BAYTOWN MEDICAL CENTER LP v. UNITEDHEALTHCARE INSURANCE COMPANY (2023)

ORDER GRANTING PLAINTIFF'S MOTION TO REMAND

Before the Court is Plaintiff Baytown Medical Center, LP (“Baytown”)’s Motion to Remand [Dkt. 6]. For the reasons discussed below, the Court GRANTS Baytown's Motion.

I. BACKGROUND

Baytown, a freestanding emergency room, provided emergency services to one of Defendant UnitedHealthcare Insurance Company (UnitedHealthcare)’s insureds. [Dkt. 6 at 1]. Baytown was out-of-network for the patient. Id. Baytown submitted a claim to UnitedHealthcare for its services to the patient for $13,811.91, but only received a $1,764.49 payment from UnitedHealthcare. [Dkt. 2 at 2]. Texas law requires UnitedHealthcare to reimburse Baytown for this out-of-network emergency care at “the usual and customary rate or at an agreed rate.” [Dkt. 6 at 1] (citing Tex. Ins. Code § 1271.155(a)). Baytown believed that “the tiny reimbursement” it received from UnitedHealthcare was far lower than “the usual and customary rate.” Id. As a result, Baytown appealed UnitedHealthcare's reimbursement to both UnitedHealthcare and the Texas Department of Insurance and participated in an unsuccessful mediation. Id. at 2.

Baytown filed this case in state court, asserting a cause of action under Texas Insurance Code § 1271.155. Id.; [Dkt. 2 at 3]. UnitedHealthcare removed this action on federal question grounds, citing 28 U.S.C. §§ 1331 and 1441 and 29 U.S.C. § 1132. [Dkt. 1 at 2]. Specifically, UnitedHealthcare alleged that Baytown's claims were subject to complete preemption by the Employee Retirement Income Security Act of 1974 (ERISA) as within the scope of 29 U.S.C. § 1132 and/or subject to conflict preemption by ERISA under 29 U.S.C. § 1144. Id. Baytown subsequently filed the underlying Motion to Remand, arguing that neither conflict nor complete preemption apply here. [Dkt. 6].

II. LEGAL STANDARD

“Federal courts are courts of limited jurisdiction” and “possess only that power authorized by Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Defendants may only remove a civil action from state court to a United States District Court if that district court possesses original jurisdiction. 28 U.S.C. § 1441(a). When a motion to remand is filed, this Court must presume that a case lies beyond its limited jurisdiction. Kokkonen, 511 U.S. at 377. The party seeking removal “bears the burden of showing that federal jurisdiction exists and that removal was proper.” Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002); see also Kokkonen, 511 U.S. at 377. Removal is “strictly construed, and any doubt about the propriety of removal must be resolved in favor of remand.” Gasch v. Hartford Accident & Indem. Co., 491 F.3d 278, 281–82 (5th Cir. 2007). A district court is required to remand the case to state court if, at any time before final judgment, it determines that it lacks subject matter jurisdiction. 28 U.S.C. § 1447(c).

A district court possesses federal question jurisdiction over “civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. Determining whether a case arises under federal law ordinarily turns on the well-pleaded complaint rule. Aetna Health Inc. v. Davila, 542 U.S. 200, 207 (2004). Under that rule, a defendant may not remove a case to federal court unless the plaintiff's complaint establishes that the case arises under federal law. Id. The defendant's possession of a federal defense does not confer federal question jurisdiction. Id. Complete preemption, however, serves as an exception to the well-pleaded complaint rule. Id. “ ‘[W]hen a federal statute wholly displaces the state-law cause of action through complete pre-emption,’ the state claim can be removed.” Id. (alteration in original) (quoting Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 8 (2003)).

Congress enacted ERISA “to provide a uniform regulatory regime over employee benefit plans” and equipped ERISA with “expansive pre-emption provisions ․ to ensure that employee benefit plan regulation would be ‘exclusively a federal concern.’ ” Id. at 208 (citation omitted) (quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523 (1981)). ERISA also includes a civil enforcement scheme, which is laid out in § 502(a) of the Act. 29 U.S.C. § 1132(a). Section 502(a)(1)(B) provides that a participant or beneficiary may bring a civil action “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.” Id. § 1132(a)(1)(B).

