan that Bolton & Menk, Inc. offered to its employees and that Blue Cross administered. M.K. and L.P. were also covered as beneficiaries. The plan’s summary plan description said: “Payments made in error or overpayments may be recovered by the Claims Administrator as provided by law.” Blue Cross used an automated process under which, after identifying an overpayment and sending repayment requests, it could apply later payments to the alleged overpayment instead of sending those payments to the subscriber.

J.P. paid $189,477.74 for services his daughter received at Change Academy, a nonparticipating provider. Blue Cross initially approved $83,554.55, then later determined that the services were not covered and requested repayment. When J.P. did not repay the amount, Blue Cross applied payments for later behavioral-health claims against the alleged overpayment. Those later services were provided by Helene Timpone, a nonparticipating provider. The record stated that J.P. and his family were in Minnesota, Timpone was in Arizona, and Timpone was not licensed to practice in either state.

The plaintiffs sought certification of a class consisting of people covered under any ERISA-governed health-benefit plan insured or administered by Blue Cross against whom Blue Cross had offset covered charges based on the same or similar “Payments Made in Error” language. Blue Cross identified 221 people in 84 different ERISA plans and stated that it had withheld $275,965.00 from later payments out of $378,841.78 in alleged overpayments.

Rulings on Evidence

The court denied the plaintiffs’ request to strike declarations from Blue Cross witnesses Stacey Rice, Eric Salkowski, Thomas E. Bazzarre, IV, Amy Johnson, and Robert Jasper because those witnesses had not been identified in Blue Cross’s initial disclosures. The court found that the plan-document custodians’ declarations concerned documents that would necessarily be relevant and admissible if the class were certified, that Bazzarre’s information had been disclosed through a deposition and his role as a corporate designee, and that Salkowski’s declaration was substantially justified because Blue Cross learned of the licensing issue during later depositions.

Class-Certification Analysis

Under Federal Rule of Civil Procedure 23, a proposed class must satisfy requirements including numerosity, commonality, typicality, and adequacy. The court found that numerosity was satisfied because the proposed class included more than 200 people. It did not reach the additional requirements under Rule 23(b) because the plaintiffs failed to satisfy Rule 23(a).

The court held that the plaintiffs failed to show commonality. Whether Blue Cross had authority to offset payments depended on the governing plan documents. The proposed class members belonged to 84 plans, and some plans had “wrap” documents containing different or additional language. The court specifically noted relevant provisions in the Medtronic, Cargill, and Travelers plans. It concluded that deciding the claims would require individualized review of the documents for each plan, rather than resolving a common question for the class in one decision. The court also rejected the plaintiffs’ proposal to remove members of the Medtronic, Cargill, and Travelers plans because the plaintiffs had not shown that the remaining plans had common controlling language.

The court also held that the plaintiffs could not show typicality or adequacy because they faced major, individualized defenses. First, Blue Cross argued that the plaintiffs might not be members of the proposed class because the Timpone services might not have been “covered” under the plan’s licensing and coverage provisions. The court recognized that Blue Cross had initially treated the claims as covered for purposes of payment but held that the plaintiffs’ actual class membership could still depend on whether the services were covered under the plan.

Second, the court found a substantial and fact-intensive issue about exhaustion of administrative remedies. The plan required claimants to exhaust its procedures before filing suit. Although an earlier ruling found that the plaintiffs had adequately pleaded exhaustion because the explanations of benefits might not have sufficiently explained the offset, that ruling did not prevent Blue Cross from raising exhaustion again on a fuller record. The court stated that the parties’ written and telephone communications created substantial evidence relevant to whether J.P. had received adequate notice and a fair opportunity for review.

Finally, the court identified possible adequacy concerns arising from a parallel earlier lawsuit involving L.P. and the same Change Academy overpayment dispute. The court reasoned that the plaintiffs’ incentives could differ from those of class members seeking recovery of allegedly improper offsets, depending on whether Blue Cross returned the money or prevailed on its claim to recover the alleged overpayment.

Disposition

The court denied the plaintiffs’ Motion for Class Certification. It did not decide the underlying ERISA claims or whether Blue Cross was ultimately entitled to the offsets. The court’s order states: “Plaintiffs’ Motion for Class Certification [Docket No. 74] is DENIED.”