Weight Loss Healthcare v. Office of Personnel MGT., 655 F.3d 1202, 10th Cir. (2011)
Weight Loss Healthcare v. Office of Personnel MGT., 655 F.3d 1202, 10th Cir. (2011)
Elisabeth A. Shumaker
Clerk of Court
No. 10-3247
OFFICE OF PERSONNEL
MANAGEMENT,
Defendant - Appellee.
Daniel D. Owen of Shughart, Thomson & Kilroy (P. John Brady, Andrew J.
Ennis, and Anthony W. Bonuchi of Polsinelli Shughart, PC, on the briefs), Kansas
City, Missouri, for Plaintiff - Appellant.
David B. Bailey, Assistant United States Attorney, (Barry P. Grissom, United
States Attorney, and Jackie A. Rapstine, Assistant United States Attorney, on the
brief), Topeka, Kansas, for Defendant - Appellee.
the EOB said that the allowance was $2,300. Walters was responsible for the
remaining $54,390 billed by Weight Loss.
Weight Loss, having obtained permission from Walters to act on his behalf,
requested that Blue Cross reconsider its payment, but the insurance company
responded that it had correctly calculated Walterss benefits. Weight Loss
appealed to the federal Office of Personnel Management (OPM), which held that
Blue Crosss interpretation of Walterss Plan was correct and it had paid the
proper amount.
Weight Loss, again acting on behalf of Walters, then brought suit in the
United States District Court for the District of Kansas, asking that the court order
OPM to require Blue Cross to pay the amount of benefits in dispute and to
provide specific and detailed reasons for the partial denial of the benefits. Id. at
14. The district court affirmed OPMs decision.
Weight Loss appeals, raising three issues. First, it argues that the district
court erred by deferring to OPMs interpretation of the Plan. Second, it argues
that OPM and the court incorrectly interpreted the Plan. Third, Weight Loss
argues that OPM never obtained the calculations and data that Blue Cross used to
determine the amount of the plan allowance for outpatient surgery, making a
reasoned decision impossible.
We have jurisdiction under 28 U.S.C. 1291. We hold that OPMs
interpretation of the Plan is entitled to deference because of its intimate and
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extensive involvement in the negotiation and interpretation of federal healthinsurance plans. We further determine that OPM reasonably interpreted the Plan
language. We reverse the district courts decision, however, because OPM
neither (1) reviewed the evidence that would show whether Blue Cross had
correctly calculated the Plan allowance, nor (2) explained why such review was
unnecessary.
I.
DISCUSSION
A.
Sternberg v. Secy, Dept of Health & Human Servs. (HHS), 299 F.3d 1201, 1205
(10th Cir. 2002); cf. Tex. Gas Transmission Corp. v. Shell Oil Co., 363 U.S. 263,
270 (1960) (when agency interprets contract using standard legal analysis and not
its expertise, review is de novo). We have previously recognized the following as
factors that can indicate the propriety of deferring to an agencys interpretation
under an arbitrary-and-capricious standard of review: (1) the agency routinely
reviews such contracts, (2) review of such contracts is a duty delegated to the
agency by Congress, and (3) the contract deals with arcane subject matter or uses
specialized terminology with which the agency is familiar. See Sternberg, 299
F.3d at 120506 (refusing to defer to HHS interpretation of a sentencing
agreement in a criminal case because HHS did not routinely review sentencing
agreements, such review was not a duty delegated to HHS by Congress, and the
agreement did not concern arcane subject matter); see also Nw. Pipeline Corp. v.
Fed. Energy Regulatory Commn (FERC), 61 F.3d 1479, 1486 (10th Cir. 1995)
(deferring to FERC interpretation of natural-gas tariff filed by pipeline company
because Congress had delegated broad authority over natural-gas rates to FERC
and it had vast experience in reviewing the tariffs). In addition, when a contract
affects numerous persons throughout the country, fairness and efficiency may
suggest the advisability of a central decisionmaker to resolve ambiguities. See
Muratore v. OPM, 222 F.3d 918, 923 (11th Cir. 2000) (OPM has the ability to
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take a broad, national view when it interprets plans which serves the function of
ensuring consistent, nationwide application.).
Whether to defer to OPMs interpretation of a federal-employee insurance
plan is a matter of first impression in this circuit. We begin our analysis by
describing the role of OPM. OPM is responsible for executing, administering
and enforcing . . . the civil service rules and regulations of the President and
[OPM] and the laws governing the civil service. 5 U.S.C. 1103(a)(5)(A). It
has authority to administer and regulate many aspects of federal employment,
including pay rates, see id. 5338, hours of work, see id. 6101(c), annual and
sick leave, see id. 6311, and life-insurance benefits, see id.. 8716.
