Harris Corporation v. Humana Health Insurance , 253 F.3d 598 ( 2001 )

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
JUNE 6, 2001
THOMAS K. KAHN
No. 99-14906 CLERK
________________________
D. C. Docket No. 98-00470-CIV-ORL-22A
HARRIS CORPORATION,
Plaintiff-Appellant,
Cross-Appellee,
versus
HUMANA HEALTH INSURANCE
COMPANY OF FLORIDA, INC., a Florida
corporation,
Defendant-Appellee,
Cross-Appellant.
________________________
Appeals from the United States District Court
for the Middle District of Florida
_________________________
(June 6, 2001)
Before HULL, RONEY and GOODWIN*, Circuit Judges.
*
Honorable Alfred T. Goodwin, U.S. Circuit Judge for the Ninth Circuit, sitting by
designation.
PER CURIAM:
Two health insurance plans provided coverage for the same individual. The
district court held that the plan of the Harris Corporation (“Harris”) was primary,
and not entitled to recover its expenditures on behalf of that individual from the
plan of Humana Health Insurance Company of Florida, Inc. (“Humana”) . After
review, we affirm.
I. BACKGROUND
Margaret Shallenberger, a Harris employee, enrolled in the Harris plan on
November 4, 1991. At that time, she was already enrolled in the Humana plan as
the wife of an employee of the City of Ft. Lauderdale, whose coverage under
Humana had commenced in 1990. On May 23, 1992, Shallenberger became ill and
qualified for and elected to purchase long-term disability benefits in connection
with her Harris employment. On July 1, 1994, she became entitled to Medicare A
and B coverage based upon her disability and illness. She died on December 4,
1995.
From the time Shallenberger became eligible for Medicare coverage in July
1994 through her death in December 1995, Harris paid approximately $780,
267.88 in benefits on her behalf and recovered approximately $13,643.99 from
2
various providers.1 Harris first submitted a claim for reimbursement of these
expenditures to Medicare, which declined to pay and noted Shallenberger’s
dependent coverage through Humana. Thereafter, Harris submitted a claim for
reimbursement to Humana, which Humana declined to pay, and this litigation
commenced.
Harris and Humana each had specific language in their respective health
plans intended to define the priority of benefits when benefits appeared to be
available under two or more plans. The Harris plan did not contain an “internal
coordination of benefits” paragraph, but contained an explanation of
“nonduplication.” The nonduplication provision did not deal with the situation of a
Harris covered employee who was also entitled to benefits under a plan in which
her spouse was an employee beneficiary.
The Humana plan, however, contained a “Coordination of Benefits
Provision,” which included: “1. A plan which does not contain a coordination of
benefits provision is considered to determine its benefits before a plan which does
contain a coordination of benefits provision.” Thus, under this language, the
1
Although it appears that Harris also paid all benefits on behalf of Shallenberger after
she became ill in February 1992 and before her Medicare eligibility in July 1994, Harris does not
seek reimbursement from Humana of any amounts paid prior to Shallenberger’s Medicare
eligibility in July 1994.
3
Humana plan would have the advantage if a dispute arises with another plan not
having a “COB” provision.
In interpreting the relevant plan language, the district court noted that, “as
regards Harris employees, there is nothing in the Harris plan that states that other
plans (such as Humana’s) are primary under any circumstances.” After concluding
that the Harris plan contained no “coordination of benefits provision,” and that the
Humana plan did contain such a provision, the court held that the Harris plan is
primary. Accordingly, the district court granted summary judgment in favor of
Humana and entered a take nothing final judgment against Harris.
On appeal, Harris does not challenge the district court’s findings with
respect to the plain language of the above provisions in the two insurance plans
and the priority of payment established by those provisions. Instead, Harris
contends that the Medicare Secondary Payer statute, 42 U.S.C. § 1395y(b),
operates to reverse the priority of payment created by those provisions. As such,
Harris contends that the district court erred in dismissing count one of its amended
complaint for double damages against Humana under the Medicare Secondary
Payer statute, and in granting summary judgment in favor of Humana based upon
4
the priority created by the plan language without regard to the Medicare Secondary
Payer statute.2
II. DISCUSSION
On appeal, Harris claims that the Medicare Secondary Payer statute makes
Humana primarily liable for the costs of Shallenberger’s health care and entitles
Harris to double damages from Humana arising out of its expenditures on
Shallenberger’s behalf. Thus, Harris contends that the district court erred with
regard to the Medicare Secondary Payer statute in: (1) dismissing count one of its
amended complaint and (2) finding Humana secondary to Harris and granting
summary judgment in favor of Humana.
