From the desk of Jeff Eberhard: Health plan contracts may provide broad rights that an injured plaintiff must repay any liability and/or UIM payments received. If Oregon PIP/health insurance statutes are applied, the likelihood of repayment is much less. However, as the Oregon Court of Appeals recently found, the activities of the third-party administrator play a role in determining whether they are or are not an actual insurer for purposes of the statutes. Read on to see how one party who claimed to be a third-party administrator was instead found to be an insurer that was subject to ORS reimbursement requirements.
Case Pointer: The Oregon Court of Appeals has determined that contractual language in an agreement between a company that purports to act as a third-party administrator (Providence) and the Oregon Public Employees Benefits Board (PEBB) made the company an insurer under ORS 750.055 such that it was required to follow the reimbursement requirements of ORS 742.534 et seq. Whether or not those reimbursement requirements might have applied in the absence of such an agreement was immaterial in the court’s determination that Providence was in fact an insurer as opposed to a mere third party administrator.
Providence Health Plan v. Allen, 299 Ore. App. 128 (Aug. 28, 2019).
The underlying trial court case arose from defendant Allen’s injuries that he sustained in a motor vehicle accident caused by the negligence of another driver. At the time of the injury, defendant was a participant in one of Public Employees Benefits Board’s health plans, and Providence Health Plan had contracted with PEBB to act as the health plan’s third-party administrator. Pursuant to the plan, Providence paid about $56,500 in medical expenses. A provision in the health plan required defendant to reimburse PEBB from any judgment, settlement, or other monetary recovery for amounts paid for medical expenses related to injuries inflicted by a third party. Providence learned that the negligent driver’s insurance planned to pay policy limits directly to defendant, and before defendant settled, Providence asserted its subrogation rights against defendant. Providence also asserted a breach of contract claim, which defendant argued was barred by the applicable reimbursement statutes.
The parties filed competing summary judgment motions and defendant’s was granted. In granting the motion, the trial court determined that the PEBB, and, by way of association, Providence were insurers for purposes of the reimbursement statutes. Under those statutes (specifically ORS 742.538), Providence had not properly asserted its subrogation rights because, at the time of filing, defendant had not yet settled. Thus, the battle lines were drawn: could Providence take advantage of the broad contract provisions in the health plan – or was it limited by the PIP/health insurance statutes that would result in no recovery?
On appeal, Providence argued three points. First, Providence argued that PEBB was not an authorized health insurer under ORS 742.534 because it did not hold a certificate of authority to transact health insurance in Oregon. Second, Providence argued that PEBB was not subject to the Insurance Code because it was a labor-management board created by the Oregon Health Authority with the purpose of securing health and other benefits for public employees and their dependents under ORS 243.061. Finally, based on those two arguments, Providence argued that because it was merely a third-party administrator for PEBB’s plan, that it could not be subject to the reimbursement statutes (which it argued did not apply to PEBB either). Defendant argued that Providence was not a mere third-party administrator, but rather a health care service contractor, because it was “intimately connected with a group of doctors [and hospitals] licensed by this state.”
The court was quick to note a section in the agreement between PEBB and Providence which stated, in relevant part that “if [Providence] is a health care service contractor within the meaning of ORS 750.005, the portions of the Insurance Code that ORS 750.055 applies to health care service contractors.” Defendant relied heavily on this portion of the agreement, as it required Providence to comply with ORS 750.005, section (2) of which states “health care service contractors shall be deemed insurers.”
In siding with defendant and determining that Providence was a health care service contractor (and therefore required to comply with the statutes applicable to those contractors, which include the reimbursement statutes), the appellate court explained why Providence was not actually a third-party administrator as it was claiming to be. Specifically, the agreement between PEBB and Providence stated that the agreement’s purpose was for Providence to “provide health benefits for calendar year 2012 to state employees and their dependents.” In the court’s view, providing health benefits was far beyond the scope of mere administrative tasks.
Ultimately, the court determined that Providence is a health care service contractor and was required by its agreement with PEBB to comply with the statutes governing such contractors. Because Providence was an insurer, its claim for breach of contract was properly barred by the reimbursement statutes.
The trial court was affirmed on all issues.