Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-akd-3_15-cv-00208/USCOURTS-akd-3_15-cv-00208-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1446 Breach of Contract- Insurance

---

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UNITED STATES DISTRICT COURT

DISTRICT OF ALASKA

JOHN D. ZIPPERER, JR., M.D., )

)

Plaintiff, ) 3:15-CV-00208 JWS

)

vs. ) ORDER AND OPINION

)

) [Re: Motion at docket 26]

PREMERA BLUE CROSS BLUE )

SHIELD OF ALASKA, )

)

Defendant. )

)

I. MOTION PRESENTED

At docket 26, Defendant Premera Blue Cross and Blue Shield of Alaska

(“Premera”) filed a motion to dismiss the First Amended Complaint filed by John D.

Zipperer, Jr., M.D. (“Plaintiff”). Plaintiff responded at docket 31. Premera replied at

docket 35. Oral argument was heard on July 27, 2016. 

II. BACKGROUND

Plaintiff is a doctor practicing in Alaska. He owns and operates Zipperer Medical

Group (“ZMG”), which is a clinic that specializes in providing interventional pain

management and addiction recovery services in Anchorage, Wasilla, Eagle River, and

Fairbanks. The dispute in this case involves unpaid insurance claims ZMG filed with

Premera for laboratory services that were provided to patients enrolled in various

Case 3:15-cv-00208-JWS Document 43 Filed 08/16/16 Page 1 of 17
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Premera health plans with dates of service ranging from December 2014 to the present. 

Plaintiff asserts that all the insurance claims at issue were properly assigned to him

from insured patients. 

ZMG operates laboratories in Alaska and Tennessee. According to Plaintiff’s

complaint, the laboratory in Tennessee is a “physician office laboratory,” as that term is

defined under federal regulations because it is owned by ZMG, bills under ZMG’s billing

number, is used solely for ZMG patients, and is registered with Medicare as a location

of the physician group.1 Its Alaska laboratory does not maintain a certain compliance

certification and, as a result, cannot process some types of laboratory tests needed by

ZMG patients. Therefore, ZMG uses its Tennessee laboratory when necessary to

service its Alaskan patients. Plaintiff alleges that for the laboratory claims at issue here,

the insured patient would meet with a doctor in Alaska and provide a sample. The

sample was then sent to the Tennessee laboratory for processing. 

 When filing a claim for payment for these Tennessee laboratory services, ZMG

completes Premera’s standard claim form referred to as the “HCFA 1500.” In Box 32 of

that form, ZMG marks that the laboratory service location was Alaska, not Tennessee,

because Alaska is where the doctor and patient had the face-to-face contact and where

the sample was taken from the patient. Plaintiff asserts that this practice is proper and

required under HIPAA and its transaction and code set rules. However, to be

transparent, ZMG also lists the Tennessee laboratory’s identification number in Box 23

of the form to show that the samples were processed in Tennessee rather than Alaska. 

Premera believes that Box 32 of the form should reflect that the laboratory services

were performed in Tennessee regardless of where the doctor-patient contact took

place. Premera also asserts that claims for laboratory services performed for patients

enrolled in Premera’s health insurance plan for federal employees (referred to as the

1Based on correspondence between ZMG and Premera, it appears as if Premera does

not agree that the Tennessee laboratory should be considered a physician office laboratory.

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“Service Benefit Plan”) should be sent to Blue Cross and Blue Shield of Tennessee for

payment processing. 

On March 19, 2015, Premera wrote ZMG informing ZMG that Premera was

placing it on pre-payment review of all laboratory claims. The letter stated that prepayment review was necessary to review laboratory codes used by ZMG and that any

electronic insurance claim submitted to Premera “will pend and a statement may be

sent to the provider indicating the need for additional documentation in order to

determine the location where the laboratory services were performed.”2 It also stated

that ZMG was filling out Box 32 improperly and further instructed that for patients

enrolled in the federal Service Benefit Plan, claims for laboratory tests processed in

Tennessee must be sent to Blue Cross Blue Shield of Tennessee. 3

Plaintiff filed its complaint against Premera. Count I alleges a violation of

Alaska’s Prompt Pay Statute, AS § 21.36.495. The Prompt Pay Statute requires

Premera to pay insurance claims or provide notice to the claimant as to what is needed

to process the claim or setting forth the reasons for denial within thirty calendar days of

its receipt of the claim. Plaintiff alleges that Premera has failed to pay, deny, or provide

the necessary notice as to the insurance claims at issue here. He further alleges that

Premera’s decision to place ZMG on pre-payment review is “in fact a pretext to avoid

application of the [Prompt Pay Statute].”4 Plaintiff asks that the court “declare that

[Permera] is in violation of the [Prompt Pay Statute] due to its failure to pay or deny the

claims at issue and failure to meet the specific notice requirements within 30 calendar

days after it received the claim”

5

 and that the court order Premera to pay the claims with

interest as required under the law. He also requests that the court direct Premera to

2Doc. 23-1 at p. 2.

