IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 15-10154

HEALTH CARE SERVICE CORPORATION, an Illinois Mutual Legal Reserve 

Company, 

 Plaintiff - Appellee

v.

METHODIST HOSPITALS OF DALLAS, a Texas Corporation doing business 

as Methodist Health System, 

 Defendant - Appellant

Appeal from the United States District Court

for the Northern District of Texas

Before SMITH, WIENER, and GRAVES, Circuit Judges.

WIENER, Circuit Judge:

A Texas statute—Chapter 1301 of the Texas Insurance Code1—requires 

healthcare insurers to make coverage determinations and pay claims made by 

preferred healthcare providers within a specified time or face penalties. 

Plaintiff-Appellee Health Care Service Corporation (“HCSC”) filed this action 

for a declaratory judgment against Defendant-Appellant Methodist Hospitals 

of Dallas (“Methodist”), seeking inter alia a declaration that (1) Chapter 1301 

does not apply to HCSC as the administrator of particular health plans, and

 

1 TEX. INS. CODE § 1301.

United States Court of Appeals

Fifth Circuit

FILED

February 10, 2016

Lyle W. Cayce

Clerk

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(2) the Federal Employee Health Benefits Act of 1959 (“FEHBA”), 5 U.S.C. § 

8901, et seq., preempts application of the statute to its administration of claims 

under the Federal Employees Health Benefits Program (“FEHBP”). The 

district court granted summary judgment in favor of HCSC, holding that 

Chapter 1301 does not apply to HCSC as the administrator of the plans at issue

and that FEHBA preempts Chapter 1301’s application to claims under FEHBP 

plans administered by HCSC. We affirm.

I.

A.

Texas Insurance Code, Chapter 1301 applies exclusively to preferred 

provider plans.2 It requires insurers receiving a “clean claim” to determine,

within specified times, whether the claim is payable: 45 days for non-electronic 

claims and 30 days for electronic claims. Within these times, such insurers 

must either (1) pay the claim, (2) partially pay and partially deny the claim 

and notify the provider in writing of the reason for partial denial, or (3) deny 

the claim in full and notify the provider in writing of the reason for denial.3

The Texas statute imposes a range of penalties for late payments of claims 

determined to be payable.4

The statute’s express applicability provision—section 1301.0041—states 

that “this chapter applies to each preferred provider benefit plan in which an 

 

2 Together, Texas Insurance Code Chapters 843 (applicable to health maintenance 

organizations) and 1301 (applicable to preferred provider plans) comprise the Texas Prompt 

Pay Act. The instant case implicates only Chapter 1301.

3 TEX. INS. CODE § 1301.103.

4 Id. § 1301.137(a) (imposing penalties when “a clean claim submitted to an insurer is

payable and the insurer does not determine . . . that the claim is payable and pay the claim 

on or before the date the insurer is required to make a determination or adjudication of the 

claim”). The statute does not provide any recourse for coverage determinations that occur 

after the 30- or 45-day deadlines but result in a determination that the claim is not payable. 

Accordingly, the statute imposes penalties only for late payment of approved claims.

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insurer provides, through the insurer's health insurance policy, for the 

payment of a level of coverage that is different depending on whether an 

insured uses a preferred provider or a nonpreferred provider.”5 Separately, 

section 1301.109 extends the statute’s coverage to administrators with whom 

insurers contract: “This subchapter applies to a person, including a pharmacy 

benefit manager, with whom an insurer contracts to: (1) process or pay claims; 

(2) obtain the services of physicians and health care providers to provide health 

care services to insureds; or (3) issue verifications or preauthorizations.”6

The statute defines “preferred provider benefit plan” as “a benefit plan 

in which an insurer provides, through its health insurance policy, for the 

payment of a level of coverage that is different from the basic level of coverage 

provided by the health insurance policy if the insured person uses a preferred 

provider.”7 It defines “insurer” as “a life, health, and accident insurance 

company, health and accident insurance company, health insurance company, 

or other company operating under Chapter 841, 842, 884, 885, 982, or 1501, 

that is authorized to issue, deliver, or issue for delivery in this state health 

insurance policies.”8 The statute defines “health insurance policy” as “a group 

or individual insurance policy, certificate, or contract providing benefits for 

medical or surgical expenses incurred as a result of an accident or sickness.”9

B.

