Chester County Intermediate Unit, Lincoln Intermediate Unit, Mr. And Mrs. John M. Gillespie, and Mr. And Mrs. Kevin Nonemaker v. Pennsylvania Blue Shield and Capital Blue Cross, 896 F.2d 808, 3rd Cir. (1990)
Chester County Intermediate Unit, Lincoln Intermediate Unit, Mr. And Mrs. John M. Gillespie, and Mr. And Mrs. Kevin Nonemaker v. Pennsylvania Blue Shield and Capital Blue Cross, 896 F.2d 808, 3rd Cir. (1990)
2d 808
I.
Introduction
1
The principal issue before us is whether the Education of the Handicapped Act
(EHA or Act), 84 Stat. 175, as amended, 20 U.S.C. Secs. 1400 et seq.,
Both the Gillespies and the Nonemakers have policies with Pennsylvania Blue
Shield and Capital Blue Cross covering their families' health care needs. The
billing offices for the Chester and Lincoln IUs submitted the Nonemakers' and
Gillespies' claims for payment to Blue Cross/Blue Shield. They apparently rely
on the Major Medical benefits which supplement Blue Cross and Blue Shield
basic coverage and provide coverage for, inter alia, "[p]hysical therapy
prescribed by the attending provider as to type and duration when performed by
The district court dismissed the action. It stated, in agreement with plaintiffs'
position, "that insurers are not relieved of contractual obligations they would
otherwise have had had the [EHA] not been enacted." App. at 7 (emphasis in
original). The court then examined the policy attached by plaintiffs to the
complaint and held that as a matter of law Blue Cross/Blue Shield were not
obligated under that policy to make payments to the IUs for the physical
therapy treatments. Regarding the three contractual provisions relied on by
Blue Cross/Blue Shield in denying reimbursement to the IUs, the court noted
there was a disputed issue of fact as to whether the physical therapy provided to
Todd Gillespie and Kevin Nonemaker would have been medically necessary if
the EHA had not been enacted. The court assumed, for purposes of the motion,
that the services would have been medically necessary.
8
The court held, however, that there was no disputed issue of material fact with
respect to the procedure for reimbursement for Major Medical coverage. The
court construed the policy as requiring payment directly to the subscriber, and
held that there is no applicable provision for assignment. The court accepted
defendants' contention that "because there is no actual charge upon which an
appropriate Blue Shield reimbursement calculation could be based" and "no
deductibles are paid," the reimbursement provisions of the policy bar payment.
It stated that the plaintiffs' "suggested scheme for payments to be made directly
to the IU's, totally disregards the [reimbursement] terms of the policy."
Consequently, the court concluded that plaintiffs had not stated a cause of
action upon which relief can be granted under the terms of their policy with
Blue Cross/Blue Shield. Under this approach, the court never reached the
issues of the construction and validity of the exclusionary provisions of the
Blue Cross/Blue Shield policy.1
The scope of our review from the district court's grant of a motion to dismiss is
plenary. Daly v. United States Dept. of the Army, 860 F.2d 592, 593 (3d
Cir.1988).
III.
Discussion
A.
10
public education." 20 U.S.C. Sec. 1412(1) (1988). The Act defines "free
appropriate public education" as
11
special
education and related services that--(A) have been provided at public
expense, under public supervision and direction, and without charge, (B) meet the
standards of the State educational agency, (C) include an appropriate preschool,
elementary, or secondary school education in the State involved, and (D) are
provided in conformity with the individualized education program required under
section 1414(a)(5) ...
20 U.S.C. Sec. 1401(a)(18) (1988). 2
12
Although defendants agree with the district court's action in dismissing the
complaint, they argue that the district court erred in construing the statutory
language "free appropriate public education" to mean "free to the parents."
Defendants argue that the IUs have a statutory duty to provide an appropriate
public education for handicapped children at public expense, and they
complain that the district court should have adopted their position that the EHA
does not authorize shifting of costs to private insurers.
13
We see no reason to reach this amorphous issue in the context of this appeal.
The district court's statement was not necessary to its decision. Even Blue
Cross/Blue Shield concede that under some circumstances, they would be
obliged to pay for physical therapy services furnished pursuant to a
handicapped child's individualized education program.3 We therefore leave
consideration of the theoretical question of the meaning of a "free" appropriate
education to the case where it is necessary to the disposition.