3

Id.

4Doc. 23 at p.8, ¶ 47.

5Doc. 23 at p.9, § 2.

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rescind its notice placing ZMG under pre-payment review. Count II is brought pursuant

to HIPAA. Plaintiff asks the court to “declare that ZMG has submitted all laboratory

claims at issue with the proper [code] in Box 32, as is consistent with HIPAA.”6

Both parties agree that some of the insurance claims at issue involve patients

enrolled in the Service Benefit Plan, which is created pursuant to FEHBA, and some of

the insurance claims at issue involve patients enrolled in health benefit plans governed

by ERISA. The remaining claims are those brought under other Premera health

insurance plans. Premera argues: 1) that Count I should be dismissed as to Plaintiff’s

insurance claims for laboratory services rendered to patients insured under the Service

Benefit Plan because the Prompt Pay Act is expressly preempted pursuant to FEHBA,

displaced by federal common law, impliedly preempted by FEHBA, and barred by the

federal government’s sovereign immunity; and 2) that Count I should be dismissed as to

Plaintiff’s insurance claims relating to laboratory services rendered to patients insured

under self-funded ERISA-governed health benefit plans because the Prompt Pay

Statute is preempted by ERISA as to those claims. Premera also argues that Count I

should be dismissed in its entirety. It asserts Plaintiff has not adequately stated a claim

for which relief can be granted under the Prompt Pay Statute. Premera also argues

that Count I should be dismissed as to all insurance claims because Plaintiff has failed

to exhaust his administrative remedies provided for under Alaska’s Insurance Code.

As for the HIPAA claim in Count II, Premera argues that Plaintiff does not have

standing to bring such an action in relation to insurance claims filed under the federal

Service Benefit Plan. 

III. STANDARD OF REVIEW

Rule 12(b)(6) tests the legal sufficiency of a plaintiff’s claims. In reviewing such

a motion, “[a]ll allegations of material fact in the complaint are taken as true and

6Doc. 23 at p. 9, ¶ 6.

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construed in the light most favorable to the nonmoving party.”7 To be assumed true,

the allegations, “may not simply recite the elements of a cause of action, but must

contain sufficient allegations of underlying facts to give fair notice and to enable the

opposing party to defend itself effectively.”8 Dismissal for failure to state a claim can be

based on either “the lack of a cognizable legal theory or the absence of sufficient facts

alleged under a cognizable legal theory.”9 “Conclusory allegations of law . . . are

insufficient to defeat a motion to dismiss.”10

 

To avoid dismissal, a plaintiff must plead facts sufficient to “‘state a claim to relief

that is plausible on its face.’”11 “A claim has facial plausibility when the plaintiff pleads

factual content that allows the court to draw the reasonable inference that the

defendant is liable for the misconduct alleged.”12 “The plausibility standard is not akin

to a ‘probability requirement,’ but it asks for more than a sheer possibility that a

defendant has acted unlawfully.”13 “Where a complaint pleads facts that are ‘merely

consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and

plausibility of entitlement to relief.’”14 “In sum, for a complaint to survive a motion to

7Vignolo v. Miller, 120 F.3d 1075, 1077 (9th Cir. 1997).

8Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). 

9Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990).

10Lee v. City of Los Angeles, 250 F.3d 668, 679 (9th Cir. 2001).

11Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly,

550 U.S. 544, 570 (2007)).

12

Id.

13

Id. (citing Twombly, 550 U.S. at 556).

14

Id. (quoting Twombly, 550 U.S. at 557).