There are two forms of ERISA preemption: conflict and complete. Encompass Off. Sols., Inc. v. Ingenix, Inc., 775 F. Supp. 2d 938, 950 n.3 (E.D. Tex. 2011). Conflict preemption, which flows from § 514(a), provides that “the provisions of [ERISA] shall supersede any and all State laws insofar as they may now or hereafter relate to any [ERISA] plan.” Id. (second alternation in original) (quoting 29 U.S.C. § 1144(a)). Conflict preemption, however, provides “merely an affirmative defense and does not operate to confer subject matter jurisdiction.” Id. (quoting Ellis v. Liberty Life Assurance Co. of Bos., 394 F.2d 262, 275 n.34 (5th Cir. 2004)). Complete preemption, on the other hand, stems from § 502(a) and arises when a “state-law cause of action ․ duplicates, supplements, or supplants the ERISA civil enforcement remedy [and thus] conflicts with the clear congressional intent to make the ERISA remedy exclusive.” Davila, 542 U.S. at 209. Indeed, ERISA possesses “such ‘extraordinary pre-emptive power’ that when complete preemption is triggered it ‘converts an ordinary state common law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule.” Id. (quoting Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 65–66 (1987)). In short, state-law causes of action that implicate ERISA's civil enforcement provisions in this manner are “necessarily federal” and, thus, removable to federal court. Lone Star OB/GYN Assocs. v. Aetna Health Inc., 579 F.3d 525, 529 (5th Cir. 2009).

In Aetna Health Inc. v. Davila, the Supreme Court articulated a test for determining whether ERISA completely preempts a non-federal cause of action. 542 U.S. at 210. Specifically, under Davila, a party's state-law claim falls within the scope of § 502(a)(1)(B) and therefore is completely preempted if (1) an individual could have brought the claim under § 502(a)(1)(B), and (2) there is no independent legal duty that is implicated by the defendant's actions. Id. The defendant, as the party seeking removal on the basis of ERISA preemption, bears the burden of satisfying this two-part inquiry. Lone Star, 579 F.3d at 528. Courts may not remand a civil action if the defendant demonstrates that one of the plaintiff's claims is completely preempted by ERISA. Id. at 528–29.

III. DISCUSSION

Baytown's Complaint asserts a state law claim rather than a federal one. [Dkt. 2]. Thus, federal question jurisdiction does not exist and removal to this Court is not proper unless Baytown's claim is completely preempted by ERISA.¹ See Davila, 542 U.S. at 207. The Court considers in turn the two prongs of Davila’s complete preemption inquiry. Although Davila’s first prong is met, its second prong is not. Therefore, ERISA does not completely preempt Baytown's claim and Baytown's Motion to Remand must be granted.

A. Davila’s first prong is satisfied because Baytown, as the patient's assignee, could have brought its claim under ERISA.

Because Baytown received an assignment of benefits from the patient and, thus, has derivative standing, the first prong of the Davila inquiry is satisfied. Davila’s first prong requires this Court to determine whether Baytown could have brought its claims under ERISA § 502(a)(1)(B). Id. at 210. In other words, the Court must assess whether Baytown has standing to sue under ERISA § 502(a)(1)(B). Dallas Cnty. Hosp. Dist. v. Assocs.’s Health & Welfare Plan, 293 F.3d 282, 285 (5th Cir. 2002); Scott & White Mem'l Hosp. v. Aetna Health Holdings, LLC, No. 6:17-CV-0075, 2018 WL 7377912, at *25 (W.D. Tex. Aug. 31, 2018).

A healthcare provider has no independent standing to bring an action under ERISA § 502(a), but can obtain derivative standing as an assignee of plan benefits. Mem'l Hosp. Sys. v. Northbrook Life Ins. Co., 904 F.2d 236, 249–50 (5th Cir. 1990) (citing Hermann Hosp. v. MEBA Med. & Benefits Plan, 845 F.2d 1286, 1290 (5th Cir. 1988)). Under this theory, the medical provider stands in the shoes of the ERISA beneficiary to assert its rights under the plan terms, rather than asserting some independent legal duty owed directly to the healthcare provider. Id.