A. The Medicare Secondary Payer Statute
Prior to 1981, Medicare coverage was generally primary to coverage under
an employee health benefit plan. Baptist Memorial Hosp. v. Pan American Life
Ins. Co., 45 F.3d 992, 996 (6th Cir. 1995). “As a cost-cutting measure, however,
Congress eventually enacted a series of amendments designed to make Medicare a
2
The dismissal of count one of Harris’s amended complaint is reviewed by this Court de
novo. See Galindo v. ARI Mutual Ins. Co., 203 F.3d 771, 774 (11th Cir. 2000). This Court also
reviews de novo a district court’s grant of summary judgment, applying the same standards as
the district court. Harris v. H&W Contracting Co., 102 F.3d 516, 518 (11th Cir. 1996). “The
moving party has the burden of demonstrating that there is no genuine issue as to any material
fact, and a summary judgment is to be entered if the evidence is such that a reasonable jury could
find only for the moving party.” Hilburn v. Murata Elec. North America, Inc., 181 F.3d 1220,
1225 (11th Cir. 1999).
5
‘secondary’ payer with respect to such plans. These amendments have been
codified as 42 U.S.C. § 1395y(b), which is referred to as the ‘Medicare as
Secondary Payer’ (‘MSP’) statute.” Id. (quoting Health Ins. Ass’n of America v.
Shalala, 23 F.3d 412, 414 (D.C. Cir. 1994)); see also Perry v. United Food and
Commerical Workers District Unions, 64 F.3d 238, 243 (6th Cir. 1995)(“In the
MSP statute Congress made Medicare coverage secondary to any coverage
provided by private insurance programs. It did so in order to lower Medicare
costs.”).
In order to make Medicare secondary to such private insurance plans, the
MSP statute provides that a group health plan may not “take into account” the fact
that an individual or that individual’s spouse, who is covered by the plan by virtue
of the individual’s current employment status, is entitled to benefits under
Medicare in covering claims. 42 U.S.C. § 1395y(b)(1)(A)(i)(I). Specifically, 42
U.S.C. § 1395y(b)(1)(A)(i)(I) provides:
A group health plan –
(I) may not take into account that an individual (or the
individual’s spouse) who is covered under the plan by virtue of the
individual’s current employment status with an employer is entitled to
benefits under this subchapter under section 426(a) of this title, ...
42 U.S.C. § 1395y(b)(1)(A)(i)(I). Thus, the MSP statute prohibits private insurers
providing coverage as a result of an individual’s current employment status from
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making Medicare primary to its coverage for that individual or that individual’s
spouse. Instead, Medicare is the “secondary payer” with respect to claims by an
individual who is entitled to benefits under Medicare and also covered by private
insurance as a result of the current employment status of that individual or that
individual’s spouse. The MSP statute contains no similar provision with respect to
private insurance plans covering such individuals for reasons other than current
employment status. Thus, private plans covering such individuals for reasons other
than current employment status of that individual or that individual’s spouse may
make their coverage secondary to Medicare when those individuals are
simultaneously eligible for Medicare.
The MSP statute provides a private cause of action for double damages
against insurance carriers covering individuals by virtue of such current
employment status that fail to provide for payment primary to Medicare consistent
with the statute’s mandate. 42 U.S.C. § 1395y(b)(3)(A). Specifically, the statute
provides:
(A) Private cause of action
There is established a private cause of action for damages
(which shall be in an amount double the amount otherwise provided)
in the case of a primary plan which fails to provide for primary
payment (or appropriate reimbursement) in accordance with such
paragraphs (1) and (2)(A).