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dismiss, the non-conclusory ‘factual content,’ and reasonable inferences from that

content, must be plausibly suggestive of a claim entitling the plaintiff to relief.”15

IV. DISCUSSION

A. Failure to state a Prompt Pay Statute claim

Premera argues that Count I should be dismissed in its entirety because Plaintiff

failed to adequately allege a violation of Alaska’s Prompt Pay Statute. It argues that its

March 19, 2015 letter to Plaintiff constituted proper notice under the Prompt Pay

Statute, and therefore, Plaintiff’s claims are not “clean” claims subject to prompt

payment. The letter, however, is not adequate notice under AS §21.36.495(b). 

According to the statute, the notice required must provide “the basis for denial or the

specific information that is needed for the insurer to adjudicate the claim.”16 Here, the

letter did not address any specific insurance claim, but rather, just put Plaintiff on notice

that Premera was placing ZMG on pre-payment review status. That is, it did not state

that it was going to deny a claim or a group of claims, nor did it set forth “the specific

information that is needed for the insurer to adjudicate the claim.” Rather, the letter

merely stated that any electronically submitted laboratory claims “will pend and a

statement may be sent to the provider indicating the need for additional

documentation.”17

Premera also argues that Plaintiff’s claim for prompt payment in Count I is

inadequate because Premera “is within its contractual right to keep Plaintiff on

prepayment review for reasons unrelated to Box 32 or the entity to which [Plaintiff]

submitted the claim.”18

 However, as Plaintiff notes in his response brief, his “argument

15Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009); see also Starr, 652 F.3d

at 1216.

16A.S. § 21.36.495(b).

17Doc. 23-1 at p. 2.

18Doc. 26 at p. 43.

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has nothing to do with whether [Premera] has the general contractual right to place a

provider on prepayment review.”19 His argument is that regardless of ZMG’s

prepayment status, Premera has nonetheless violated the Prompt Pay Statute by failing

to pay or provide the requisite notice. The court concludes that Count I properly alleges

a violation of the Prompt Pay Statute.

B. Failure to exhaust administrative remedies

Premera argues that Count I should be dismissed in its entirety because Plaintiff

failed to exhaust his state administrative remedies. Here, administrative remedies are

provided for under the state insurance code. An insured may file a complaint with the

director of Alaska’s division of insurance and then the director may conduct an

investigation to determine whether a person is engaged in an unfair method of

competition or a practice prohibited under Chapter 36 of the insurance code, which

includes the Prompt Pay Statute.20 The director may then provide for an administrative

proceeding as set forth in the insurance code.21 However, while an administrative

remedy is provided for under Chapter 36 of the insurance code, there is nothing in the

insurance code, including the Prompt Pay Statute itself, that indicates this

administrative process is a mandatory step before an insured, or his or her provider,

can file a lawsuit against an insurer.

Premera contends that while the language of the statute is not mandatory the

court should nonetheless conclude that exhaustion is required. It argues that

exhaustion is required any time an administrative remedy is provided for under a statute

and when the disputed matter involves factual issues rather than a challenge to the

validity of the statute itself. The court disagrees with Premera’s assessment of the law. 

Under Alaska law, exhaustion is usually required when the matter involves an agency

19Doc. 31 at p.11, n.3.

20AS § 21.36.910(a).

21AS § 21.36.910(b).

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decision, which is not the case here.22 When discussing whether a court should require

exhaustion the Alaska Supreme Court has indicated that the court must assess the

“benefits obtained through affording an agency an opportunity to review the particular

action in dispute” and that one of the purposes of the exhaustion requirement is “to

correct its own errors so as to moot judicial controversies.”23

 Indeed, the cases that

Premera relies on to support its exhaustion argument involve disputes over agency

actions24

 or employment disputes with a municipal employer,25

 not private insurance

disputes. The court declines to require Plaintiff to pursue an administrative remedy.

C. FEHBA preemption of the Prompt Pay Statute as to Service Benefit Plan

insurance claims

Premera argues that Count I should be dismissed as to Plaintiff’s insurance

claims that were filed for laboratory services rendered to patients enrolled in the federal

Service Benefit Plan. It argues that as to these insurance claims the Prompt Pay

Statute is preempted by the contract terms between the federal government and Blue

Cross Blue Shield of Alaska (“BCBSA”) pursuant to FEHBA, 5 U.S.C. § 8902(m)(1).

1. FEHBA in general 

Congress enacted FEHBA to provide health benefits to federal employees. 