Here, Baytown received an assignment of benefits from the patient and submitted that assignment to UnitedHealthcare with its initial claim. [Dkt. 21-A; Dkt 22 at 1]. Even so, Baytown contends that it does not have derivative standing as an assignee because UnitedHealthcare has not demonstrated that the plan allows assignments or agreed to waive any such assignment prohibition. [Dkt. 22 at 1–2]. Baytown's presentation of the assignment to UnitedHealthcare prior to this lawsuit is sufficient to meet the first prong of Davila. See ACS Primary Care Physicians Sw., P.A. v. United Healthcare Ins. Co., 479 F. Supp. 3d 366, 371 (S.D. Tex. 2020); Spring E.R., LLC v. Aetna Life Ins. Co., No. H-09-2001, 2010 WL 598748, at *4 n.3 (S.D. Tex. Feb. 17, 2010) (stating that allowing a plaintiff “to hold itself as an assignee of ERISA benefits such that it could receive direct payments from insurance companies, but escape ERISA entirely when attempting to collect these payments, simply by stating that it never actually received such assignments” would be “illogical and ․ contrary to the interests of justice”). Accordingly, because Baytown could have brought its claim under ERISA, the Court finds that the first prong of the Davila inquiry is satisfied.

B. Davila’s second prong is not met and remand is required because Baytown's claim under Texas Insurance Code § 1271.155(a) implicates an independent legal duty.

Davila’s second prong is not satisfied because Baytown's claim under Texas Insurance Code § 1271.155(a) concerns the rate of payment—not the right to payment—and thus creates an independent legal duty. Under Davila’s second prong, a cause of action is completely preempted by ERISA “where there is no other independent legal duty that is implicated by a defendant's actions.” 542 U.S. at 210. A legal duty is not independent where interpretation of the terms of a benefit plan “forms an essential part” of the plaintiff's claim. Id. at 213. The relevant question is whether the plaintiff is “seeking benefits under the terms of the plan[ ] or rights that derive from [an] independent basis.” Scott & White Mem'l Hosp., 2018 WL 7377912, at *26 (quoting Lone Star, 579 F.3d at 529 n.3).

Baytown's Complaint asserts entitlement to reimbursement from UnitedHealthcare under Texas Insurance Code § 1271.155(a). [Dkt. 2 at 3]. Section 1271.155(a) provides: “A health maintenance organization shall pay for emergency care performed by non-network physicians or providers at the usual and customary rate or at an agreed rate.” Tex. Ins. Code § 1271.155(a) (emphasis added).

The parties debate whether this statute implicates an independent legal duty. [Dkt. 6 at 7–9; Dkt. 21 at 4–7; Dkt. 22 at 2, 5–8]. Baytown, relying on this Court's previous orders as well as other case law, argues that § 1271.155(a) creates an independent legal duty because (1) Baytown's claim does not require a benefit determination under the plan as the “ ‘usual and customary rate’ is a product of the local market” and (2) Baytown's claim involves the rate of payment rather than its right to payment. [Dkt. 6 at 7–9; Dkt. 22 at 2, 5–8]. UnitedHealthcare contests this by (1) pointing to definitions of “usual and customary rate” elsewhere in the Texas Insurance Code and (2) asserting that because Baytown is an out-of-network provider “any alleged underpayment of claims necessarily arose from a benefits determination under the Plain at issue.” [Dkt. 21 at 4–7].