HCSC is a mutual legal reserve company that operates in Texas as Blue 

Cross and Blue Shield of Texas (“BCBSTX”), a division of HCSC. Methodist is 

a healthcare provider that has a preferred provider agreement with HCSC, 

 

5 Id. § 1301.0041(a).

6 Id. § 1301.109.

7 Id. § 1301.001(9).

8 Id. § 1301.001(5).

9 Id. § 1301.001(2).

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according to which Methodist agrees to provide medical services to patients 

who have health plans either insured or administered by HCSC.

BCBSTX acts in various roles, two of which are relevant in this case: (1) 

It administers some plans that expressly assume the risk of medical costs and 

establish their own benefit plans, and (2) it services benefit plans for federal 

employees in Texas, pursuant to the FEHBP, under the Blue Cross and Blue 

Shield Service Benefit Plan, known as the Federal Employee Program.

(BCBSTX also operates as a direct insurer, selling fully insured plans and 

assuming the risk of medical costs. None of the claims at issue here, however, 

implicate the fully insured plans offered by BCBSTX.)

In the first category, BCBSTX acts as the administrator for (1) employer 

self-funded plans, (2) state government plans, and (3) claims arising under the 

BlueCard program. When BCBSTX administers self-funded plans and state 

government plans, it enters into administrator agreements with such plans to 

perform administrative services only. Those services include processing claims, 

providing customer service, linking beneficiaries to providers, and making 

medical-necessity determinations. The plans, not BCBSTX, must bear the risk 

of medical costs.10

As for BlueCard claims administered by BCBSTX, the BlueCard 

program allows beneficiaries covered by out-of-state Blue Cross and Blue 

Shield plans to access their coverage when receiving medical services in a state 

 

10 “Under a self-funded benefit plan, an employer assumes the risk of providing health 

insurance to its employees, instead of ceding the risk to a third-party insurance company. 

The employer then either sets aside funds for its employees’ covered medical expenses or pays 

for such expenses out of its general accounts.” Tex. Dep’t of Ins. v. Am. Nat’l Ins. Co., 410 

S.W.3d 843, 846 (Tex. 2012). See also id. at 848 (“Employers who self fund their employee 

health-benefit plans are clearly not insurance companies, but they perform a similar 

service.”).

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other than the one in which their plans are based. If, for example, an out-ofstate Blue Cross beneficiary receives medical care in Texas, the medical 

provider submits a claim to BCBSTX, which forwards the claim to the 

beneficiary’s out-of-state Blue Cross plan. That out-of-state Blue Cross plan 

makes a coverage determination, then returns the claim to BCBSTX to pay the 

claim if there is coverage. Finally, the out-of-state plan reimburses BCBSTX 

for any payments made on its behalf.

In the second category, BCBSTX’s only obligation is to service FEHBP 

plans. FEHBA provides health benefits for federal employees.11 Under 

FEHBA, the federal Office of Personnel Management (“OPM”) negotiates plans 

with various insurers. Relevant here, the OPM12 and the Blue Cross and Blue 

Shield Association contracted to form the Federal Employee Program to 

provide health benefits plans for federal employees. Local affiliates of Blue 

Cross administer the plans within such affiliates’ states. In Texas, BCBSTX, 

as a licensee of the Blue Cross and Blue Shield Association, processes claims 

and provides customer service for members of the Federal Employee Program.

Under this scheme, the federal government pays about 75% of the premiums 

and the enrollees pay the remainder.13 These premiums are paid into the U.S.

 

11 See 5 U.S.C. §§ 8901-8914. 12 FEHBA gives the OPM the responsibility to negotiate and regulate federal 

employees’ health benefit plans. See id. § 8902(a).

13 Id. § 8906(b); see also Empire Healthchoice Assur., Inc. v. McVeigh, 547 U.S. 677, 

684 (2006).

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Treasury Employees Health Benefits Fund.14 BCBSTX draws from this fund 

to pay for both covered benefits and administrative costs.15

C.

Anticipating that Methodist would seek relief under Chapter 1301 for 

the late payments of its claims, HCSC filed this action for, relevantly, a 

declaration that (1) Chapter 1301 of the Texas Insurance Code does not apply 

to HCSC’s administration of self-funded plans, state government plans, or 

claims under the BlueCard program, (2) the Employee Retirement Income 

Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001, et seq., preempts Chapter 

1301’s application to claims arising under self-funded ERISA plans, and (3)

FEHBA preempts Chapter 1301’s application to claims arising from FEHBP

plans. Methodist asserted a counterclaim for over $31 million in penalties, 

interest, and attorneys fees under Chapter 1301 attributable to BCBSTX’s 

alleged late payment of approved claims.

