Opinion ID: 4518258
Heading Depth: 2
Heading Rank: 1

Heading: The Base-Rate and Mileage Fees

Text: The Plan provides that “Ambulance Services,” including “[b]enefits for air transportation . . . when ground transportation is not Medically Appropriate and Necessary as determined by BCBSND,” will be provided at a percentage of the “Allowed Charge.” The “Allowed Charge” is “the maximum dollar amount that payment for a procedure or service is based on as determined by BCBSND.” In 2014, BCBSND interpreted these terms as providing for a base-rate reimbursement of $6,601.01 and a mileage reimbursement of $18.72 per mile, “based on 150 percent of the 2013 Medicare rural air ambulance rates.” The Mitchells do not seriously challenge the district court’s conclusions that, “because the provisions of the Plan are written quite broadly,” providing a payment of 150% of the Medicare rural air-ambulance rate does not contravene the clear “language of the plan” or “render any of the terms of the Plan itself inconsistent or even superfluous.” Mitchell v. Blue Cross Blue Shield of N.D., No. 2:15-cv-00086, -11- 2018 WL 3463260, at  (D.N.D. July 18, 2018). However, the Mitchells argue that BCBSND’s interpretation is unreasonable because it conflicts with “the substantive or procedural requirements of the ERISA statute.” See Finley, 957 F.2d at 621. In particular, they assert that BCBSND violated their right to a full and fair review under ERISA § 503 and violated BCBSND’s fiduciary duties under ERISA § 404(a). ERISA § 503 requires an employee benefit plan to: (1) provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant, and (2) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim. 29 U.S.C. § 1133. Department of Labor regulations implement this provision by “set[ting] forth minimum requirements for employee benefit plan procedures pertaining to claims for benefits.” See 29 C.F.R. § 2560.503-1(a). The Mitchells contend that BCBSND’s interpretation is unreasonable because it failed to provide them with proper notice that it interpreted the “Allowed Charge” for air-ambulance services as 150% of the 2013 Medicare rural air-ambulance rates. Although BCBSND provided this information to participating healthcare providers on January 13, 2014, it did not similarly notify plan participants. BCBSND also did not provide this information in its initial EOB or in its responses to VMF and the Mitchells’ requests for further review. Like the district court, we find it “troubling that the participants of the plan themselves [we]re not provided this information outright.” Mitchell, 2018 WL 3463260, at . It is especially disconcerting that BCBSND refused to explain the basis for its reimbursement rate when it initially processed the Mitchells’ claim. However, we agree with the district court that the -12- delay in providing this information does not by itself render BCBSND’s interpretation unreasonable given that the Mitchells “were ultimately provided this information through the claim process.” Id.3 The Mitchells also note that the district court regarded BCBSND’s January 18, 2017 letter as “a prolix after-the-fact plan interpretation devised for purposes of litigation.” Id. at  (cleaned up). However, the district court declined to find BCBSND’s interpretation of the “Allowed Charge” for air-ambulance services unreasonable on this basis, explaining that “it cannot be said that the rate is supplied as a post-hoc rationale when the 2014 letter establishes that rate just prior to the provision of services received by Ms. Mitchell.” Id. at . We agree with this analysis. The alleged deficiencies in the January 18, 2017 letter do not show that the interpretation BCBSND adopted several years earlier was unreasonable. Next, the Mitchells assert that BCBSND’s interpretation is unreasonable because it resulted in a reimbursement rate that was so low as to constitute a breach of fiduciary duty. They cite ERISA § 404(a), which requires a plan administrator to “discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries” and “for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan.” 29 U.S.C. § 1104(a)(1). However, they have not identified any specific standard BCBSND was required to follow in interpreting the Plan. 3 The Mitchells correctly note that ERISA fiduciaries have a duty to disclose material information to plan participants. See Shea v. Esensten, 107 F.3d 625, 628–29 (8th Cir. 1997). However, their claim in this action is not that BCBSND failed to disclose material information; it is that BCBSND’s interpretation of the “Allowed Charge” for air-ambulance services was unreasonable. Their allegations of procedural irregularities in the claims process are therefore only relevant insofar as they bear on the reasonableness of BCBSND’s interpretation. -13- When a plan indexes the term “Allowable Charge” to an external standard, such as “the fee which is recognized by a prudent person,” HCA Health Servs. of Ga., 240 F.3d at 996, or “the usual and customary amount,” Geddes v. United Staffing All. Emp. Med. Plan, 469 F.3d 919, 930 (10th Cir. 2006), that standard can be used to evaluate the plan administrator’s determination. State statutory or administrative rules requiring plan administrators to consider certain factors may also provide a basis for deeming certain interpretations unreasonable. See Phi Air Med. v. Tex. Mut. Ins. Co., M4-12-1671-02, (Tex. Dep’t Ins. Jan. 13, 2012); Khaw v. Allstate Ins. Co., ATX-2007-5-P (Haw. Ins. Comm. Oct. 16, 2008). But there is nothing like that here. The Plan circularly defines the “Allowed Charge” as “the maximum dollar amount that payment for a procedure or service is based on as determined by BCBSND.” The Mitchells have not identified any rule prohibiting Mr. Mitchell’s employer from giving such broad discretion to BCBSND and, absent such a rule, an employer’s decision to give broad discretion to a plan administrator is an unreviewable matter of plan design. See Lockheed Corp. v. Spink, 517 U.S. 882, 887 (1996). Even if the Mitchells are correct that a plan administrator might nonetheless violate its fiduciary duties if it set a reimbursement rate so low that it failed to act “in the interest of the participants and beneficiaries,” 29 U.S.C. § 1104(a)(1), we cannot say that BCBSND’s interpretation of the “Allowed Charge” for air-ambulance services as 150% of the Medicare rural air-ambulance rates violated that basic duty. This does not mean that BCBSND’s discretion is limitless. Its interpretation could be unreasonable if it was not “consistent with the goals of the Plan” or if BCBSND had not “interpreted the words at issue consistently.” See Finley, 957 F.2d at 621. The Mitchells suggest that BCBSND’s interpretation is inconsistent with the Plan’s goal to ensure that members are not held personally responsible for large medical expenses. But this is an imprecise description of the Plan’s goal. The Plan’s only explicit purpose is to “provide, among other things, various benefits to Members in the Plan.” It is consistent with that purpose to provide benefits in accordance with the Plan’s terms and to otherwise deny them—even if doing so results in members -14- being held responsible for large payments. Nor have the Mitchells shown that BCBSND failed to consistently interpret the “Allowed Charge” for air-ambulance services. The record indicates that BCBSND has used Medicare rates as the applicable benchmark rates since 2009.4 Finally, we consider BCBSND’s conflict of interest. BCBSND interprets the Plan language, pays participants’ claims, and adjudicates their appeals. It was also involved in a dispute with VMF over its reimbursement rate for air-ambulance services shortly before the Mitchells’ claims were submitted. This provides a good reason to be suspicious of BCBSND’s interpretation. But here, the Plan gives BCBSND broad discretion to determine the “Allowed Charge” for air-ambulance services, and BCBSND has adopted a consistent interpretation, tied to an external benchmark, which is compatible with both the Plan’s language and its purpose. Under these circumstances, we cannot say that BCBSND abused its discretion.