7
42 U.S.C. § 1395y(b)(3)(A); See also Baptist Memorial Hosp., 45 F.3d at 998(“Where a hospitalization plan that is primary to Medicare under the MSP statute
fails to provide for primary payment in accordance with the statute, a private cause
of action exists for damages ‘in an amount double the amount otherwise
provided.’”).
B. Private Insurers Vis-A-Vis Medicare
We first apply the MSP statute to each private insurer vis-a-vis Medicare.
Because Shallenberger’s coverage through Humana after July 1, 1994, when she
became eligible for Medicare, was the result of her husband’s then current
employment status with the City of Ft. Lauderdale, the MSP statute makes
Humana’s coverage primary to Medicare. Humana does not dispute its primary
status vis-a-vis Medicare.
In contrast, because Harris covered Shallenberger during the same time
period as an inactive former employee and not as a result of her current
employment status (or that of her spouse), the MSP statute did not prevent Harris
from making its coverage secondary to Medicare or, in other words, in making
Medicare the primary as opposed to secondary payer of her benefits vis-a-vis
Harris. The parties do not appear to dispute Harris’s claims that its plan contains a
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provision to this effect. Thus, after Shallenberger became eligible for Medicare,
Harris became secondary vis-a-vis Medicare.
These priorities of each insurer vis-a-vis Medicare appear clear under the
MSP statute.
C. Parties’ Contentions
The issue in this case, however, addresses what effect, if any, the MSP
statute has on reordering the priorities of Harris vis-a-vis Humana under the factual
circumstances of this case. Harris contends the MSP statute not only reorders the
priorities between private insurers and Medicare, but also between private plans
once a covered individual becomes eligible for Medicare. Specifically, Harris
argues that Humana became the primary payer as between the two private
insurance carriers by virtue of the MSP statute because the statute requires Humana
to pay in advance of Medicare, but allows Harris to pay after Medicare. Thus,
Harris argues that it may maintain a private cause of action for double damages
against Humana for its failure to reimburse Harris according to its primary status
under the MSP statute.
Humana responds that the MSP statute was designed to save money for the
Medicare program by establishing the priority of payment as between Medicare
and private insurance carriers under certain circumstances. Humana claims that the
9
MSP statute simply does not apply to determine the relative payment priority as
between private insurance plans only and that the coordination of benefits terms of
the plan documents control the priority of liability as between private carriers.
Where Humana has refused to pay because of the terms of Harris’s and Humana’s
private plans and has not refused to pay Shallenberger’s medical expenses as a
result of her Medicare eligibility, Humana argues that the statute does not affect its
priority with respect to Harris and that Harris may not bring a private cause of
action against it under the MSP statute.
D. The Sixth Circuit Decisions
In accepting Humana’s argument in this regard, the district court relied on
two Sixth Circuit cases directly on point. In Baptist Memorial Hosp. v. Pan
American Life Ins. Co., 45 F.3d 992 (6th Cir. 1995), Horace Thomas, a retired
postal worker, was simultaneously covered for hospitalization by three separate
entities. Blue Cross/Blue Shield provided coverage in connection with Thomas’s
former federal employment. Thomas was also covered by Pan-American as a
dependent of his wife by virtue of her current employment. Id. at 993. Finally,
Thomas was enrolled in Medicare. Id.After an automobile accident, Thomas was hospitalized for several months,
incurring a hospital bill of almost $600,000. Blue Cross/Blue Shield refused to pay
10
the bill, claiming that Pan-American’s dependent coverage was primary. Pan-
American likewise refused to pay the bill, claiming that Blue Cross/Blue Shield
was the primary payer as Thomas’s former employer.
The hospital brought suit against both Blue Cross/Blue Shield and Pan-
American, seeking a determination as to which insurer was primary. Id. Medicare
was not joined as a party and the hospital apparently never demanded payment
from Medicare. Id. Although the coordination of benefits provisions of both plans
demonstrated that the Blue Cross/Blue Shield coverage was primary to the Pan-
American coverage, the district court entered summary judgment against Pan-
American. The district court found that Pan-American became primary to Blue
Cross/Blue Shield by virtue of the MSP statute. While Pan-American was not
permitted to make Medicare primary to its coverage for Thomas because his
coverage was based upon his wife’s current employment status, Blue Cross/Blue
Shield was permitted to do so and had done so. Based upon this priority under the
MSP statute, the district court found Pan-American primarily responsible for
Thomas’s hospital bill.