In Lone Star OB/GYN Associates v. Aetna Health Inc., the United States Court of Appeals for the Fifth Circuit held that a claim implicating the rate of payment rather than the right to payment is not completely preempted by ERISA. 579 F.3d at 530. Then, in Kelsey-Seybold Medical Group PA v. Great-West Healthcare of Texas, Inc., the Fifth Circuit further explained that the operative question when applying Davila was not “whether plaintiff's claims relate to benefits under ERISA plans, but rather whether adjudication of those claims requires an interpretation of an ERISA plan.” 611 F. App'x 841, 842 (5th Cir. 2015). The Fifth Circuit has yet to rule on whether Lone Star encompasses cases like this one, in which no contract exists between the insurer and medical-care provider. However, this Court has previously held ² —and holds once again—that Lone Star’s logic applies in cases like this. “[T]here is no need to interpret an ERISA plan because the claims have already been deemed payable, and the question is simply whether payment has been made at the usual and customary rate.” ACS Primary Care Physicians Sw., P.A., 479 F. Supp. 3d at 373. Here, the parties do not dispute whether Baytown's claim is payable—UnitedHealthcare has already paid Baytown. The issue is whether UnitedHealthcare paid Baytown's claim at the correct rate. Accordingly, under Lone Star alone, § 1271.155(a) implicates an independent legal duty and is not completely preempted by ERISA. See 579 F.3d at 530.

Additionally, a United States District Court for the Southern District of Texas previously grappled with the relationship between ERISA and § 1271.155(a) in ACS Primary Care Physicians Southwest, P.A. v. United Healthcare Insurance Co., 479 F. Supp. 3d at 376. There, Judge Hanan found that the plaintiff's § 1271.155(a) claim was not completely preempted because the Texas Insurance Code “create[s] an independent legal duty on health insurers to pay emergency health care providers ‘at the usual and customary rate or at an agreed rate.’ ” Id. As indicated in previous orders, this Court agrees with ACS’s holding that § 1271.155(a) implicates an independent legal duty.³ Altus Waxahachie, LP, No. 1:22-CV-00205, at 6; Altus Waxahachie, LP, No. 1:22-CV-00206, at 6; Altus Waxahachie, LP, No. 1:22-CV-00282, at 6.

Texas places affirmative obligations on emergency room physicians to provide medical care to patients. It does so knowing that these doctors will be conferring benefits on those that are insured (and indirectly their insurer) and those that are not. It stands to reason that in situations like this where the state compels one party (the emergency care doctors) to confer benefits to another (the insurance company) that the state should be permitted to impose a duty on the party receiving the benefit to pay compensation at a reasonable rate. Otherwise, emergency care might not be economically feasible, and the medical care provided by them could be lost. Similarly, if such an obligation is not imposed on the insurance company, a patient in need, even if insured, may hesitate to seek important medical help in emergency situations.

ACS Primary Care Physicians Sw., P.A., 479 F. Supp. 3d at 376 n.7.

UnitedHealthcare attempts to undercut ACS’s holding that § 1271.155(a) creates an independent legal duty by arguing that it does not take account of recent amendments to other chapters of the Texas Insurance Code defining the phrase “usual and customary rate.” [Dkt. 21 at 5]. Specifically, UnitedHealthcare points to §§ 1551.003(15) and 1575.002(8), which were added by amendment in 2019 and define “usual and customary rate” as “the relevant allowable amount as described by the applicable master benefit plan document or policy.” Id.; Tex. Ins. Code §§ 1551.003(15), 1575.002(8). The Court does not find this argument compelling. Both of these sections begin with the language “[i]n this chapter.” This language explicitly cabins the applicability of this definition to those specific chapters of the Texas Insurance Code. Section 1271.155(a) is in a different chapter altogether. In any case, the chapter containing § 1271.155(a) possesses an “Applicability of Definitions” section, which notably contains no definition of “usual and customary rate” or reference to a definition of that phrase elsewhere in the Code. Tex. Ins. Code § 1271.001. Furthermore, like §§ 1551.003 and 1575.002, § 1271.155 was amended by the Texas State Legislature in 2019. 2019 Tex. Sess. Law Serv. Ch. 1342 (West). In fact, these sections were all amended by the same law. Id. Presumably, if the Legislature had also desired to define “usual and customary rate” in § 1271.155 as “the relevant allowable amount as described by the applicable master benefit plan document or policy,” it would have done so in this law. Therefore, there is no statutory basis for this Court to apply §§ 1551.003(15) and 1575.002(8) here.