14
Similarly, we are reluctant to decide this appeal as did the district court on the
basis of the reimbursement scheme. The plaintiffs argue that the district court
had no basis from the complaint to assume that there was no actual charge
made on which a reimbursement calculation could be based, had no evidence
with respect to the status of payment of deductibles and coinsurance, and could
not properly rely on payment procedures or Assignment Account Guidelines
which were not properly in evidence. It may be that the district court correctly
analyzed these issues, but we are sensitive to plaintiffs' contention that there are
relevant facts which were not of record and which should have been the subject
of discovery. Accordingly, we leave undecided the issue of the reimbursement
scheme.4 It is more productive for us to examine whether the language of the
policy relied on by plaintiffs purports to cover the physical therapy services at
issue, and we turn in particular to the exclusions on which defendants rely.
B.
15
Blue Cross/Blue Shield relied in the district court on the provisions in the
Major Medical policy specifying that coverage is excluded for:
Services or supplies for which the subscriber is not legally obligated to pay:
16
17
Services
or supplies paid or which the subscriber is entitled to have paid or to obtain
without cost under the laws or regulations of any federal, state, provincial, or local
government or any political subdivision thereof;
18
19
Although plaintiffs now argue that the descriptive material attached to the
complaint is not the actual policy or contract, 5 the plaintiffs, having themselves
attached this material to their complaint and described the exhibits in the
complaint as "true and correct cop[ies] of the [subscribers'] polic[ies] which
[are] incorporated herein as though fully set forth," App. at 14, 15, are bound
by them. The exhibits were properly considered by the district court in granting
the motion to dismiss. See Quiller v. Barclays American/Credit, Inc., 727 F.2d
1067 (11th Cir.1984), cert. denied, 476 U.S. 1124, 106 S.Ct. 1993, 90 L.Ed.2d
673 (1986); Amfac Mortgage Corp. v. Arizona Mall, 583 F.2d 426 (9th
Cir.1978); Fed.R.Civ.P. 10(c) ("a copy of any written instrument which is an
exhibit to a pleading is a part thereof for all purposes."); cf. Rose v. Bartle, 871
F.2d 331, 339-40 n. 3 (3d Cir.1989) (distinguishing between documentary
exhibits, such as contracts, which are written instruments for purposes of Rule
10(c), and affidavits, which are not).6
20
Moreover, plaintiffs have not suggested to this court that these descriptive
brochures are not accurate as to the scope of health care coverage provided in
the respects relevant here. In fact, as to the exclusion on which we focus, the
complaint specifically provides:
Both the Gillespies' and the Nonemakers' insurance agreements exclude from
21
payment by Blue Cross services or supplies for which the subscriber is not legally
obligated to pay as well as services or supplies for which the subscriber is entitled to
have paid or obtain without cost under the laws or regulations of any federal, state,
provincial or local government or any political subdivision.
22
App. at 12. Indeed, these exclusions form the basis of one of the, if not the
principal, legal arguments asserted on appeal. Accordingly, we are free to
examine as a matter of law the effect of the exclusions pled by plaintiffs.
C.
23
It is undisputed that the children of the Gillespies and Nonemakers are entitled
"to obtain without cost" under the EHA the physical therapy services provided
and that the parents are "not legally obligated to pay" for these services. The
exclusionary provisions, therefore, explicitly preclude Blue Cross/Blue Shield
coverage of the physical therapy and they would appear to be dispositive of
plaintiffs' claim. Plaintiffs, however, contend that the exclusionary provisions
are in contravention of the provisions of, and public policy underlying, the
EHA, as well as of regulations promulgated under the Act.
24
(9) provide satisfactory assurance that Federal funds made available under this
subchapter--(A) will not be commingled with State funds, and (B) will be so
used as to supplement and increase the level of Federal, State and local funds
(including funds that are not under the direct control of State or local
educational agencies) expended for special education and related services
provided to handicapped children under this subchapter and in no case to
supplant such Federal, State or local funds....
27
20 U.S.C. Sec. 1413(a)(9) (1988). Plaintiffs contend that because this language
requires that federal funds supplement, and not supplant, other available
resources, the EHA cannot be relied on to relieve private insurers of otherwise
valid contractual obligations.
28
funds that are not under the direct control of State or local educational
agencies" refers to private insurance dollars, rather than public funds, at most
this would bar supplanting, i.e., substitution, of federal funds for private funds
previously expended for such services. This is a far cry from reading the
language to require insurers to cover the costs of services which the policy
excludes.
29
30
Under
the Committee Bill, a State's application shall provide that special education
and related services shall be provided at no cost to the parents of a handicapped
child. This provision is designed to insure that students served by private facilities
are treated equally with those in public schools and is not to be construed to prohibit
charges by the educational agency to insurers, public programs, and others for
hospital care, health services, rehabilitation, and other non-educational services.
