United States District Court, D. New Jersey
ALPHONSE DEMARIA, et al., on their own behalf and on behalf of all others similarly situated, Plaintiffs,
HORIZON HEALTHCARE SERVICES, INC. d/b/a BLUE CROSS BLUE SHIELD OF NEW JERSEY, et al., Defendants.
WILLIAM J. MARTINI, District Judge.
This is a putative class action brought by three chiropractors who treated patients insured by Horizon Blue Cross Blue Shield of New Jersey and Horizon HMO ("Horizon" or "Defendants"). The Complaint alleges that Horizon systematically denied payment to the putative class of chiropractors for certain services rendered. Before the Court is Plaintiffs' Motion to Certify a Class pursuant to Federal Rule of Civil Procedure 23. For the reasons set forth below, the Motion is GRANTED.
According to the Complaint, the putative class members regularly provided three types of chiropractic treatment: (1) chiropractic manipulative therapy ("CMT"); (2) evaluation and management services ("E/M"); and (3) ancillary physical therapy ("PT"). During the class period, Horizon paid the Plaintiffs for CMT but denied all claims for E/M and PT. Horizon explained that it used a practice called "bundling" in which it incorporated payments for all chiropractic treatments into a "global fee" for CMT. Denial of payments for E/M and PT to chiropractors was automatic, and denial of all appeals was also automatic. Explanation of Benefit forms stated that Horizon denied the class members claims for E/M and PT because chiropractors were not eligible for payment for those services.
In October 2009, the New Jersey Department of Banking and Insurance ("DOBI") determined that Horizon's bundling practice violated New Jersey's Unfair Claim Settlement Practices Act, N.J.S.A. 17B:30-13.1. The DOBI issued a cease and desist order effective April 15, 2010. Plaintiffs seek relief for Horizon's denial of E/M and PT claims that they filed before the DOBI's April 15, 2010 cease and desist order.
Horizon offers, underwrites, and administers health benefit plans for more than 3.6 million people in New Jersey. Horizon provides health care benefits in two ways: (1) underwriting and administering "fully insured" plans, where Horizon is both the insurer and the administrator of health care plans, or (2) administering other "self-funded" plans, where Horizon processes and administers claims ultimately paid by the self-insured entity. The "self-funded" line of business is also known as ASO (Administrative Services Only).
Most of the plans operated and/or administered by Horizon are private employer welfare benefit plans governed by the Employment Retirement Security Income Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001, et seq., but certain plans are exempt from ERISA coverage. The parties have stipulated that Horizon tracks which of its plans are covered by ERISA and which are ERISA-exempt. (Plaintiffs' Ex. 2 (Sept. 11, 2014 Stipulation at ¶ 5)).
Persons covered by a Horizon Plan ("Horizon Insureds") receive covered services either from a network of participating providers ("Par providers"), or through out-of-network, non-participating providers ("Non Par providers"). Par providers enter into Provider Agreements with Horizon wherein they agree to treat Horizon Insureds in return for a fixed fee. Par providers also agree not to bill the patient for any other charges, other than a Horizon-mandated co-pay or deductible. Non Par providers have no agreement with Horizon; instead, Horizon pays them for treating Horizon Insureds at "usual and customary" rates. Non Par providers do not waive the right to bill their patients for the difference, if any, between Horizon's reimbursement and their regular charges.
Providers create relationships with Horizon Insureds through "Patient Intake Forms." (Opp. Br. 12-13). On Patient Intake Forms, Horizon Insureds frequently: (1) assigned their rights to payment to the provider; (2) agreed to bear the ultimate financial responsibility for their treatments, regardless of what Horizon agreed to pay.
All Plaintiffs and class members electronically submitted to Horizon an industry-standard form (the "Form 1500") to collect payment. These forms contained "CPT codes, " a coding system devised by the American Medical Association and mandated by federal law to be used for insurance reimbursement claims. Finally, the Form 1500 contained an assignment to the submitting provider of the Horizon Insureds' right to payment.
Horizon processed Form 1500s through one of three "claims engines, " i.e., sophisticated databases and claims adjudication software. These engines record various data about each benefit claim, including the CPT codes for the services rendered, the provider's network status, the result of the claim, and who was paid, i.e., the provider or Horizon Insured. ( See Plaintiffs' Ex. 5 (July 18, 2014 Stipulation Concerning Defendants' Claims Data ¶ 4 (identifying data fields)). The claims engines processed a claim to one of three outcomes: (1) pay the claim; (2) deny the claim; or (3) "pend" the claim. If a benefits claim is paid or denied, that is the end of the claims processing; if a claim is "pended, " Horizon employees manually review it to resolve any issues, which can include asking the provider to submit supporting documentation. (Plaintiffs' Ex. 6 (Mehroke Dep. 19:16-20:24)).
All Horizon plans covered E/M, PT, and CMT. (Moving Br. 7). However, at some point in the 1990s, Horizon made a decision to start automatically denying all claims for PT and E/M submitted by a chiropractor. (Moving Br. 8). Horizon claims that it started doing this due to the bundling of E/M and PT into the CMT service. Horizon's Explanation of Benefits, however, would state that chiropractors were not a "provider type" eligible for payment for the billing codes designated for PT and E/M. ( See Plaintiffs' Exs. 11, 13, 14). Moreover, when chiropractors appealed the denials, they were systematically denied without any meaningful review. ( See Moving Br. 17-21). Plaintiffs have evidence that the systematic denial of their claims for PT and E/M violated the terms of all Provider Agreements and also the terms of all the plans held by Horizon's Insureds. ( See Moving Br. 7, 20-21).
B. The Test Plaintiffs
Plaintiffs are three New Jersey chiropractors subjected to Horizon's bundling policy. Dr. DeMaria was a Par provider during the entire Class Period. Dr. Proodian was a Non Par provider during the entire Class Period. Dr. Probe was a Par provider for part of the Class Period (until April 3, 2009) and Non Par for the remainder.
Plaintiffs have brought federal ERISA claims (Counts I-II) and state law claims (Counts III-VI) on behalf of themselves and other chiropractors who were denied E/M and PT benefits under Horizon plans during the Class Period. Count I seeks the recovery of benefits due under ERISA-covered plans pursuant to ERISA § 502 (a)(1)(B), and Count II seeks an order requiring Horizon to provide a "full and fair review" of denied benefit claims under ERISA § 502 (a)(3) and 29 C.F.R. § 2560.503-1(h)(2) (claims procedure). Plaintiffs' ERISA claims allege that Horizon's uniform and automated policy of denying benefits for E/M and PT services violated Horizon plans, which covered those services.
Plaintiffs' non-ERISA claims sound in breach of contract (Count III), breach of the covenant of good faith and fair dealing (Count IV), promissory estoppel (Count V), and unjust enrichment (Count VI). Plaintiffs' non-ERISA claims allege that Horizon's denial of E/M and PT benefits breached various duties Horizon owed under its plans and Provider Agreements. ( See Opinion of July 31, 2013, ECF No. 31 at 3-4 (summarizing state law claims)).
II. PROPOSED CLASSES
Plaintiffs seek the certification of two classes, each with sub-classes. The two proposed classes are distinguished by the plan type: ERISA or Non-ERISA. The two subclasses are distinguished by ...