Under FEHBA, the U.S. Office of Personnel Management (“OPM”) has the discretion to

establish insurance plans with multiple insurers.26 OPM contracted with BCBSA to

provide the Service Benefit Plan to federal employees in Alaska. Premera is a local

22Smart v. State, Dep’t of Health & Soc. Servs., 237 P.3d 1010, 1015 (Alaska 2010)

(“Where . . . a regulation provides for administrative review of an agency decision, a person

ordinarily must exhaust such administrative remedies before bringing an action in superior court

challenging the decision.” (emphasis added)).

23Ben Lomond, Inc. v. Municipality of Anchorage, 761 P.2d 119, 121-22 (Alaska 1988)

24State, Dep’t of Revenue v. Andrade, 23 P.3d 58 (2001); Smart, 237 P.3d at 1015.

25Bruns v. Municipality of Anchorage, 32 P.3d 362 (2001). 

265 U.S.C. §§ 8902-03, 8913.

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BCBSA licensee that insures and administers the Service Benefit Plan. Under FEHBA,

OPM has the authority to determine the benefit structure of each plan and set forth the

plan’s statement of benefits.27

 OPM has established a mandatory administrative

remedy at the agency level for those who believe that the carrier has wrongfully denied

benefits.28

 If OPM upholds the denial of benefits, the enrollee, or his or her medical

provider, can bring suit only against OPM and not the carrier or carrier’s subcontractors. 

Furthermore, there is no allowance for the recovery of penalties or interest.29

 

2. Preemption

FEHBA contains an express preemption provision, 5 U.S.C. § 8902(m)(1), which

states as follows:

The terms of any contract under this chapter which relate to the nature,

provision, or extent of coverage or benefits (including payments with respect

to benefits) shall supersede and preempt any State or local law, or any

regulation issued thereunder, which relates to health insurance or plans.30

 

“The policy underlying section 8902(m)(1) is to ensure uniformity in the administration of

FEHBA benefits.”31

 Under the statute, two conditions must be met to warrant

preemption: “(1) the FEHBA contract terms at issue ‘relate to the nature, provision, or

extent of coverage or benefits (including payment with respect to benefits)’ and (2) the

state or local law ‘relates to health insurance or plans.’”32

 “A law ‘relates to’ an

employee benefit plan, in the normal sense of the phrase, if it has a connection with or

275 U.S.C. § 8902(a), (d); 5 U.S.C. § 8907.

285 C.F.R. §§ 890.105, .107(d)(1).

295 C.F.R. § 890.107(c).

305 U.S.C. § 8902(m)(1). 

31Hayes v. Prudential Ins. Co. of Am., 819 F.2d 921, 925 (9th Cir. 1987).

32Vrijesh S. Tantuwaya MD, Inc. v. Anthem Blue Cross Life & Health Ins. Co.,

No. 15cv1671, 2016 WL 1253867, at *7 (S.D. Cal. Mar. 11, 2016) (quoting 5 U.S.C.

§ 8902(m)(1)).

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reference to such a plan.”33 Under FEHBA’s exemption provision, “state law—whether

consistent or inconsistent with federal plan provisions—is displaced on matters of

‘coverage or benefits’” under FEHBA.34

 Premera has identified the specific contract provisions between OPM and

BCBSA that relate to “payments with respect to benefits” that should preempt Alaska’s

Prompt Payment Statute. These provisions include ones that (1) specify the particular

remedies available in disputes over payments of FEHBA benefits, but that do not allow

for interest; (2) call for the processing of claims within time frames that are more lenient

than the thirty days required under the Prompt Pay Statute; and (3) allow Premera to

request information needed to demonstrate the claims are payable before Premera

pays a claim.

35

 Plaintiff argues that these contract provisions are procedural ones not

aimed at “coverage, benefits, or payments with respect to benefits” and thus do not

preempt the Prompt Pay Statute. 

The Fifth Circuit has held that other states’ prompt pay laws are preempted by

FEHBA insurance contracts with similar terms. In Burkey v. Government Employees

Hospital Association, the court held that Louisiana’s prompt pay statute calling for

penalties for delays in processing health insurance claims was preempted under

§ 8902(m)(1).36 It rejected the plaintiff’s argument that her claim for penalties against

the insurer under the state’s prompt pay law only related to remedies and not to matters

of coverage or benefits.37 The court stated that “[t]ort claims arising out of the manner

in which a benefit claim is handled are not separable from the terms of the contract that

33Botsford v. Blue Cross & Blue Shield of Mont., Inc., 314 F.3d 390, 394 (9th Cir. 2002).

34Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 686 (2006).