States are encouraged to utilize all sources of support for comprehensive services for
handicapped students.
31
S.Rep. No. 168, 94th Cong., 1st Sess. 32, reprinted in 1975 U.S.Code Cong. &
Admin.News 1425, 1456 (emphasis added).
32
We find no support in this paragraph for plaintiffs' position that the Act
prohibits insurers from excluding coverage for services that must be provided
free under the Act. A statement that an agency is not prohibited from charging
insurers for special education and related services simply cannot be transmuted
into congressional intent to abrogate agreed-upon exclusions or to require
insurers to cover costs for services which the parties agreed to exempt from
coverage.
33
34 Each State may use whatever State, local, Federal, and private sources of support
(a)
are available in the State to meet the requirements of this part....
35 Nothing in this part relieves an insurer or similar third party from an otherwise
(b)
valid obligation to provide or to pay for services provided to a handicapped child.
36
37
37
38
39
40
judgment to which courts and litigants may properly resort for guidance' " was
tempered by its cautionary note that " '[t]he weight of such a judgment in a
particular case will depend upon the thoroughness evident in its consideration,
the validity of its reasoning, its consistency with earlier and later
pronouncements, and all those factors which give it power to persuade, if
lacking power to control.' " General Electric Co. v. Gilbert, 429 U.S. 125, 14142, 97 S.Ct. 401, 410-11, 50 L.Ed.2d 343 (1976) (quoting Skidmore v. Swift &
Co., 323 U.S. 134, 140, 65 S.Ct. 161, 164, 89 L.Ed. 124 (1944)). Because the
letters cited by plaintiffs are consistent with, and go no further than, the
regulation found at 34 C.F.R. Sec. 300.301, which we have already held does
not support the position advocated by plaintiffs, we need not decide the extent
to which they must be accorded deference.8
41
42
IV.
Conclusion
43
For the foregoing reasons, we will affirm the district court's order dismissing
the action.
Hon. John C. Lifland, United States District Court for the District of New
Jersey, sitting by designation
Because the district court held that the plaintiffs did not satisfy the
reimbursement provisions of the policy and were not permitted to assign their
policy benefits to the IUs, it also did not reach the argument of Blue Cross/Blue
They state, for example, "[i]f a handicapped child were receiving physical
therapy services for which Blue Cross and Blue Shield paid prior to being
enrolled in a special education program, the insurers could not discontinue
payment and demand that the provider of those services bill the intermediate
unit." Brief of Appellees at p. 32 n. 7
We therefore need not consider Blue Cross/Blue Shield's contention that the
requirement that the parents pay the applicable deductibles and coinsurance
under the Major Medical policy is inconsistent with the Act's explicit provision
that the related services must be "free". See Interpretation of 34 C.F.R. Secs.
104 and 300 at 45 Fed.Reg. 86,390 (1980). Cf. Seals v. Loftis, 614 F.Supp. 302
(E.D.Tenn.1985) (IU cannot require parents to use insurance proceeds if result
is to decrease maximum lifetime benefits available under policy). Nor do we
need to reach Blue Cross/Blue Shield's further claim that payment by the IUs of
the deductibles and coinsurance, rather than by the parents, would not satisfy
the provisions of the policy
In Goodwin v. Elkins & Co., 730 F.2d 99 (3d Cir.1984), cert. denied, 469 U.S.
831, 105 S.Ct. 118, 83 L.Ed.2d 61 (1984), we considered, without resolving,
the appropriateness of the district court's reliance on a partnership agreement,
signed by the plaintiff, which was attached to the defendant's motion to dismiss.
Judge Garth explicitly did not reach the question, see id. at 103 n. 6, 104 n. 9,
Chief Judge Seitz stated that such reliance was in fact inappropriate, but was
harmless error in that case, see id. at 111-12 (Seitz, J., concurring), and Judge
Becker would have held that it was proper for the district court to rely on the
partnership agreement, as it was "actually and necessarily relied upon in the
allegation of [the complaint], and its authenticity [was] conceded." Id. at 113-14
(Becker, J., concurring)
Unlike the partnership agreement at issue in Goodwin, which was attached by
the defendant to its motion to dismiss, the Blue Cross and Blue Shield
brochures were attached by the plaintiffs to their complaint and incorporated by
reference therein. The issue which the Goodwin court was unable to resolve is
therefore not present in the instant case.