On appeal, the Sixth Circuit reversed, finding that the MSP statute had no
impact on the priority as between solely private insurers and did not trump the plan
language adopted by the private insurers as to priority:
11
What difference does the MSP statute make as far as priority of
payment obligations between Blue Cross and Pan-Am is concerned?
None at all, in our view, on the facts presented here. In precluding
Pan-Am from making its coverage secondary to the coverage provided
by Medicare, Congress did not purport to preclude either Pan-Am or
Blue Cross from making the Pan-Am coverage secondary to the
coverage provided by Blue Cross.
* * *
Medicare has no dog in this particular fight. Medicare has never been
asked to pay anything, as far as we know, and has not been made a
party to the lawsuit. Congress manifested no interest whatever in who
would pay first as between private insurance carriers such as Pan-Am
and Blue Cross. The sole interest of Congress, as far as the statute
discloses, was to provide that Medicare would not have to pay ahead
of private carriers in certain situations. Where that interest is not
affected – and it does not seem to be here – we see no reason why the
pertinent contractual provisions should not be enforced in accordance
with their terms.
Baptist Memorial, 45 F.3d at 996 & 998 (emphasis in original).
In holding that the MSP statute did not affect the private contractual
provisions adopted by the carriers, the Sixth Circuit noted that the National
Association of Insurance Commissioners had developed a coordination of benefits
rule specifically designed to adjust the private priorities to take into account the
rules of the MSP statute regarding the primary status of certain plans vis-a-vis
Medicare. Id. That provision operates to resolve the circularity involved where a
primary payer under the coordination of benefits provisions is secondary to
Medicare under the MSP statute and the secondary payer under the coordination of
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benefits provisions is primary to Medicare under the statute. Id. It does so by
reversing the private order of priority so that the payer primary to Medicare under
the MSP statute is also primary to the other private carrier under the private
coordination of benefits provisions. Id. Where Blue Cross had not adopted such a
provision and where the coordination of benefits provisions in place made Blue
Cross primary, the court held that the MSP statute did not reverse the order of
priority and did not provide a private cause of action to recover double damages.
Id.The Sixth Circuit revisited the impact of the MSP statute on the priority of
payment between private insurance carriers in Perry v. United Food and
Commerical Workers District Unions, 64 F.3d 238 (1995). As in Baptist
Memorial, the insured individual in Perry was eligible for Medicare benefits as a
result of his disability and was simultaneously insured by two separate private
insurance plans: (1) by the insurance plan of his former employer as a former
employee and (2) by the insurance plan of his wife’s current employer as a
dependent. After the insured’s large hospital bill went unpaid, the executor of the
insured’s estate filed suit in state court against both private insurers, Medicare, and
the hospital. After the case was removed to federal court, both the hospital and
Medicare were dismissed as defendants.
13
As in Baptist Memorial, the district court entered summary judgment against
the insurance plan sponsored by the wife’s employer despite the fact that the
coordination of benefits provisions showed that the insurance plan of the insured’s
former employer was the primary payer. The district court found that the MSP
statute: (1) made the wife’s employer’s plan primary because it was primary to
Medicare under that statute, and (2) authorized a private cause of action against
that plan for double damages. Id. at 241.
