Determining whether multiple coverage options constitute one plan under ERISA is a case of first impression for this Court. To be sure, there have been numerous cases considering the issue of â€œwhat is a plan,â€ but those cases address whether an ERISA plan exists at all-i.e., whether the employee benefits arranged by employers constitute a plan for ERISA purposes, thereby subjecting the administrator to fiduciary duties under ERISA. See Kolkowski v. Goodrich Corp., 448 F.3d 843 (6th Cir.2006) (determining existence of an ERISA plan); Hughes v. White, 467 F.Supp.2d 791 (S.D.Ohio 2006). Here, there is no doubt about whether there is an ERISA plan. The question is how many. Loren v. Blue Cross & Blue Shield of Mich., — F.3d —-, 2007 WL 2726704 C.A.6 (Mich.) (September 20, 2007)
The issue carried importance in Loren v. Blue Cross & Blue Shield of Mich inasmuch as the district court’s ruling against the plaintiffs stemmed from a finding that they had no standing to sue:
In granting BCBSM’s Motion to Dismiss, the district court concluded that, although Loren had statutory standing when the complaint was filed, his claims were rendered moot after he withdrew from the coverage administered by BCBSM and, therefore, now lacks an interest in the remedies available to a participant under Â§Â§ 1132(a)(2) and 1132(a)(3). In addition, the district court concluded that, even before filing the suit, Hagemann was covered as a beneficiary under a health care option for which BCBSM does not administer claims, and, therefore, she lacks statutory standing to bring claims against BCBSM. Accordingly, the district court dismissed Plaintiffs’ complaint for lack of subject matter jurisdiction.
So, the issue of whether options under a benefit arrangement created separate benefits alternatives under one plan or multiple plans thus became entangled in an issue of available remedies.
Discrimination Against Self Funded Plans?
The plaintiffs argued that Blue Cross Blue Shield of Michigan’s (â€œBCBSMâ€), which administered self-funded benefits and which was the parent company of Blue Care Network (â€œBCNâ€), a state-licenced health maintenance organization, negotiated more favorable rates for the HMO business than the self-funded plans. In other words, the plaintiffs contended that the defendant advantaged itself by permitting health care providers to bill the employer plans where it did not bear risk. The trade-off was lower rates for the HMO arrangements where Blue Cross fully insured the claims.
Nutshell Version Of The Facts
To obtain some context here, a closer look at the plans will be helpful –
– The Self-Funded Health Benefits
BCBSM is a health care corporation, organized under the State of Michigan, that administers and processes claims for various ERISA welfare benefit plans, including self-insured (or â€œself-fundedâ€) health benefit plans sponsored and maintained by Ford Motor Company (â€œFordâ€) and American Axle & Manufacturing (â€œAxleâ€).
– The Fully Insured Health Benefits
BCBSM is also the parent company of Blue Care Network (â€œBCNâ€), a state-licenced health maintenance organization (â€œHMOâ€), which issues its own insurance policies to groups and individuals. BCBSM negotiates hospital reimbursement rates on BCN’s behalf, and these rates are factored into the premiums BCN charges to its customer base.
– The Plaintiffs
- Loren (covered under the self-funded option)
Loren was covered by the Axle self-funded option administered by BCBSM at the time of the filing, but as of January 1, 2006, Loren no longer received coverage from the option serviced by BCBSM. Loren, instead, switched to Medicare benefits through another carrier that does not contract with BCBSM for its claims administration.
- Hagemann (covered under the self-funded option)
Hagemann had not been a beneficiary of Ford’s BCBSM-administered coverage option since March 1, 2000, when his spouse elected coverage for her under CareChoices, a fully insured HMO offered by Ford as an alternative benefit plan option.
– The Plaintiffs’ Argument
The larger argument was, of course, whether BCBSM was taking advantage of the self-funded plans it administered for its own gain. The specific issue on appeal, however, centered on standing, and on this point the plaintiffs argued as follows:
Plaintiffs claim that all of the coverage alternatives sponsored by their employers-both the BCBSM-administered and non-BCBSM-administered coverage options – constitute one ERISA plan. Specifically, Loren asserts that the coverage that he currently receives is part of the same ERISA plan as the BCBSM-administered option because Axle reports both coverage options under the same ERISA identification number. Similarly, Hagemann asserts that the coverage options offered through CareChoices and BCBSM are part of the same ERISA plan because Ford reports both options under the same ERISA identification number. (emphasis added)
– The Defendant’s Argument
BCBSM defended the multiple plan view, contending as follows:
Conversely, BCBSM asserts that each coverage option offered by Axle and Ford is a separate and distinct ERISA health care plan. As such, BCBSM argues that Plaintiffs have no standing to bring claims against BCBSM because they are not participants in, or beneficiaries of, an ERISA plan connected to BCBSM.