HCSC moved for summary judgment on all claims and counterclaims. In 

granting HCSC’s motion, the district court held that (1) Chapter 1301 does not 

apply to BCBSTX’s administration of the plans at issue, and (2) FEHBA 

preempts application of Chapter 1301 to Methodist’s claims arising from 

FEHBA-governed plans. Because it found that Chapter 1301 does not apply to

BCBSTX’s administration of the self-funded plans, the district court did not 

address whether ERISA preempts such application. Methodist filed a motion 

for reconsideration, which the district court denied.

 

14 5 U.S.C. § 8909(a) (“There is in the Treasury of the United States an Employees 

Health Benefits Fund which is administered by the Office of Personnel Management. The 

contributions of enrollees and the Government described by section 8906 of this title shall be 

paid into the Fund.”).

15 Id. (“The Fund is available—(1) . . . for all payments to approved health benefits 

plans; and (2) to pay expenses for administering this chapter . . . .”).

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II.

A.

We review a district court’s summary judgment de novo.16 We review the 

facts in the light most favorable to the non-moving party.17 Summary judgment 

is appropriate only when there is no genuine dispute of material fact and the 

moving party is entitled to judgment as a matter of law.18

B.

We first consider whether Chapter 1301 applies to BCBSTX’s 

administration of the plans at issue. HCSC contends that Chapter 1301 does 

not apply to BCBSTX’s administration of self-funded plans, state government 

plans, or claims under the BlueCard program because (1) BCBSTX is not an 

“insurer” providing coverage through its “health insurance policy” under 

Chapter 1301’s general applicability section, and (2) BCBSTX is not a “person” 

with whom an “insurer” is contracting to perform administrative services

under section 1301.109.

Methodist counters that Chapter 1301’s definition of “insurer” is broad 

enough to encompass BCBSTX’s activities, even when it acts only as an 

administrator. Methodist further asserts that, individually or collectively, 

BCBSTX’s administrator agreements and preferred-provider agreements 

constitute “health insurance policies” under Chapter 1301.

We are convinced that BCBSTX neither provides for coverage through 

its “health insurance policy” when it administers the plans at issue here, nor 

is a “person” with whom an “insurer” contracts to perform administrative 

 

16 Martinez v. Tex. Workforce Comm’n—Civil Rights Div., 775 F.3d 685, 687 (5th Cir. 

2014).

17 Id.

18 Id. (quoting FED. R. CIV. P. 56(a)).

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services. We therefore hold that Chapter 1301 is not applicable to BCBSTX’s 

activities as administrator of the self-funded plans or state government plans, 

nor to those activities that it performs as administrator of claims under the

BlueCard program.

1.

Texas law governs this issue. We review determinations of state law de 

novo.19 When interpreting a Texas statute, we follow “the same rules of 

construction that a Texas court would apply—and under Texas law the 

starting point of our analysis is the plain language of the statute.”20 Texas 

courts aim “to determine and give effect to the Legislature’s intent” when 

construing a statute.21 When a statute is clear and unambiguous, Texas courts 

“apply its words according to their common meaning in a way that gives effect 

to every word, clause, and sentence.”22 If a “statute’s words are unambiguous 

and yield a single inescapable interpretation, the judge’s inquiry is at an 

end.”23 When a statute defines a term, the “court is bound to construe that term 

by its statutory definition only.”24 Further, the court should consider a 

provision in the context of the broader statute because “[o]nly in the context of 

the remainder of the statute can the true meaning of a single provision be made 

clear.”25

 

19 See Salve Regina Coll. v. Russell, 499 U.S. 225, 239 (1991) (“The obligation of 

responsible appellate review and the principles of a cooperative judicial federalism 

underlying Erie require that courts of appeals review the state-law determinations of district 

courts de novo.”). 20 Wright v. Ford Motor Co., 508 F.3d 263, 269 (5th Cir. 2007).

21 Am. Nat’l Ins. Co., 410 S.W.3d at 853.

22 Id. (quotation marks and citation omitted).

23 Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644, 651–52 (Tex. 2006).

24 Tex. Dep’t of Transp. v. Needham, 82 S.W.3d 314, 318 (Tex. 2002).

25 Bridgestone/Firestone, Inc. v. Glyn-Jones, 878 S.W.2d 132, 133 (Tex. 1994).

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2.

We first determine whether Chapter 1301’s express applicability 

provision makes that statute applicable to BCBSTX’s relevant roles in this 

case. Chapter 1301 applies expressly “to each preferred provider benefit plan 

in which an insurer provides, through the insurer’s health insurance policy, for 

the payment of a level of coverage . . . .”26 Thus, we must determine whether 

BCBSTX, acting in its capacity as an administrator, is an “insurer” and 

whether it provides coverage through its “health insurance policy.”