35Doc. 35 at p. 6.

36983 F.2d 656 (5th Cir. 1993).

37

Id. at 660.

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governs benefits.”38 The Fifth Circuit reasserted its preemption holding as to Texas’s

prompt pay law earlier this year. It stated that “[b]y imposing penalties for late

payments, [the state prompt pay law] mandates that insurers process and pay claims

within the set time periods,” and, as a result the law, “would directly affect the operation

of the plans and expand FEHBA carriers’ duties under the plans.”39

The Ninth Circuit has not specifically addressed preemption of a state prompt

pay law pursuant to FEHBA. However, in Hayes v. Prudential Insurance Co. of

America, the court examined whether the plaintiff’s state law claims, which involved “the

manner in which a benefit claim is handled,” were preempted pursuant to FEHBA.40 It

rejected the plaintiff’s argument that preemption does not apply to laws that deal with

how a claim is processed. Analogously, a state prompt pay law involves the manner in

which a benefit claim is handled, and therefore preemption is likewise proper.41 

Plaintiff argues that the Prompt Pay Statute is analogous to subrogation and

reimbursement laws and that such laws have not been preempted by FEHBA, citing a

Seventh Circuit case, Blue Cross Blue Shield of Illinois v. Cruz.

42

 However, as noted by

Premera, Plaintiff misconstrues the case law. Most federal courts have actually held

38

Id.

39Health Care Serv. Corp. v. Methodist Hosps. of Dallas, 814 F.3d 242, 255 (5th Cir.

2016).

40819 F.2d 921, 926 (9th Cir. 1987).

41Cf. Tantuwaya, 2016 WL 1253867, at *8 (holding that the plaintiff’s state law claim

that he was entitled to be paid for non-covered emergency room services based on California’s

Knox-Keene Health Care Service Act, which requires insurers to pay emergency room doctors

reasonable and customary value for the emergency services rendered to the insurer’s

enrollees, even if the service rendered is not covered under the insurance plan, was preempted

under § 8902(m)(1) because, while not a dispute about coverage under the contract terms, it

nonetheless related to the processing and administration of the enrollee’s claims and reasoning

that the application of the act would expand the obligations of the insured beyond the terms of

the contract).

42495 F.3d 510, 512 (7th Cir. 2007).

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that state laws regarding subrogation and reimbursement are preempted under

§ 8902(m)(1) because subrogation and reimbursement are tied directly to payments

with respect to benefits.43

 Furthermore, Cruz is inapplicable here because the Seventh

Circuit was not addressing whether the state law at issue—a common fund doctrine—

was related to health insurance plans and implicated coverage or benefit terms. 

Rather, it was dealing with the issue of whether § 8902(m)(1) conferred exclusive

federal jurisdiction by completely preempting any and all state laws that might implicate

a FEHBA health insurance plan. It rejected the insurer’s argument that FEHBA’s

preemption provision was broad enough to completely preempt any state law dealing

with insurance contracts, finding that § 8902(m)(1) was not a jurisdiction-conferring

provision. Indeed, after finding a lack of federal jurisdiction and sending the case back

to state court, the Seventh Circuit nonetheless recognized that the insurer could plead

FEHBA preemption in state court based on the insurance contract terms as a defense

to the plaintiff’s invocation of the state common fund doctrine.44 

Plaintiff also relies on a Supreme Court case, Empire Healthchoice Assurance,

Inc. v. McVeigh,

45

 for the proposition that the court should apply a limited reading of

§ 8902(m)(1). As with Cruz, however, Empire dealt with the jurisdictional doctrine of

complete preemption. It did not discuss the ordinary preemption issue presented here. 

Indeed, other courts have found Empire’s holding limited in its reach: “As we view

[Empire], the Supreme Court held only that federal common law did not displace the

entire area of state law involving ‘FEHBA-authorized contracts at large.’ The Court left

open the possibility that state law could be displaced more narrowly.”46

43See doc. 35 at p. 8.

44Cruz, 495 F.3d at 514.

45547 U.S. 677 (2006).

46Bell v. Blue Cross & Blue Shield of Okla., No. 14-3731, 2016 WL 3027487, at *5 (8th

Cir. May 26, 2016).