Of particular relevance to this appeal are OPMs duties under the Federal
Employees Health Benefits Act of 1959 (FEHBA), 5 U.S.C. 890114, which
governs health benefits for federal employees. Under the Act, OPM may enter
into contracts with health-insurance carriers to provide coverage for federal
employees. See id. 8902(a). It can prescribe minimum standards for healthinsurance plans, see id. 8902(e); it determines whether rates charged by the
plans reasonably and equitably reflect the cost of the benefits provided, id.
8902(i); and it is responsible for providing information to federal employees
about available insurance plans and for continually studying their operation, see
id. 8907, 8910. And each contract must require the carrier to pay for or
provide services if OPM finds that the employee is so entitled. See id. 8902(j).
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(3) payment of benefits under the FEHB Program. 60 Fed. Reg. at 16,037
(Mar. 29, 1995).
Weight Loss does not attempt to dispute these factors supporting
deferential review under an arbitrary-and-capricious standard. Its sole argument
against deference is that health-insurance contracts do not necessarily involve
arcane or technical language and that a court is just as qualified as OPM to
interpret ordinary language. But this argument both (1) understates the
complexity of health-care contracts and (2) implicitly overstates the deference due
under arbitrary-and-capricious review. On the first point, we would note that
contract language need not be arcane to require expertise in its interpretation.
Even when the language of a paragraph may seem clear in isolation, the
interrelationships of provisions can create complications. A full understanding of
such interrelationships can be essential in interpreting a lengthy health-care plan
that makes detailed distinctions in many dimensions of coverage. See, e.g.,
Nesseim, 995 F.2d at 80507 (Insurance plan covered chemotherapy, but insureds
proposed breast-cancer chemotherapy treatment required high-dose chemotherapy
that had to be accompanied by autologous bone-marrow transplant, which was
covered only for certain enumerated diseases that did not include breast cancer.
OPM determined that the bone-marrow transplant was not covered because breast
cancer was not one of the specifically enumerated diseases and because another
provision barred all transplants not specifically listed as covered.). And on the
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To explain the dispute regarding the meaning of Walterss Blue Cross Plan,
we start with a sketch of the Plan, a 130-page document. The amounts paid by
the Plan and by the insured for medical services incurred by the insured depend
on the type of service provided and the service providers contractual relationship
with Blue Cross. The categories of services include, among others, medical
services and supplies, surgical and anesthesia services, services provided by a
hospital or other facility, emergency services, and prescription drug benefits.
Within each category the payment arrangement may further depend on the
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specific service. For example, payments by the Plan and the insured to a hospital
or other facility differ for inpatient and outpatient services.
Providers are divided into preferred, participating, and non-participating
categories depending on their contractual arrangement with the Plan. Preferred
and participating providers have fee agreements with Blue Cross that limit the
amount that the insured must pay, but the share of the fee paid by the insured is
greater for service from participating providers than for preferred providers.
Non-participating providers have no contract with Blue Cross. The insured is
responsible for whatever the provider bills the insured, but the Plan may pay a
percentage of the allowance it computes for the service. As would be expected,
the amount that the insured pays for a service will be the least if the provider is a
preferred provider and the most if the provider is a non-participating provider.
The dispute in this case concerns only what the Plan should pay for
services provided to an outpatient by a non-participating hospital or other facility.
In particular, there has been no claim for [m]edical services and supplies
provided by physicians and other health care professionals, Aplt. App. at 114
(Blue Cross Plan at 27), or for [s]urgical and anesthesia services provided by
physicians and other health care professionals. Id. at 135 (Blue Cross Plan at
48). For [o]utpatient surgery and related services performed and billed for by a
hospital or freestanding ambulatory facility that is a non-participating (also
called a non-member) facility, the Plan will pay 70% of its allowance for the
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service; the insured pays the remainder (30% of the allowance plus the difference
between the allowance and the amount billed). Id. at 154 (Blue Cross Plan at 67).
The parties differ regarding what the Plan should have computed as the
allowance for the services provided to Walters.
A provision of the Plan describes how Blue Cross computes allowances for
non-participating providers. Although the issue before us concerns only nonparticipating facilities providing outpatient care, we include the paragraphs
preceding and following the paragraph for outpatient care because the contrast is
informative:
Non-participating providersWe have no agreements with these
providers. We determine our allowance as follows:
!