Chapter 1301 defines “insurer” as “a life, health, and accident insurance 

company, health and accident insurance company, health insurance company, 

or other company operating under Chapter 841, 842, 884, 885, 982, or 1501, 

that is authorized to issue, deliver, or issue for delivery in this state health 

insurance policies.”27 The parties agree that BCBSTX operates generally as a 

licensed insurance carrier under Chapter 841 and that it is authorized to issue 

health insurance policies in Texas. Thus, BCBSTX would seem to fit Chapter 

1301’s definition of “insurer.” BCBSTX insists, however, that it is not an 

“insurer” under Chapter 1301 when, as here, it acts only as an administrator. 

Instead, notes BCBSTX, it operates under a different chapter—Chapter 4151 

of the Texas Insurance Code—when only administering plans. It observes that 

Chapter 4151 is not one of the chapters enumerated in Chapter 1301’s 

definition of insurer. Resolving the parties’ opposing contentions is not 

necessary, however, because we conclude that Chapter 1301 is inapplicable for 

a different reason.

 

26 TEX. INS. CODE § 1301.0041(a).

27 Id. § 1301.001(5).

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Even if BCBSTX is an “insurer” under Chapter 1301, it does not provide 

payments through its “health insurance policy” when it is administering the 

plans here at issue. Methodist insists that subsection 1301.0041(a)’s 

“provides . . . for . . . payment” language is broad enough to encompass the 

actions of an administrator that merely facilitates payment and does not have

the financial burden of payment. Under this reasoning, Methodist relies on the 

common definition of “provide” because the statute does not define this term.

Methodist contends further that BCBSTX maintains a “health insurance 

policy” under Chapter 1301. It urges us to hold that, individually or 

collectively, BCBSTX’s administrator agreements and preferred provider 

network agreements constitute a “health insurance policy.”28

First, Methodist reads Chapter 1301’s “provides . . . for . . . payment” 

language too broadly. When referring to payments made by administrators,

Chapter 1301 does not use these quoted words, but instead describes those acts 

of administrators with the words, “process or pay claims.”29 This suggests that 

subsection 1301.0041(a)’s “provides . . . for . . . payment” language does not 

encompass payments by others that are merely distributed by an 

administrator.

But even accepting, arguendo, Methodist’s insistence that subsection

1301.0041(a)’s “provides . . . for . . . payment” language is broad enough to 

encompass an administrator’s payment of claims on behalf of a self-funded 

plan, Methodist’s reasoning still fails: BCBSTX does not make payments 

 

28 In support of its argument to read the two agreements as a single contract, 

Methodist relies on a federal district court decision in which the court relied on a “single 

unified contract theory” to conclude that a claims administrator was in privity of contract 

with a healthcare provider. See Baylor Univ. Med. Ctr. v. Epoch Group, L.C., 340 F. Supp. 2d 

749 (N.D. Tex. 2004).

29 See TEX. INS. CODE § 1301.109.

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through its “health insurance policy” as defined by Chapter 1301. Under that 

chapter, a “health insurance policy” means “a group or individual insurance 

policy, certificate, or contract providing benefits for medical or surgical 

expenses incurred as a result of an accident or sickness.”30 Importantly, a 

health insurance policy must provide benefits for medical or surgical expenses. 

Here, as the parties agree, BCBSTX’s preferred provider agreements set out, 

inter alia, the reimbursement rate for services rendered by providers to 

beneficiaries, and the administrator agreements establish BCBSTX’s duties as 

administrator, consisting of, for example, making coverage determinations and 

paying claims. Whether read together or separately, the provider and 

administrator agreements provide no benefits for medical or surgical expenses. 

Instead, any benefits furnished to beneficiaries derive from the plans of others,

wholly independent of any contractual relationship with BCBSTX. Simply put, 

BCBSTX, as an administrator, does not confer any benefits for medical 

expenses on beneficiaries and therefore does not provide for payment through 

its “health insurance policy.”31

Our conclusion that BCBSTX does not provide benefits through its 

administrator and preferred provider agreements, but instead merely 

distributes claim payments from plans to providers, is consistent with the text 

of Chapter 1301. That text clearly distinguishes between the provision of 

“benefits” to beneficiaries and the payment of “claims” to providers, by using 

the word “benefit” in relation to insureds, not providers. For example, 

 

30 Id. § 1301.001(2).

31 Methodist also contends that in subsection 1301.001(2)’s definition of “insurer,” the 

word “insurance” modifies only “policy,” and that therefore any “certificate” or “contract” can 

also be a “health insurance policy” under Chapter 1301. Even if this reasoning is correct, this

argument ignores that definition’s operative words: “providing benefits for medical or 

surgical expenses.”