Again, the Sixth Circuit reversed. Relying on Baptist Memorial, the court
held that the MSP statute does not affect the “contractual regulations under which
one insurer’s coverage is secondary to that of another” “when no claim is being
asserted against Medicare.” Id. at 244. The court noted that the wife’s insurer
“never contended that Medicare was the primary payer” and even conceded that its
obligation was primary to that of Medicare. Id. at 243. Further, the court noted
that the plan denied payment of the expenses only because it concluded that the
insured’s estate was not legally obligated to pay the hospital bill and not for any
reason related to the insured’s Medicare coverage. Id. at 244. Thus, the court held
that where the fiscal integrity of the Medicare program was not jeopardized, the
MSP statute had no application to the obligation of the wife’s employer’s insurer to
pay the hospital bill at issue. Id.14
E. Analysis
We find the thorough analysis of the Sixth Circuit regarding the intent and
limited operation of the Medicare Secondary Payer statute persuasive, and adopt
the reasoning set forth in Baptist Memorial Hosp. v. Pan American Life Ins. Co.,
45 F.3d 992 (6th Cir. 1995) and Perry v. United Food and Commercial Workers
District Unions, 64 F.3d 238 (6th Cir. 1995) with respect to the applicability of the
MSP statute to coverage disputes solely between private insurers.
Both Sixth Circuit cases are directly on point with respect to the facts of this
case. As of July 1, 1994, Shallenberger was eligible to receive Medicare benefits
as a result of her disability. Shallenberger was also covered by Harris between
July 1, 1994 and her death in December 1995 based on her status as a former
employee of Harris. Thus, Harris was entitled to make its benefits secondary to
Medicare under the MSP statute. During the same time period, Shallenberger was
covered as a dependent by Humana based on her husband’s current employment
status with the City of Ft. Lauderdale. Thus, Humana was primary to Medicare
under the MSP statute. Harris has sued Humana claiming that Humana is
responsible for Shallenberger’s medical expenses as a result of its primary status
vis-a-vis Medicare.
15
As in Baptist Memorial, Medicare is not a party to this case and the fiscal
integrity of the Medicare program is not at risk. The instant suit is between solely
private insurance plans and involves their priority vis-a-vis one another in
connection with the payment of Shallenberger’s medical expenses. As in Perry,
Humana has never claimed that Medicare is the primary payer of Shallenberger’s
medical expenses in contravention of the priority created between it and Medicare
under the MSP statute. Indeed, Humana has denied coverage based upon legal and
equitable defenses to Harris’s claim for reimbursement unrelated to
Shallenberger’s Medicare eligibility.3 Because it is only the priority as between
these two private insurance plans that is at issue in this case, the respective priority
of the two insurers is not affected by the MSP statute. While Harris was free to
alter the coordination of benefits of its plan to align the priority of its liability vis-
a-vis Medicare with the priority of its liability vis-a-vis other private insurance
plans, the MSP statute was not enacted to address such private priorities and does
3
In addition to relying on its coordination of benefits provision to deny coverage,
Humana also argues that Harris cannot obtain reimbursement from Humana because: (1) Harris’s
plan documents do not allow it to act as subrogee for Shallenberger for claims arising out of a
disabling illness; (2) Harris is estopped from denying primary coverage after informing
Shallenberger that it would continue to be primary to Medicare through 1995; and (3) Harris’s
notice to Humana of Shallenberger’s claims almost one year after her death was untimely under
Humana’s plan documents.
16
not operate to reprioritize the obligations of private insurance plans where the
liability of Medicare is not at issue.
Contrary to Harris’s argument that the Sixth Circuit cases are wrongly
decided, the reasoning of both cases appears thorough and persuasive.4 Harris does
not dispute that the MSP statute was designed only to lower Medicare costs.
Where Medicare’s liability to pay health care expenses is not at issue, it follows
that the statute would not operate to rearrange the priority of payment as between
purely private insurance plans.
Furthermore, this conclusion does not render the private cause of action in
the MSP statute superfluous. Indeed, both Baptist Memorial and Perry
acknowledged the existence of such a private right of action in cases involving the
failure of an insurance plan to make its coverage primary to Medicare as required
by the statute. See Baptist Memorial Hosp., 45 F.3d at 998 (“Where a
hospitalization plan that is primary to Medicare under the MSP statute fails to
4
Harris also urges the Court to adopt the holding of a New York State case rejecting the
Sixth Circuit decisions regarding the MSP statute. See Cooperative Health Insurance Fund v.
