Birchard v. Blue Cross & Blue Shield of N.C.

IN THE COURT OF APPEALS OF NORTH CAROLINA
2022-NCCOA-333
No. COA21-729
Filed 17 May 2022
Orange County, No. 21 CVS 007
KATHERINE BIRCHARD, Plaintiff,
v.
BLUE CROSS AND BLUE SHIELD OF NORTH CAROLINA, INC., THE NORTH
CAROLINA STATE HEALTH PLAN a/k/a NORTH CAROLINA STATE HEALTH
PLAN, a body politic and corporate, and THE BOARD OF TRUSTEES OF THE
STATE HEALTH PLAN FOR TEACHERS AND STATE EMPLOYEES, Defendant.
Appeal by plaintiff from order entered 2 July 2021 by Judge Alyson Adams
Grine in Orange County Superior Court. Heard in the Court of Appeals 26 April
2022.
Barry Nakell for plaintiff-appellant.
Gallivan, White & Boyd, P.A., by Christopher M. Kelly and Kelsey N. Dorton,
for defendant-appellee Blue Cross and Blue Shield of North Carolina, Inc.
TYSON, Judge.
¶1 Katherine Birchard (“Plaintiff”) appeals the trial court’s order dismissing her
complaint for lack of subject matter jurisdiction and for failure to state a claim upon
which relief can be granted in favor of Blue Cross and Blue Shield of North Carolina,
the North Carolina State Health Plan, and the Board of Trustees for the State Health
Plan for Teachers and State Employees (collectively “Defendants”). We affirm.
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I. Background
¶2 Plaintiff was a member of a medical insurance plan entitled “State Health Plan
for Teachers and State Employees Enhanced 80/20 PPO Plan” (“Plan”). The Plan was
made available to Plaintiff pursuant to N.C. Gen. Stat. §§ 135-48.1 et seq. and 135-
75.2 (2021), because of her employment at the University of North Carolina School of
Medicine as a licensed physician and faculty member of the Radiology Department.
¶3 The Plan is administered under a state contract with Defendant, Blue Cross
Blue Shield of North Carolina (“BCBSNC”). BCBSNC is a private North Carolina
corporation and serves as the contract administrator of the Plan. BCBSNC also
separately provides medical insurance to other subscribers and members in the State
of North Carolina. The Plan requires a member to request “certification from the
Mental Health Case Manager” before accessing coverage and benefits for care in a
“Psychiatric Residential Treatment Center.” The Plan specifically states there is no
coverage for services “that are: Not medically necessary.”
¶4 Plaintiff requested certification from BCBSNC of coverage and benefits for her
to be treated and monitored for severe depression and suicidal ideation in a
“Psychiatric Residential Treatment Center.” Defendant denied Plaintiff’s request in
December 2017 after finding the request was “Not medically necessary” in accordance
with Beacon NMNC 1.101.02. These standards require: first, the patient shows
“symptoms consistent with a DSM or corresponding ICD diagnosis”; second, the
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“member’s psychiatric condition requires 24-hour medical/psychiatric and nursing
services and of such intensity that needed services can only be provided in an acute
psychiatric hospital”; third, “[i]npatient psychiatric services are expected to
significantly improve the member’s psychiatric condition within a reasonable period
of time so that acute, short-term 24-hour inpatient medical/psychiatric and nursing
services will no longer be needed”; and, fourth, the “symptoms do not result from a
medical condition that would be more appropriately treated on a medical/surgical
unit.”
¶5 Plaintiff filed her original complaint in superior court in January 2021 alleging
breach of contract, in violation of N.C. Gen. Stat. § 59-3-220 (2021), and unfair and
deceptive trade practices against only BCBSNC. BCBSNC filed motions to dismiss
for lack of subject matter jurisdiction and failure to assert a claim by law pursuant to
North Carolina Rules of Civil Procedure 12(b)(1) and 12(b)(6).
¶6 Plaintiff filed her First Amended Complaint on 14 April 2021 and added
Defendants, North Carolina State Health Plan, and the Board of Trustees of the State
Health Plan for Teachers and State Employees, as parties. Plaintiff alleged breach
of contract, violation of N.C. Gen. Stat. § 59-3-220, unfair and deceptive trade
practices, and bad faith refusal to pay health or medical insurance benefits against
Defendants. Plaintiff never asserted any claim before the Industrial Commission.
Defendants filed a motion to dismiss Plaintiff’s First Amended Complaint for lack of
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subject matter jurisdiction and for failure to state a claim for which relief can be
granted.
¶7 The trial court granted Defendants’ Rules 12(b)(1) and 12(b)(6) motions to
dismiss. Plaintiff appeals.
II. Jurisdiction
¶8 Appellate review is proper pursuant to N.C. Gen. Stat. § 7A-27(b) (2021).