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subsection 1301.001(1) refers to “benefits to an insured.” Likewise, section

1301.005 requires that “preferred provider benefits and basic level benefits are 

reasonably available to all insureds . . . .” In contrast, when describing 

payments of claims to providers, Chapter 1301 uses the term “payment of 

claims,” not “payment of benefits.”32

Methodist also argues that BCBSTX provides coverage through its 

“health insurance policy” because it acts as a stop-loss insurer for some of the 

plans it administers and therefore acts as a direct insurer. In Brown v. 

Granatelli,33 we cautioned in dicta that a stop-loss insurance policy could 

qualify as an accident-and-sickness policy subject to regulation as direct 

insurance if its coverage kicked in at an unreasonably low dollar amount.34

Here, HCSC provides stop-loss insurance for some of the self-funded plans 

from which Methodist’s claims for penalties arise. Methodist now speculates 

that if HCSC’s stop-loss insurance is triggered at unreasonably low amounts, 

it should be considered an “insurer” under Chapter 1301.

Methodist’s argument fails on the facts. Methodist points to no evidence 

in the record suggesting that HCSC’s stop-loss insurance triggers at 

unreasonably low amounts.

 

32 See, e.g., TEX. INS. CODE § 1301.139 (using the language “payment of claims to 

preferred providers”); id. § 1301.109 (using the language “pay claims”); id. § 1301.103 

(referring to “whether the claim is payable”); id. § 1301.137(a) (using “claim is payable” and 

“pay the claim” language to describe payments to providers).

33 897 F.2d 1351 (5th Cir. 1990).

34 Id. at 1355 (“We do not suggest that Article 3.70-2(E) can be avoided by naming an 

employee benefit plan as the insured on a policy which in reality insures the plan 

participants. If, for example, a plan paid only the first $500 of a beneficiaries’ health claim, 

leaving all else to the insurer, labeling its coverage stop-loss or catastrophic coverage would 

not mask the reality that it is close to a simple purchase of group accident and sickness 

coverage.”).

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We conclude that BCBSTX does not provide for payment through its 

health insurance policy when it only administers the plans at issue. We

therefore hold that subsection 1301.0041(a) is inapplicable.

3.

Having determined that Chapter 1301’s express applicability section 

does not apply to BCBSTX when it administers self-funded plans or state 

government plans, or when it processes claims under the BlueCard program,

we next examine whether Chapter 1301 applies to BCBSTX by virtue of section 

1301.109. That section extends Chapter 1301 “to a person . . . with whom an 

insurer contracts to” perform certain administrative services.35 Thus, for 

section 1301.109 to apply, the self-funded plans, state government plans, and 

out-of-state BlueCard plans must operate as “insurers” under Chapter 1301.

The self-funded plans and state government plans are not insurers under 

subsection 1301.001(5) because they do not operate under any of that 

subsection’s enumerated provisions. Neither are they authorized to issue, 

deliver, or issue for delivery health insurance policies in Texas.36 Accordingly, 

BCBSTX is not an entity with which an “insurer” contracts in relation to these 

plans, and section 1301.109 is therefore inapplicable. This reasoning applies 

with equal force when BCBSTX administers claims under the BlueCard 

program for out-of-state Blue Cross plans administered or insured by out-ofstate insurers.

 

35 TEX. INS. CODE § 1301.109 (emphasis added) (extending Chapter 1301 “to a 

person . . . with whom an insurer contracts to: (1) process or pay claims; (2) obtain the 

services of physicians and health care providers to provide health care services to insureds; 

or (3) issue verifications or preauthorizations”).

36 Id. § 1301.001(5); see also Am. Nat’l Ins. Co., 410 S.W.3d at 849 (“[S]elf-funded 

employee health-benefit plans . . . are not regulated like insurance companies.”); id. at 849 

n.5 (noting that Texas law exempts self-funded plans of governmental entities from 

regulation).

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In its reply brief, Methodist contends—for the first time—that section

1301.109 applies to BCBSTX’s administration of an indeterminate subset of 

BlueCard claims in which an out-of-state division of HCSC—as opposed to a 

separate independent licensee of the Blue Cross and Blue Shield Association—

administers or insures the out-of-state plan.37 Under this reasoning, Methodist 

contends that section 1301.109 applies to such claims because the out-of-state 

plan is issued by an “insurer” under Chapter 1301, given that HCSC is a 

licensed Texas insurer through its BCBSTX division.

