L.P. v. Blue Cross and Blue Shield of Minnesota

Background

L.P., through her father, J.P., sought benefits under a self-funded employee benefits plan sponsored by Bolton & Menk, Inc. and administered by BCBSM, Inc., doing business as Blue Cross and Blue Shield of Minnesota. L.P. received inpatient treatment at Change Academy, an out-of-network, nonparticipating provider, from June 30, 2016, through November 6, 2017. J.P. paid the provider’s bills and sought reimbursement. Blue Cross paid $83,554.55 toward some claims, denied others, and later determined that none of the claims were covered.

L.P. alleged that the plan’s definition of a residential behavioral health treatment facility violated the Mental Health Parity and Addiction Equity Act because it imposed restrictions on residential mental-health facilities that were not imposed similarly on skilled nursing facilities. She sought benefits and other relief under the Employee Retirement Income Security Act (ERISA), and she sought to represent a nationwide class. No class had been certified. Blue Cross also asserted a counterclaim against J.P. seeking recovery of alleged overpayments.

Earlier Ruling and Remand

The court previously adopted a magistrate judge’s recommendation that Blue Cross’s summary-judgment motion be denied and L.P.’s summary-judgment motion be granted in part and denied in part. The earlier ruling held that the plan definition violated the Parity Act because it excluded services at facilities providing more than incidental educational or recreational services, while the plan did not impose a comparable facility restriction on skilled nursing facilities. The court remanded the claims to the plan administrator to consider additional evidence about physician oversight, allow L.P. to resubmit properly coded claims, and reprocess them. The court also found Blue Cross’s overpayment counterclaim not ripe at that time.

On remand, L.P. proposed several ways to calculate benefits, including using the bundled daily charge, subtracting educational costs, or adding together individual services. Blue Cross rejected those approaches. It maintained that the claims included noncovered education and recreational therapy, charges for days L.P. was absent, and amounts greater than the amount J.P. actually paid. Blue Cross estimated that benefits would be $32,028.16 if certain reductions were applied, but it initially refused to reprocess the claims because it believed additional information was necessary.

Judicial Review of Benefits Decision

The court reviewed Blue Cross’s benefits decision for abuse of discretion because the plan gave Blue Cross discretionary authority to administer and pay benefits. The court held that Blue Cross did not abuse its discretion by rejecting L.P.’s proposed methods for calculating benefits. The plan excluded educational services and recreational therapy, and the court found substantial evidence supporting Blue Cross’s conclusion that Change Academy’s bundled charges included significant amounts of those services. The court also held that Blue Cross reasonably used the $409 daily amount J.P. paid rather than higher amounts billed to Blue Cross, and reasonably accounted for days when L.P. was not present.

The court also held that Blue Cross did not abuse its discretion by rejecting L.P.’s proposed 19-percent deduction for education because L.P. had not supplied a method for removing the recreational-therapy costs. Nor did Blue Cross abuse its discretion by rejecting L.P.’s proposal to add individual services using outpatient codes; the parties agreed that method was incorrect, and it was not tied to the amount actually paid.

However, the court held that Blue Cross abused its discretion by refusing to pay any part of the claim. The record showed that L.P. received at least some covered services, including room and board and certain therapy. Using the $409 daily charge, subtracting $79.59 for education and $77.83 for estimated recreational therapy, and applying Blue Cross’s 30-percent reimbursement rate for nonparticipating providers, the court accepted Blue Cross’s estimate of $32,028.16 in benefits. Because Blue Cross had already paid $83,554.55, the court entered judgment against Blue Cross for $0.

Injunction, Fees, and Interest

The court denied L.P.’s request for an injunction barring Blue Cross from using the disputed facility definition. L.P. had not shown the required grounds for permanent injunctive relief, including likely irreparable harm, and she offered no evidence that she might again need treatment at a facility providing substantial high-school educational services. The court also said that her request for attorney’s fees and prejudgment interest was premature. It stated that fees should be sought after entry of judgment and that prejudgment interest was inappropriate because Blue Cross owed no additional benefits.

Counterclaim

The court held that Blue Cross’s counterclaim, as pleaded in this case, sought to recover money from J.P.’s general assets. Under the Supreme Court’s interpretation of ERISA in Montanile, an ERISA fiduciary may not enforce an equitable lien against a defendant’s general assets. The court therefore granted summary judgment against Blue Cross on the counterclaim; the final order states that the counterclaim was denied. The court noted that a claim concerning Blue Cross’s ability to offset amounts owed on one claim against amounts owed on another could be addressed in a companion case, but it interpreted this lawsuit’s counterclaim as seeking only the barred recovery from J.P.’s general assets.

Reconsideration Request and Disposition

Blue Cross asked for permission to file a motion for reconsideration of the earlier Parity Act ruling, offering evidence and arguments about separately billed covered services and skilled nursing facilities. Judge Michael J. Davis denied that request because Blue Cross could have presented the evidence earlier, including before the remand, and allowing it later would have prejudiced L.P. after the remand proceedings.

The court ordered that L.P.’s Motion for Judicial Review Following Remand, Entry of Judgment, and Attorney’s Fees was granted in part and denied in part. L.P. was entitled to $32,028.16 in benefits, but judgment was entered against Blue Cross for $0 because of its prior payments. Blue Cross’s counterclaim was denied, and its Letter Request for Permission to File Motion for Reconsideration was denied.