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Premera makes alternative arguments as to why the Prompt Pay Statute should

not apply here, including an argument that federal common law governs and an

argument that sovereign immunity prevents Plaintiff from suing Premera as to insurance

claims brought under the Service Benefit Plan. The court need not address these

arguments given that under FEHBA, 5 U.S.C. § 8902(m)(1), the Prompt Pay Statute is

preempted by the contract terms governing the Service Benefit Plan and therefore does

not apply to Plaintiff’s insurance claims for services provided to patients enrolled in the

Service Benefit Plan.

D. ERISA preemption of the Prompt Pay Statute as to insurance claims made

under self-funded ERISA benefit plans

Premera argues that ERISA’s preemption provision preempts Alaska’s Prompt

Pay Statute as to Plaintiff’s insurance claims for services rendered to patients enrolled

in self-funded, ERISA-governed benefit plans. ERISA contains a broad preemption that

“expressly preempts all state laws ‘insofar as they may now or hereafter relate to any

employee benefit plan.’”47

 ERISA’s preemption provision is limited by a “savings

clause.”48 Under the savings clause, a state law governing the insurance industry

escapes preemption. However, ERISA also contains a “deemer clause” that brings

laws that regulate self-funded ERISA benefit plans back within the scope of the

statute’s preemption provision.49 Application of the deemer clause means that a selffunded ERISA benefit plan cannot become subject to a state’s otherwise “saved”

insurance laws.50 Consequently, the Prompt Pay Statute would not apply to self-funded

47Cleghorn v. Blue Shield of Cal., 408 F.3d 1222, 1225 (9th Cir. 2005) (quoting 29

U.S.C. § 1144(a)).

4829 U.S.C. § 1144(b)(2)(A).

4929 U.S.C. § 1144(b)(2)(B).

50See Pilot Life Ins. Co v. Dedeaux, 481 U.S. 41, 45 (1987); FMC Corp. v. Holliday, 498

U.S. 52, 61 (1990). 

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health benefit plans if the statute is otherwise premempted under ERISA—that is, if it

“relates to” an employee benefit plan. 

A state statute “relates to” an employee benefit plan, and is therefore preempted,

if it has (1) a “reference to” ERISA plans or (2) a “connection with” such plans.51 A state

law has a “reference to” an ERISA plan when it “acts immediately and exclusively upon

ERISA plans” or when “the existence of ERISA plans is essential to the law’s

operation.”52

 A state law has an impermissible “connection with” ERISA plans, when

the law “‘governs . . . a central matter of plan administration’” or “‘interferes with

nationally uniform plan administration.’”53

The court concludes that Alaska’s Prompt Pay Statute has the requisite

connection with an ERISA health benefit plan. Indeed, “[c]ourts addressing the ERISA

pre-emption of claims brought under similar ‘prompt pay’ state statutes tend to find

preemption unless the claim for payment arises from an independent agreement

between provider and plan.”54 In America’s Health Ins. Plans v. Hudgens, the Eleventh

Circuit held that Georgia’s prompt-pay provision was preempted as applied to selffunded ERISA plans because the provision interfered with uniform administration of

benefits.55 It stressed that the while the law’s “requirements will not necessarily directly

alter the coverage decision-making process” it nonetheless “will compel certain action

(prompt benefit determination and payments) by plans and their administrators” and

51Gobeille v. Liberty Mut. Ins. Co., 136 S.Ct. 936, 943 (2016).

52

Id. (internal quotations omitted); Golden Gate Rest. Ass’n v. City & County of San

Francisco, 546 F.3d 639, 657 (9th Cir. 2008).

53Gobeille, 1326 S.Ct. at 943 (quoting Egelhoff v. Egelhoff, 532 U.S. 141, 148 (2001)).

54OSF Healthcare Sys. v. Contech Constr. Prods. Inc. Grp. Comprehensive Health Care,

No. 1:13-cv-01554, 2014 WL 4724394, at * 6 (C.D. Ill. Sept. 23, 2014).

55742 F.3d 1319 (11th Cir. 2014).

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“impact the amount paid to beneficiaries in the case of late payment or notice.”56

Consequently, “employers offering self-funded health benefit plans would be faced with

different timeliness obligations in different states, thereby frustrating Congress’s

intent.”57 Similarly, Alaska’s Prompt Pay Statute compels payment timeframes and

impacts the amount paid by an employer to a claimant under a self-funded ERISA plan,

and therefore the reasoning set forth in Hudgens is applicable here. Plaintiff did not

cite any Ninth Circuit authority that specifically conflicts with Hudgens or would

otherwise suggest that the reasoning behind Hudgens should not apply here. 