UnitedHealthcare also invokes Brushy Creek Family Hospital, LLC v. Blue Cross and Blue Sheild of Texas, No. 1:22-CV-00464-RP, 2022 WL:6727278 (W.D. Tex. Oct. 11, 2022), report and recommendation adopted, No. 1:22-CV-464-RP, 2022 WL 17732683 (W.D. Tex. Nov. 15, 2022), in support of its argument that this Court should not follow ACS. [Dkt. 21 at 5]. Brushy Creek, however, is non-binding on this Court. See generally Brushy Creed Fam. Hosp., LLC, 2022 WL 6727278. It also adopts holdings regarding Lone Star’s application and the scope of §§ 1551.003(5) and 1575.002(8)’s definitions of “usual and customary rate” that this Court rejects. See id. at *4–5.

Finally, UnitedHealthcare argues that § 1271.155(a) cannot implicate an independent duty because but for the existence of the underlying plan Baytown would have no reason to look to UnitedHealthcare for reimbursement at all. [Dkt. 21 at 6–7]. Having found that Lone Star and ACS apply here, the Court also finds this argument unpersuasive. Moreover the cases cited by UnitedHealthcare in support of this proposition are either non-binding, Emerus Hosp. v. Health Care Serv. Corp., No. 13 C 8906, 2016 WL 946916, at *3 (N.D. Ill. Mar. 14, 2016), or factually distinct, Quality Infusion Care Inc. v. Humana Health Plan of Tex. Inc., 290 F. App'x 671, 679–81 (5th Cir. 2008) (holding, prior to Lone Star, that Texas's any willing provider statute is preempted by ERISA).

Therefore, because § 1271.155(a) implicates an independent legal duty, Davila’s second prong is not met and Baytown's claim against UnitedHealthcare is not completely preempted by ERISA. Accordingly, this case must be remanded.

IV. CONCLUSION

It is therefore ORDERED that Plaintiff's Motion to Remand [Dkt. 6] is GRANTED. The Clerk is INSTRUCTED to remand this case back to the Justice Court, Hardin County, Texas, Precinct 5.

FOOTNOTES

1.   UnitedHealthcare's Notice of Removal asserted that federal jurisdiction exists in this case through either conflict or complete preemption. [Dkt. 1 at 2]. In its Motion to Remand, Baytown argues that neither of these grounds provide this Court with jurisdiction. [Dkt. 6]. As outlined above, conflict preemption is an affirmative defense that does not confer federal question jurisdiction. Encompass Off. Sols., Inc., 775 F. Supp. 2d at 950 n.3 (quoting Ellis, 394 F.2d at 275 n.34). Accordingly, in determining whether this case should be remanded to state court, the Court will confine its analysis to whether there is complete preemption under ERISA. This decision is bolstered by UnitedHealthcare's choice to focus its Response to Plaintiff's Motion to Remand on complete preemption alone. See [Dkt. 21].

2.   See Lumberton Hosp. LLC v. Aetna Life Ins. Co., No. 1:22-CV-00222, at 6 (E.D. Tex. Jan. 10, 2023); Altus Waxahachie, LP v. Aetna Life Ins. Co., No. 1:22-CV-00205, at 5 (E.D. Tex. Aug. 12, 2022); Altus Waxahachie, LP v. Aetna Life Ins. Co., No. 1:22-CV-00206, at 5 (E.D. Tex. Aug. 12, 2022); Altus Waxahachie, LP v. Aetna Life Ins. Co., No. 1:22-CV-00282, at 5 (E.D. Tex. Aug. 12, 2022).

3.   Although the Fifth Circuit was poised to address whether § 1271.155(a) was preempted by ERISA through its consideration of a related case, ACS Primary Care Physicians Sw., P.A. v. UnitedHealthcare Ins. Co., 514 F. Supp. 3d 927 (S.D. Tex. 2021), it ultimately did not on account of mootness. ACS Primary Care Physicians Sw., P.A. v. UnitedHealthcare Ins. Co., 60 F.4th 899, 901 (5th Cir. 2023). Accordingly, the Court sees no reason to deviate from its previous holdings regarding § 1271.155(a).

Michael J. Truncale, United States District Judge