III. Issues
¶9 Plaintiff raises two issues of whether the trial court erred by: (1) dismissing
her First Amended Complaint against Defendants under Rule 12(b)(l) of the North
Carolina Rules of Civil Procedure for lack of subject matter jurisdiction in the
superior court; and, (2) dismissing her First Amended Complaint against Defendants
under Rule 12(b)(6) for failure to state a claim upon which relief can be granted.
IV. Analysis
A. Standard of Review
¶ 10 A trial court’s order granting a motion to dismiss under Rule 12(b)(1) and
under Rule 12(b)(6) is reviewed de novo on appeal. Corwin as Tr. for Beatrice Corwin
Living Irrevocable Tr. v. Brit. Am. Tobacco PLC, 371 N.C. 605, 611, 821 S.E.2d 729,
734 (2018).
B. Procedural Status
¶ 11 Plaintiff argues the superior court possessed jurisdiction to review BCBSNC’s
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decision to deny her certification.
[Part 4. Health Benefit Plan External Review] applies to
all insurers that offer a health benefit plan and that
provide or perform utilization review pursuant to G.S. 58-
50-61, the State Health Plan for Teachers and State
Employees, and any optional plans or programs operating
under Part 2 of Article 3A of Chapter 135 of the General
Statutes.
N.C. Gen. Stat. § 58-50-75(b) (2021) (emphasis supplied).
¶ 12 The statutes provide several definitions applicable here. The standard of
external utilization review provides “a covered person” may file for review within 120
days of notice and be assigned an independent review organization. N.C. Gen. Stat.
§ 58-50-80 (2021). A “‘[u]tilization review organization’ [is] an entity that conducts
utilization review under a managed care plan, but does not mean an insurer
performing utilization review for its own health benefit plan.” N.C. Gen. Stat. § 58-
50-61(a)(18) (2021).
¶ 13 N.C. Gen. Stat. § 58-50-61(a)(12) provides,
“Medically necessary services or supplies” means those
covered services or supplies that are:
a. Provided for the diagnosis, treatment, cure, or
relief of a health condition, illness, injury, or disease.
b. Except as allowed under G.S. 58-3-255, not for
experimental, investigational, or cosmetic purposes.
c. Necessary for and appropriate to the diagnosis,
treatment, cure, or relief of a health condition,
illness, injury, disease, or its symptoms.
d. Within generally accepted standards of medical
care in the community.
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e. Not solely for the convenience of the insured, the
insured’s family, or the provider.
For medically necessary services, nothing in this
subdivision precludes an insurer from comparing the cost-
effectiveness of alternative services or supplies when
determining which of the services or supplies will be
covered.
N.C. Gen. Stat. § 58-50-61(a)(12) (2021).
¶ 14 Under the statute: “‘noncertification’ means a determination by an insurer or
its designated utilization review organization that an admission, availability of care,
continued stay, or other health care service has been reviewed and, based upon the
information provided, does not meet the insurer’s requirements for medical
necessity[.]” N.C. Gen. Stat. § 58-50-61(a)(13) (2021).
¶ 15 BCBSNC is the Plan’s designated “utilization review organization” (“URO”) to
which “a covered person” must seek review of all “medically necessary” care under
the Plan. Id.¶ 16 The General Assembly specifically determined the “utilization review” for
coverage and benefits under the Plan is regulated by Chapter 58. See N.C. Gen. Stat.
§ 58-50-75(b) (2021). The General Assembly created an avenue to review external
“utilization review” claims under the State Health Plan before the Industrial
Commission. See N.C. Gen. Stat. § 58-50-61;N.C. Gen. Stat. § 143-291(a) (2021).
¶ 17 When this Court reviews a statute, “it is presumed the legislature acted with
full knowledge of prior and existing law, and with care and deliberation. Every
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statute is to be interpreted in light of the . . . laws as they were understood at the
time of the enactment at issue.” Dare Cty. Bd. of Educ. v. Sakaria, 127 N.C. App. 585,
588, 492 S.E.2d 369, 371 (1997) (citations and internal quotation marks omitted).
¶ 18 The parties stipulated this dispute involves contract claims and not negligence
claims. “The legislature has the power to define the circumstances under which a
remedy is legally cognizable and those under which it is not.” Lamb v. Wedgewood
South Corp., 308 N.C. 419, 444, 302 S.E.2d 868, 882 (1983).
¶ 19 BCBSNC’s role as the Plan’s URO, conducted two rounds of internal reviews,
Plaintiff then sought an appeal of those decisions via external review by an
independent review organization, which was assigned pursuant to N.C. Gen. Stat. §
58-50-80(b)(5).
¶ 20 “An external review decision is binding on the insurer.” N.C. Gen. Stat. § 58-
50-84(a) (2021). “[A]n independent review organization . . . shall not be liable for
damages to any person for any opinions rendered during or upon completion of an
external review conducted under this Part, unless the opinion was rendered in bad
faith or involved gross negligence.” N.C. Gen. Stat. § 58-50-89 (2021).