For inpatient services at hospitals, and other facilities that do
not contract with your local Blue Cross and Blue Shield Plan
(Non-member facilities), our allowance is based on the
average amount paid nationally to contracting and noncontracting facilities for covered room, board, and ancillary
charges for your type of admission. For inpatient stays
resulting from medical emergencies or accidental injuries, or
for routine deliveries, our allowance is the billed amount;
!
For outpatient, non-emergency surgical services at hospitals
and other facilities that do not contract with your local Blue
Cross and Blue Shield Plan (Non-member facilities), our
allowance is the average amount for outpatient surgical
services that we pay nationally to contracting and noncontracting facilities. For other outpatient services by Nonmember facilities, and for outpatient surgical services resulting
from a medical emergency or accidental injury, our allowance
is the billed amount (minus any amounts for noncovered
services);
!
For physicians and other covered health care professionals
that do not contract with your local Blue Cross and Blue
Shield Plan, our allowance is equal to the greater of 1) the
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to the average amount for outpatient surgical services of the same type that we
pay nationally, or, equivalently, the average amount for the outpatient surgical
service that we pay nationally.
But the language of the preceding and following paragraphs of the
allowance provision in the Plan shows that such a reading would be incorrect. In
the paragraph immediately preceding the paragraph discussing the Plan allowance
for outpatient surgery, the Plan states that the allowance for inpatient services at
hospitals . . . is based on the average amount paid nationally . . . for your type of
admission. Id. (emphasis added). The inpatient Plan allowance is clearly based
on the condition or procedure that causes the insured to be hospitalized. And
similarly, the paragraph immediately after the paragraph at issue in this case says
that the Plan allowance for doctors and other health care professionals is the
greater of the Medicare . . . schedule amount for the service or supply and the
(UCR) amount for the service or supply. Id. (emphasis added). Unlike the
paragraph at issue, these two paragraphs include language making clear that the
average is an average for the particular service provided to the insured.
We will not read the dispositive paragraph as implicitly including language
that the drafters explicitly included in adjacent paragraphs; the decision not to
include such language is apparent. When faced with language that could bear two
meanings, attorneys (and, too often, courts) may try to resolve the ambiguity in
favor of their preferred meaning by arguing that if the drafters had intended the
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other meaning, they could have added or changed language to make that clear.
The weakness of the argument is that the drafters could equally have added or
changed language to make clear that they intended the preferred meaning. The
force of the argument is greatly strengthened, however, when the drafters in fact
had used the alternative language elsewhere. When the drafters so clearly knew
how to express one meaning, their failure to do so implies that the meaning was
not intended. Here, that argument is particularly compelling because if the
drafters of the Plan had intended the meaning suggested by Weight Loss, they
could have used the method of expression employed in either the preceding or
succeeding paragraph. See Russello v. United States, 464 U.S. 16, 23 (1983)
(We refrain from concluding here that the differing language in the two
subsections [of the statute] has the same meaning in each. We would not presume
to ascribe this difference to a simple mistake in draftsmanship.); Regl Air, Inc.
v. Canal Ins. Co., 639 F.3d 1229, 1238 (10th Cir. 2011) ( Where, as here, a
legislature uses different terms in the very same statutory provision, we take
cognizance of that choice by presuming the legislature intended the different
words to carry with them (their traditional) different meanings.).
Nevertheless, relying on the reasonable-insured standard for reviewing
insurance contracts, Weight Loss argues that OPMs interpretation of the Plan is
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untenable. 1 It argues that any reasonable person who paid the extra premium to be
covered under a Blue Cross Standard Plan, rather than the cheaper Basic Plan
(which did not provide any benefits for care by a non-participating provider),
would expect a much more significant payment by Blue Cross for Walterss lapband surgerycertainly much more than the 3% of the Weight Loss bill paid by
Blue Cross.