We note initially that Methodist points to no evidence in the record 

demonstrating that any of its claims for late payment arise from claims that 

BCBSTX administered on behalf of out-of-state plans insured by one of HCSC’s

other operating divisions. At this late stage, Methodist points only to the fact 

that HCSC administers and insures Blue Cross plans in Illinois, Montana, 

New Mexico, and Oklahoma.

More problematic is the fact that Methodist’s initial appellate brief 

challenges only the district court’s determination that Chapter 1301 does not 

apply to BCBSTX’s administration of self-funded plans. It raises no challenge

to the district court’s holding that Chapter 1301 does not apply to BCBSTX’s 

processing of claims under the BlueCard program. This alone constitutes a 

waiver of the right to have us review this issue.38 Furthermore, Methodist 

never advanced this argument or presented evidence on this issue before the 

district court, either in its motion for summary judgment or its motion for 

 

37 Because HCSC operates in only five states—Texas, Illinois, Montana, New Mexico, 

and Oklahoma—Methodist’s new theory would implicate only BlueCard claims processed by 

BCBSTX on behalf of one of HCSC’s divisions in those states. 38 See DSC Commc’ns Corp. v. Next Level Commc’ns, 107 F.3d 322, 327 n.2 (5th Cir. 

1997) (“[I]t is clear that a party who fails to raise an issue in its initial brief waives the right 

to review of that issue . . . .”).

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reconsideration.39 In fact, Methodist never even invoked section 1301.109 as a 

basis for applying Chapter 1301 to BCBSTX or attempted to draw any 

distinction between out-of-state Blue Cross plans operated by independent 

licensees and those operated by divisions of HCSC. Raising this new theory 

now, Methodist attempts to take a prohibited additional bite of the apple. It 

suffices that, because it failed to raise this argument until filing its appellate 

reply brief, Methodist has waived it.

4.

Finally, we observe that Methodist’s construction of Chapter 1301 is 

incredibly strained in light of the overall structure of the statute. Chapter 

1301’s express applicability section—section 1301.0041—applies generally to 

“insurers,” and another section—section 1301.109—extends Chapter 1301 to 

administrators with whom “insurers” contract. Methodist does not urge that 

Chapter 1301 applies directly to the plans at issue; neither does it urge that 

Chapter 1301 applies to administrators of self-funded plans under Chapter 

1301’s provision that extends the statute to administrators. Instead, Methodist

claims that Chapter 1301 applies to administrators of the plans only when 

those administrators also happen to operate as insurers. Under Methodist’s

proffered construction, Chapter 1301 (1) would apply to administrators that 

are not otherwise insurers of insured plans under section 1301.109, (2) would 

apply to administrators that are otherwise insurers of self-funded plans under 

 

39 See Singleton v. Wulff, 428 U.S. 106, 120 (1976) (“It is the general rule, of course, 

that a federal appellate court does not consider an issue not passed upon below.”); Celanese 

Corp. v. Martin K. Eby Const. Co., 620 F.3d 529, 531 (5th Cir. 2010) (“The general rule of this 

court is that arguments not raised before the district court are waived and will not be

considered on appeal.”); Local Union No. 59 v. Namco Elec., Inc., 653 F.2d 143, 146 (5th Cir. 

1981) (“We are constrained to review only those exhibits, depositions, and affidavits that were 

presented to, and considered by, the trial court. The court of appeals is not the proper forum 

in which to present new facts or proffer new evidence.”).

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section 1301.0041(a), and (3) would not apply to administrators that are not 

otherwise insurers of self-funded plans.

This result makes no sense. First, Methodist leaves unexplained why the 

legislature would choose to expressly extend Chapter 1301 to administrators 

of insured plans under section 1301.109, but not extend it to administrators of 

self-funded plans in the same way. Section 1301.109 could, for example, apply 

to “a person . . . with whom an insurer [or self-funded plan] contracts.” Second, 

Methodist also leaves unexplained why the legislature would extend Chapter 

1301 to administrators of insured plans, regardless of whether the 

administrator otherwise operates as an insurer, but choose to extend Chapter 

1301 to administrators of self-funded plans only when such administrators 

otherwise operate as insurers.

Based on our plain reading of the statute, we affirm the district court’s 

ruling that Chapter 1301 is inapplicable to BCBSTX when it administers selffunded plans, state government plans, and claims under the BlueCard 

program.40

C.