¶ 21 Plaintiff exhausted her remedies by seeking the external review by the
independent review organization, and by failing to seek further review before the
Industrial Commission. Plaintiff and BCBSNC are both bound by the decision to
uphold the denial of coverage by the independent review organization. Plaintiff could
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have sought review with the Industrial Commission, if she sought to challenge the
external independent review organization’s decision. Plaintiff does not allege
negligence or bad faith in the decision levied by the independent review organization.
We are bound as is BCBSNC, and any asserted contract claim against BCBSNC is
improper regarding the external review organization’s decision to deny coverage.
C. Meyer v. Walls
¶ 22 Plaintiff relies upon Meyer v. Walls, 347 N.C. 97, 489 S.E.2d 880 (1997), and
argues the superior court possesses jurisdiction to adjudicate these claims. In Meyer,
the plaintiff committed suicide while under the care of the county department of
social services. Id. at 102, 489 S.E.2d at 883. Plaintiff therein filed negligence claims
against the county and the individuals involved. Id. at 103, 489 S.E.2d at 883. The
Court reasoned, “[a] plaintiff may maintain both a suit against a state agency in the
Industrial Commission under the Tort Claims Act and a suit against the negligent
agent or employee in the General Court of Justice for common-law negligence.” Id. at
108, 489 S.E.2d at 886 (emphasis supplied). The court denied the defendants’ 12(b)(1)
motion. Id. at 109, 489 S.E.2d at 887.
¶ 23 The Court’s holding in Meyer does not support Plaintiff’s contract arguments
here under the State Tort Claims Act:
The North Carolina Industrial Commission is hereby
constituted a court for the purpose of hearing and passing
upon tort claims against the State Board of Education, the
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Board of Transportation, and all other departments,
institutions and agencies of the State. The Industrial
Commission shall determine whether or not each
individual claim arose as a result of the negligence of any
officer, employee, involuntary servant or agent of the State
while acting within the scope of his office, employment,
service, agency or authority, under circumstances where
the State of North Carolina, if a private person, would be
liable to the claimant in accordance with the laws of North
Carolina. If the Commission finds that there was
negligence on the part of an officer, employee, involuntary
servant or agent of the State while acting within the scope
of his office, employment, service, agency or authority that
was the proximate cause of the injury and that there was
no contributory negligence on the part of the claimant or
the person in whose behalf the claim is asserted, the
Commission shall determine the amount of damages that
the claimant is entitled to be paid, including medical and
other expenses, and by appropriate order direct the
payment of damages as provided in subsection (a1) of this
section[.]
N.C. Gen. Stat. § 143-291(a) (2021) (emphasis supplied).
¶ 24 Plaintiff’s amended complaint against BCBSNC alleges breach of contract and
unfair and deceptive trade practices, not negligence. Meyer allows a negligence claim
against an agent of the state in superior court that is separate from the state agency
asserted before the Industrial Commission under the State Tort Claims Act. Meyer,
347 N.C. at 108, 489 S.E.2d at 886.
¶ 25 The holding in Meyer is inapplicable here. Plaintiff’s right to review the
independent review organization’s decision lies by statute with the Industrial
Commission. BCBSNC is bound by that decision. Plaintiff did not assert claims
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against or join the independent review organization as a party, nor did they pursue
review of their decision before the Industrial Commission.
¶ 26 The General Assembly is presumed to have “acted with full knowledge” when
they opted to not further waive North Carolina’s sovereign immunity or choice of
forum, and to create further liability for the taxpayers of the State and its agencies
regarding contract coverage disputes over treatments and payments of Plan benefits.
Sakaria, 127 N.C. App. at 588, 492 S.E.2d at 371. The superior court does not possess
subject matter jurisdiction to review the decision made by the independent review
organization or the State Health Plan and claims against BCBSNC are properly
dismissed.
¶ 27 Even if Plaintiff was entitled to further review the denial of coverage, she did
not initiate nor invoke the statutory “utilization review” process the General
Assembly expressly provided before the Industrial Commission. N.C. Gen. Stat. § 58-
50-61 (2021). The trial court’s order specifically found and concluded “Plaintiff
concedes jurisdiction for this case lies in the Industrial Commission rather than in
the superior court[.]” Plaintiff’s arguments are overruled. In light of our holding on
this issue, we need not reach Plaintiff’s remaining arguments.
V. Conclusion
¶ 28 Plaintiff bears the burden on appeal of showing the superior court possessed
subject matter jurisdiction over her claims review, or alternatively, she is entitled to
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another review for her admittedly contractual and statutory claims. Plaintiff has
failed to meet this burden.
¶ 29 Plaintiff failed to utilize the statutory review process provided to her by
Chapter 58. N.C. Gen. Stat. § 58-50-61. She is not entitled to further review in the
superior court pursuant to our statutes. The trial court’s order is affirmed. It is so
ordered.
AFFIRMED.
Judges WOOD and GRIFFIN concur.