We are not persuaded. Weight Loss tries to take the reasonable-insured
standard too far. The standard does not displace contractual language. It is not
enough for the insured to expect a particular loss or expense to be covered. See
Marshall v. Kan. Med. Mut. Ins. Co., 73 P.3d 120, 130 (Kan. 2003) (Reasonableinsured standard does not mean that the policy should be construed according to
the insureds uninformed expectations of the policys coverage.). The
reasonable insured must be able to point to specific contractual language that
provides coverage. The reasonable-insured standard prevents the insurance
company from relying on an idiosyncratic construction of undefined terms that
differs from the ordinary meaning. See LaAsmar v. Phelps Dodge Corp. Life, 605
1
F.3d 789, 80913 (10th Cir. 2010) (rejecting peculiar meaning of accident
proffered by insurer). But it does not excuse the insured from reading the policy,
the entire policy. Under the reasonable-insured standard, it is still necessary to
examine the plan documents as a whole. Miller v. Monumental Life Ins. Co.,
502 F.3d 1245, 1250 (10th Cir. 2007) (brackets omitted). When the contract read
as a whole resolves the ambiguity, there is no occasion to apply the reasonableinsured standard. See Long v. St. Paul Fire & Marine Ins. Co., 589 F.3d 1075,
108283 (10th Cir. 2009) (rejecting insureds proffered interpretation of contested
provision because interpretation would be inconsistent with remainder of policy).
The Blue Cross Plan makes clear that some health-care expenses are not
covered, and that the expense to the insured of using a non-participating provider
can be unlimited. How much is not covered can turn on numerous factors,
including how much the non-participating provider charges. Only a careful study
of the Plans provisions can reveal whether a particular payment should be
expected. Payment of a higher premium than required for another plan cannot
mean that full coverage must be provided for everything not covered in the lessexpensive plan. Most importantly, as explained above, when the allowance
provision at issue on this appeal is read in the context of the adjacent allowance
provisions, Weight Losss interpretation of the provision is not reasonable. At the
least, even if one gives the reasonable-insured standard more force than the case
law appears to, we cannot say that OPMs interpretation of the allowance
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Finally, Weight Loss contends that OPMs decision was arbitrary and
capricious because it did not obtain the data or calculations used by Blue Cross to
determine that the Plan allowance for Weight Losss charges was only $2,300.
According to the Plan, the allowance should be the average amount for
outpatient surgical services that we pay nationally to contracting and noncontracting facilities. Aplt. App. at 206 (Blue Cross Plan at 119). In response to
Weight Losss contention, Blue Cross has stated that the data were accumulated
nationally for all Blue Cross plans, and it did not have the data or calculations
itself.
Weight Loss argued before the OPM that because there was no explanation
of how the $2,300 Plan allowance was calculated, it was impossible to determine
whether the Plan allowance was correct. OPMs decision did not address this
aspect of Weight Losss complaint but merely stated: The Plan provided
benefits at 70 percent of $2,300.00, the Non-participating provider allowance for
the surgical services. Id. at 83. OPM did not request the underlying data.
In district court Weight Loss pursued the issue, arguing that the record was
incomplete and prevented anyone from verify[ing] the plan allowance
calculation. Id. at 241. OPM again stated only that [Weight Loss] was advised
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that the national average for outpatient surgical services paid nationally to
contracting and non-contracting facilities was $2300. Id. at 276. The district
court found that the record was sufficient and stated, despite Weight Losss
argument, that the reliability of the data used in reaching the plan allowance
figure was not at issue. Id. at 314. We disagree.
Before both OPM and the district court, Weight Loss raised the accuracy of
the Plan-allowance calculation as an issue. Yet nothing in the record would
enable OPM to find that the calculation was correct. OPM has never explained
why it believed in the accuracy of the $2,300 figure. It apparently just took Blue
Cross at its word. In our view, to do so without explanation was arbitrary and
capricious.
OPM argues that neither Weight Loss nor Walters has any right to detailed
calculations, statistics, formulas, numbers, or any other mathematical information
for the claim submitted to the Blue Cross plan. Aplee. Br. at 52. But this
argument misses the point. The issue is not whether Weight Loss or Walters has
a right in the abstract to obtain such data. The issue is whether OPM can make a
finding necessary to its decisionnamely a finding that the proper allowance was
$2,300without any supporting evidence or even an explanation of why evidence
was unnecessary. We therefore must send this dispute back to OPM for further
proceedings. See Fla. Power & Light Co. v. Lorion, 470 U.S. 729, 744 (1985)
(If the record before the agency does not support the agency action, . . . the
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CONCLUSION
Although we affirm OPMs interpretation of the Blue Cross Plan, we hold
that OPMs decision was arbitrary and capricious for failure to explain why it
accepted Blue Crosss allowance figure as correct. We therefore REVERSE the
judgment of the district court with instructions to set aside the OPM ruling and
REMAND to OPM for further proceedings.
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