We turn finally to the separate question whether FEHBA preempts 

Chapter 1301’s application to claims arising under FEHBP plans processed by 

BCBSTX.

FEHBA contains an express preemption provision:

 

40 The parties also point to the legislative history of Chapter 1301 and the Texas 

Department of Insurance’s interpretation of Chapter 1301. Finding that the statute is 

unambiguous, we do not rely on these interpretative aids. See City of Round Rock v. 

Rodriguez, 399 S.W.3d 130, 137 (Tex. 2013) (“When a statute is clear and unambiguous, we 

do not resort to extrinsic aides such as legislative history to interpret the statute.”). For the 

same reason, we decline Methodist’s invitation to certify this issue to the Texas Supreme 

Court.

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

nature, provision, or extent of coverage or benefits (including 

payment 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.41

“The policy underlying § 8902(m)(1) is to ensure nationwide uniformity of the 

administration of FEHBA benefits.”42 But, “Section 8902(m)(1)’s text does not 

purport to render inoperative any and all state laws that in some way bear on 

federal employee-benefit plans.”43 As articulated by the Second Circuit, 

preemption occurs under FEHBA when (1) “the FEHBA contract terms at issue 

‘relate to the nature, provision, or extent of coverage or benefits,’” and (2) the 

state law relates to health insurance or plans.44 The parties dispute only 

whether the second prong of this test is met.

Holding that FEHBA preempts Methodist’s Chapter 1301 claims arising 

out of FEHBP plans, the district court determined that Chapter 1301 relates 

to the plans because Methodist asserts its rights to statutory penalties under 

Chapter 1301, application of which depends on the way that such claims are 

processed under the Federal Employee Program. The district court relied on 

the declaration of an HCSC employee who indicated that when a provider 

submits a claim, the Federal Employee Program Direct System makes a 

coverage determination, which is then communicated to BCBSTX. Only then 

does BCBSTX process the claim in accordance with that determination.45 On 

 

41 5 U.S.C. § 8902(m)(1).

42 Burkey v. Gov’t Emps. Hosp. Ass’n, 983 F.2d 656, 660 (5th Cir. 1993).

43 McVeigh, 547 U.S. at 698.

44 Empire HealthChoice Assur., Inc. v. McVeigh, 396 F.3d 136, 145 (2d Cir. 2005), aff’d, 

547 U.S. 677 (2006) (quoting 5 U.S.C. § 8902(m)(1)). 45 The affidavit also provides that the Federal Employee Program is subject to “claims 

timeliness requirements,” including the OPM’s requirement that 95% of claims be paid 

within 30 days.

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this basis, the district court concluded that Methodist’s demand for penalties 

under Chapter 1301 for claims paid through this mechanism relates to and 

depends on the provisions of the FEHBP plan.

In Burkey v. Government Employees Hospital Ass’n, we addressed a 

similar issue. There, a beneficiary asserted a Louisiana state-law claim for 

unreasonable delay in paying health and accident insurance claims against an 

authorized insurance carrier under FEHBA. We rejected the beneficiary’s 

argument that the claim was not preempted because it related only to remedies 

and not to the nature or extent of coverage of benefits: “No such distinction can 

sensibly be made. Tort claims arising out of the manner in which a benefit 

claim is handled are not separable from the terms of the contract that governs 

benefits.”46 In sum, “[i]nsofar as the . . . claim for statutory delay damages 

necessarily refers to [the] plan to determine coverage and whether the proper 

claims handling process was followed, it refers to the plan, ‘relates to’ it and is 

therefore preempted.”47 We also noted that preemption was required because 

“imposition of Louisiana statutory penalties would invariably expand [the 

carrier’s] obligations under the terms of its plan and would foster interstate 

conflicts in coverage.”48

Attempting to distinguish Burkey, Methodist argues that Chapter 1301 

does not “relate to” FEHBP plans because it permits a claim for statutory 

penalties only after an affirmative coverage decision and therefore requires no 

inquiry into any substantive coverage determination.49 But this reasoning

 

46 Burkey, 983 F.2d at 660.

47 Id.

48 Id.

49 Methodist also relies on a number of cases in which courts conducted complete 

preemption analyses under FEHBA. Because complete preemption relates to federal 

jurisdiction and requires an inquiry different from that present here, Methodist’s reliance on 

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ignores the effect of Chapter 1301: By imposing penalties for late payments of 

approved claims, Chapter 1301 also imposes claims-processing deadlines on

FEHBP carriers.50 As in Burkey, imposition of Chapter 1301’s penalties would 

expand FEHBP carriers’ duties under the plans and force them to comply with 

divergent state deadlines for claims processing and payment. Further, any 

inquiry under Chapter 1301 requires an inquiry into how an FEHBP carrier 

administers a plan under its contract with the OPM.