Blue Cross and Blue Shield, 654 N.Y.S.2d 895 (N.Y. App. Div. 1997). First, the facts of that
case appear slightly different from the facts of Baptist Memorial and Perry which are on all fours
with the facts in the instant case. Even assuming that the New York case is indistinguishable
from the instant case, the New York case summarily rejects the Sixth Circuit holdings regarding
the inapplicability of the MSP statute to private payer disputes without any analysis. This
summary conclusion by one state court does not appear to provide a sound basis for rejecting the
thorough and persuasive analysis of the Sixth Circuit cases.
17
provide for primary payment in accordance with the statute, a private cause of
action exists for damages ‘in an amount double the amount otherwise provided.’”);
Perry, 64 F.3d at 244 (“Although § 1395y(b)(3)(A) provides for ‘a private cause of
action’ for double damages when a primary payer does not pay benefits in
accordance with the MSP statute’s provisions, this language is irrelevant outside
the scope of the MSP statute.”).5 For example, if Humana had been
Shallenberger’s only private insurer and had denied a timely claim for benefits
based solely on her eligibility for Medicare, it appears that the MSP statute would
afford Shallenberger a private cause of action for double damages against Humana.
Further, it appears that Harris could assert a private cause of action for double
damages against Humana acting on behalf of Shallenberger if Humana was
primary to Harris under the private coordination of benefits provisions, Humana
asserted no coverage defenses to Shallenberger’s claims, and Humana refused to
5
Harris also argues that the district court’s finding that the MSP statute applies only
when the “fiscal integrity” of the Medicare program is jeopardized “flies in the face of the plain
language of the statute – which contains no such limitation.” The plain language of the statutory
provision creating the private cause of action does expressly state that the cause of action exists
when a plan fails to provide for primary payment “in accordance” with the Medicare as
Secondary Payer provisions. Because those provisions dictate only the liability of private
insurance plans relative to the Medicare program, it appears completely consistent with the plain
language of the provision creating the private cause of action that such a cause of action exists
only where a plan has failed properly to provide for its liability vis-a-vis Medicare. In all such
cases, the fiscal integrity of the Medicare program that the MSP statute was designed to protect,
would be at issue. Thus, the finding of the district court and the Sixth Circuit that the fiscal
integrity of the Medicare program must be in jeopardy in order for the private cause of action to
exist is not contrary to the plain language of the statute.
18
pay Shallenberger’s medical expenses solely based on her eligibility for Medicare.
A private cause of action for double damages in these contexts serves Congress’
interest in the fiscal integrity of the Medicare program by deterring private insurers
primary to Medicare under the statute from attempting to lay medical costs at the
government’s doorstep.
Under the particular facts of this case, however, the MSP statute does not
appear to allow Harris to assert a private cause of action against Humana for its
failure to reimburse it for Shallenberger’s medical expenses. Humana has never
claimed that it was not required to pay Shallenberger’s claims because Medicare
was responsible for them. Indeed, Humana appears to concede that it is primary to
Medicare under the MSP statute with respect to Shallenberger’s expenses. Instead,
Humana has refused to reimburse Harris for the medical costs relying on Harris’s
status as the primary carrier under the plain language of the two insurance plans
and asserting other legal and equitable defenses to coverage. Thus, the plain
language of the insurance plans governs the priority of payment as between the two
insurance companies in this case.6
6
Harris also argues on appeal that the district court erroneously entered a “final, take-
nothing judgment” in favor of Humana – even assuming that Harris was the primary payer –
because the amount of Harris’s liability as the primary payer and Humana’s liability as the
secondary payer remained to be apportioned. After review of the record, we find that this
argument lacks merit. Further, Humana has purported to file a “cross appeal,” urging affirmance
of the district court’s entry of judgment in its favor on alternative grounds. In light of our
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III. CONCLUSION
In sum, it appears that the district court correctly: (1) dismissed Harris’s
claim against Humana under the MSP statute and (2) relied on the plain language
of the two insurance plans and disregarded the MSP statute in determining the
priority of obligations as between Harris and Humana in granting summary
judgment with respect to Harris’s remaining claim.
AFFIRMED.
affirmance of the district court’s dismissal and summary judgment orders, any “cross-appeal” is
moot.
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