Framing The Issue
The Sixth Circuit observed that the essential issue was as much one of determining whether there was one or multiple plans, stating:
Though the main issue is one of standing, the crux of this case lies in the determination of whether the individual coverage options offered by Axle and Ford constitute one employee benefit plan for purposes of ERISA, or multiple plans. Plaintiffs assert that, assuming statutory standing, both have Article III standing because they each sue to recover as a result of injury to the single ERISA plans sponsored by Ford and Axle, respectively, which simply include as one coverage option, the plans administered by BCBSM. Defendant maintains that each coverage option offered by Axle and Ford is a separate ERISA health care plan, and because Plaintiffs are not members of BCBSM-administered plan, they cannot establish any element of constitutional standing. Therefore, we must first determine whether the multiple coverage options offered by Ford and Axle constitute one ERISA plan or multiple plans.
A Review Of The Authorities
The Court found scant authority to assist it in the resolution of the issue. The Tenth Circuit had previously addressed the question in Chiles v. Ceridian Corp., 95 F.3d 1505, 1511 (10th Cir.1996) where it applied a presumption that different plan documents create different plans. The Sixth Circuit favored a view taken from the HIPAA regulations.
The Court opined:
Because of the paucity of case law on the issue, we will look to administrative interpretation. The only guidance from this source comes from a proposed regulation governing the group health plan portability provisions of the Health Insurance Portability and Accountability Act (â€œHIPAAâ€), jointly issued by the Department of Labor and the Department of Health and Human Services. See Notice of Proposed Rulemaking for Health Coverage Portability, 69 Fed.Reg. 78800-01 (proposed Dec. 30, 2004) (to be codified at 29 C.F.R. pt. 2590). To address uncertainty regarding whether an individual who changed benefit elections was switching between benefit options under a single plan, or switching from one plan to another (thereby triggering various provisions that apply when an individual commences or terminates coverage under a group health plan), the proposed regulations clarify that:
“all medical care benefits made available by an employer or employee organization … are generally considered to constitute one group health plan (the default rule). However, the employer or employee organization can establish more than one group health plan if it is clear from the instruments governing the arrangements to provide medical care benefits that the benefits are being provided under separate plans and if the arrangements are operated pursuant to the instruments as separate plans.”
Applying The Rule
This rule creates a “strong presumption” in favor of finding only one ERISA plan.
Given HIPPA’s default rule that all medical benefits offered by an employer are generally considered to be part of one ERISA health plan, and the fact that if an employer intends to create multiple plans it has the ability to do so by filing multiple plan documents, we start with the strong presumption that the filing of only one ERISA plan document indicates that the employer intended to create only one ERISA plan. Thus, the burden is on Defendant to defeat this presumption by establishing through sufficient evidence that these plans were intended to operate as separate plans, or operated as such in practice.
On the facts presented, the defendant failed to overcome the presumption.
We conclude that Defendant has not overcome the presumption that the employee health benefits offered by an employer constitute a single ERISA plan. In order to defeat this presumption, Ford and Axle must show, through the plan documents, that such benefits are provided and operated under separate plans. The most obvious first step in this regard would be to register multiple ERISA plans by filing multiple plan documents. In this case, Ford and Axle have instead each registered only one plan document with one ERISA identification number. The evidence which Defendant proffers does not sufficiently establish that the employers either intended to operate these options as separate plans or actually did so in practice.
Note: The Tenth Circuit view is summarized as follows:
As a threshold matter, the Chiles court had to decide whether the four plan documents established one ERISA plan or four ERISA plans. Id. at 1511. In concluding that these documents created four distinct ERISA plans, the Tenth Circuit started with the assumption that separate plan documents create separate plans. Id. The Tenth Circuit concluded that the plaintiffs failed to defeat the presumption that different plan documents create different plans. Id. The court found that the plaintiffs did not proffer sufficient evidence to prove that the employer intended there to be only one plan or that it operated the plans as a single plan. Id. In reaching its conclusion, the court considered three factors: (1) whether each plan had a different ERISA identification number; (2) whether the language of the plan documents indicated that the employer intended to establish multiple plans; and (3) whether the plans shared the same administrator or trust.