E. Standing to bring HIPAA action as to Service Benefit Plan insurance claims

Premera argues that Count II should be dismissed as to Plaintiff’s insurance

claims that were filed for laboratory services rendered to patients enrolled in the Service

Benefit Plan because Plaintiff does not have standing to bring such an action as to

these claims. It argues that Plaintiff does not have standing because the requested

remedy—a declaration that ZMG has submitted all laboratory insurance claims at issue

with the proper [code] in Box 32 as is consistent with HIPAA—will not redress the injury

here. According to Premera, even if ZMG is checking Box 32 correctly, those claims

still need to be filed with Blue Cross and Blue Shield of Tennessee (“BCBST”) to

receive payment. Originally, Premera did not provide any support for its argument that

these insurance claims need to be submitted to BCBST, but with the court’s permission

Premera filed supplemental documents that it claims support its assertion, along with

additional briefing on the matter of standing.

58 Plaintiff filed a response to Premera’s

filing.

59

 Plaintiff disputes Premera’s interpretation of the documents submitted; he

stresses that the provisions Premera relies on to support its argument are not

56

Id. at 1331.

57

Id.

58Doc. 39.

59Doc. 41.

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applicable to insurance claims involving out-of-state physician office laboratories where

the physician-patient encounter occurs in Alaska. After due consideration of both

parties’ filings, the court cannot conclude at this motion-to-dismiss stage that the

documents provided are sufficient to demonstrate that the Service Benefit Plan

insurance claims at issue must be filed in Tennessee. It appears that resolving the

issue of where Service Benefit Plan insurance claims should be filed is intertwined and

overlaps with the underlying issue in Count II—whether ZMG is properly coding its

insurance claims under HIPAA. Resolving Count II will involve a determination as to

the proper classification of ZMG’s Tennessee laboratory and consideration of whether

the location of the face-to-face contact between physician and patient is determinative. 

Those are factual and legal issues that also impact where the insurance claims should

be filed based on the controlling contracts and procedure manuals provided by Premera

in its supplemental filing. The court cannot conclude, as Premera argues, that resolving

the coding issue will not affect how Premera processes and pays Plaintiff’s laboratory

claims. As Plaintiff points out, there are facts alleged in the complaint and in the

correspondence attached to the complaint that suggest otherwise.60 Moreover, even if

Plaintiff files these types of insurance claims with BCBST, he contends that he is legally

required under HIPAA and its related regulations and rules to fill out Box 32 with Alaska

listed as the laboratory service location as he has been doing. If that is the case,

BCBST would not pay the claim either. 

Premera also asserts that Count II “offers no tangible relief on its own” if the

court concludes that the Prompt Pay Statute is preempted pursuant to FEHBA as to

Service Benefit Plan insurance claims, as it has here. It argues that because Count II

includes the allegation that Premera is using the Box 32 issue as a pretext to avoid the

Prompt Pay Statute and because the application of the Prompt Pay Act to Service

Benefit Plan insurance claims is preempted by FEHBA, there is no remaining

60See Doc. 23 at p.6, ¶¶ 34-35; Doc. 23-1 at p.2.

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substantive dispute between the parties as to these types of insurance claims. The

court, however, is not persuaded by Premera’s argument that there is no longer a

substantive dispute as it relates to HIPAA and Service Benefit Plan insurance claims. 

As Plaintiff notes in its response to Premera’s supplemental filing, the complaint

alleges, and the correspondence between the parties shows, that Premera has

represented to Plaintiff that ZMG’s prepayment review status will only be lifted once

ZMG properly fills out the HCFA 1500 form. Therefore, resolution of the coding issue is

necessary before Plaintiff can receive payment on these insurance claims, regardless

of the Prompt Pay Statute.61 

V. CONCLUSION

Based on the preceding discussion, Premera’s motion to dismiss at docket 26 is

GRANTED IN PART AND DENIED IN PART as follows: Count I is dismissed only as to

insurance claims filed in relation to patients enrolled in the Service Benefit Plan and

insurance claims filed in relation to patients enrolled in self-funded ERISA health benefit

plans. Count II remains in its entirety. 

DATED this 16th day of August 2016.

/s/ JOHN W. SEDWICK

SENIOR JUDGE, UNITED STATES DISTRICT COURT

61See Doc. 23 at p.6, ¶¶ 34-35; Doc. 23-1 at p. 2.

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