Although Methodist fails to acknowledge the effect of Chapter 1301, its 

impact on FEHBP carriers is clear. As noted above, section 1301.103 requires 

insurers receiving a “clean claim” first to “make a determination of whether the 

claim is payable” within 45 days for nonelectronic claims and 30 days for 

electronic claims, then either (1) pay the claim, (2) partially pay and partially 

deny the claim and notify the provider in writing of the reason for partial 

denial, or (3) deny the claim and notify the provider in writing of the reason for 

denial.51 By imposing penalties for late payments, Chapter 1301 mandates 

that insurers process and pay claims within the set time periods.52

 

these cases is unavailing. See Pellicano v. Blue Cross Blue Shield Ass'n, 540 F. App'x 95, 99 

(3d Cir. 2013) (disregarding a party’s reliance on cases concerning “§ 8902(m)(1)'s effect on 

federal jurisdiction, not whether FEHBA preemption provides a substantive defense to a 

particular state law claim that is properly brought in federal court”).

50 See America’s Health Ins. Plans v. Hudgens, 742 F.3d 1319, 1331 (11th Cir. 2014) 

(rejecting the argument that Georgia’s prompt pay statute is not preempted by ERISA 

because it does not impact substantive coverage determinations because although the

“requirements will not necessarily directly alter the coverage decision-making process, . . . 

they will compel certain action (prompt benefit determinations and payments) by plans and 

their administrators” (emphasis in original)).

51 TEX. INS. CODE § 1301.103 (emphasis added). 52 See America’s Health Ins. Plans v. Hudgens, 915 F. Supp. 2d 1340, 1359 (N.D. Ga. 

2012), aff’d, 742 F.3d 1319 (11th Cir. 2014) (“The Prompt Pay Statute . . . requires health 

plans, including ERISA plans, to process and to pay provider claims, or to send notices 

denying the claims, within 15 or 30 days, depending on whether the claim is submitted 

electronically or in paper. Although not explicit, the statute necessarily requires that benefit 

eligibility determinations (i.e., determinations as to whether the claim is covered) also be 

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Consequently, Chapter 1301 would directly affect the operation of the plans 

and expand FEHBP carriers’ duties under the plans. On this basis, Chapter 

1301 does relate to FEHBP plans.53

Our holding comports with the purpose of FEHBA. As stated in Burkey, 

“[t]he policy underlying § 8902(m)(1) is to ensure nationwide uniformity of the 

administration of FEHBA benefits.”54 Allowing states to regulate the timing of 

claims administration by FEHBP administrators clearly conflicts with this 

purpose. Importantly, Chapter 1301 does not present a case when the effect on 

plans is too remote or tenuous to “relate to” the plans. Although the direct 

result of Chapter 1301 is an increased cost to carriers, this does not provide 

the basis for our decision. Rather, preemption is supported by the recognition 

that the penalties compel coverage determinations and payments within stateimposed time periods, thereby affecting the administration of the plans and 

altering FEHBP carriers’ obligations under their contracts with the OPM.55 In 

as much as application of Chapter 1301 to FEHBP carriers would disrupt the 

uniformity of FEHBP plan administration, we hold that FEHBA preempts 

Chapter 1301’s application to the claims processed by BCBSTX under FEHBP 

plans.

 

made within 15 or 30 days, in time to satisfy the payment or notice timing requirement. 

These requirements, when applied to ERISA plans, have at least a ‘connection’ with the 

plans.”).

53 Performing a similar inquiry, the Eleventh Circuit recently held that ERISA 

preempts application of Georgia’s prompt-pay statute to self-funded plans. See Hudgens, 742 

F.3d at 1331 (holding that ERISA preempts application of Georgia’s prompt pay statute to 

self-funded employer plans because “employers offering self-funded health benefit plans 

would be faced with different timeliness obligations in different states, thereby frustrating 

Congress’s intent”).

54 Burkey, 983 F.2d at 660.

55 As stated, the OPM requires 95% of claims to be paid within 30 working days.

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III.

We affirm the district court’s judgment declaring that Chapter 1301 does 

not apply to BCBSTX’s administration of the plans at issue here and that 

FEHBA preempts application of Chapter 1301 to claims administered by 

BCBSTX under the FEHBP.

AFFIRMED.

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