This view applies an opposite presumption, i.e., that the employer intended separate plans by virtue of the separate documents. Even using the Tenth Circuit factors, the Defendant’s argument suffered deficiencies:
If the Chiles factors were used in this case, two of the factors would favor Plaintiffs: (1) each plan has only one ERISA identification number; and (2) Defendant failed to point to any language in the plan documents that evinced that Ford or Axle’s intent was to establish multiple plans. Given that Defendant has not overcome the presumption that filing one plan document establishes only a single ERISA plan, we hold that Ford and Axle each maintain a single ERISA group health plan with multiple benefit options.
Standing Still Problematic – The plaintiffs were still unable to state a claim for relief under Â§ 1132(a)(2. Under ERISA jurisprudence, plaintiffs cannot bring suit under Â§ 1132(a)(2) to recover personal damages for misconduct, but rather must seek recovery on behalf of the plan. Thus,
Plaintiffs may bring suit under Â§ 1132(a)(2) on behalf of their respective plans, but they are not permitted to recover individually, as all relief must go to the benefit of the ERISA plans themselves. Here, Plaintiffs claim that BCBSM charged the Axle and Ford too much for hospital services (to offset the lower amount BCN paid for hospital services), and this caused Axle’s and Ford’s ERISA plans to demand higher deductibles, co-payments, and/or contributions from participants. Plaintiffs claim that they have â€œincurred greater costs than they would otherwise have incurred if BCBSM had not violated its fiduciary duties under ERISA.â€ Plaintiff Loren states that he made â€œcontributionsâ€ to the Axle Plan and that the level of his contributions â€œprobably would have been less had BCBSM not engaged in the conductâ€ set forth in the Complaint. Hagemann offers no similar statement. This â€œinjuryâ€ is neither concrete nor particularized, and is instead, arguably conjectural and hypothetical.
Â§ 1132(a)(2) – A Remedy Without A Wrong? The caselaw under this provision makes it increasingly clear that this remedy will seldom aid the plan participant in health plans or individual account pension plans. The court observed:
Merely because Plaintiffs claim that they are suing on behalf of their respective ERISA plans does not change the fact that they must also establish individual standing. See Glanton ex rel. ALCOA Prescription Drug Plan v. Advance PCS Inc., 465 F.3d 1123, 1127 (9th Cir.2006) (â€œ[Plaintiffs assert that] ERISA plan beneficiaries may bring suits on behalf of the plan in a representative capacity. We have no quarrel with this proposition-so long as plaintiffs otherwise meet the requirements for Article III standing.â€); Cent. States, 433 F.3d at 200 (â€œ[A]n ERISA Plan participant or beneficiary must plead a direct injury in order to assert claims on behalf of a Plan.â€); Harley v. Minn. Mining and Mfg. Co., 284 F .3d 901, 906-07 (8th Cir.2002) (finding no constitutional standing where the â€œloss did not cause actual injury to plaintiff’s interests in the planâ€ and determining that the â€œlimits on judicial power imposed by Article III counsel against permitting participants or beneficiaries who have suffered no injury in fact from suing to enforce ERISA fiduciary duties on behalf of the Planâ€).
Â§ 1132(a)(3) – Wrong Without Remedy? Although a plaintiff is limited to bringing suit on behalf of his or her ERISA plan when asserting a Â§ 1132(a)(2) claim, participants and beneficiaries â€œcan also sue for breaches of fiduciary duty that harm them as individuals.â€ This grant does not come without limitation, however – relief cannot be for monetary damages, but rather is limited to “appropriate equitable relief”.
In the case at bar, the Sixth Circuit permitted the plaintiffs claims insofar as they were limited to injunctive relief:
Therefore, Plaintiffs may bring suit in their individual capacities under Â§ 1132(a)(3) for injunctive or other appropriate equitable relief, but not for monetary damages. . . . Therefore, Plaintiffs need not demonstrate individualized injury to proceed with their claims for injunctive relief under Â§ 1132(a)(3); they may allege only violation of the fiduciary duty owed to them as a participant in and beneficiary of their respective ERISA plans. Plaintiffs claim that BCBSM breached its fiduciary duty with respect to the Ford and Axle plans to which Plaintiffs belong. This is sufficient to establish injury-in-fact for purposes of constitutional standing under Â§ 1132(a)(3).
Further, Plaintiffs have sufficiently alleged that BCBSM caused the injury they complain of in this case-specifically, breach of fiduciary duty by negotiating more favorable rates for BCN at the expense of the Ford and Axle plans administered by BCBSM. Finally, because we have determined that Ford and Axle sponsor single ERISA plans, any restitution of ill-gotten gains and other equitable relief available under Â§ 1132(a)(3) would be distributed to the single ERISA plans in which Plaintiffs participate. Accordingly, we conclude that Plaintiffs have Article III standing to sue under Â§ 1132(a)(3) for breach of fiduciary duty.