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INSURANCE BD. UNDER THE SOC. INS. PLAN OF BETHLEHE

February 28, 1986

THE INSURANCE BOARD UNDER THE SOCIAL INSURANCE PLAN OF BETHLEHEM STEEL CORPORATION AND SUBSIDIARY COMPANIES, and PENNSYLVANIA BLUE SHIELD, Plaintiffs
v.
WILLIAM MUIR, ACTING INSURANCE COMMISSIONER OF THE COMMONWEALTH OF PENNSYLVANIA, Defendant



The opinion of the court was delivered by: CALDWELL

 CALDWELL, U.S.D.J.

 I. Introduction.

 Plaintiffs, The Insurance Board under the Social Insurance Plan of Bethlehem Steel Corporation and Subsidiary Companies (Board), Pennsylvania Blue Shield (Blue Shield) and Blue Cross of Western Pennsylvania (Blue Cross) have moved for summary judgment in this declaratory judgment action. *fn1" They contend that the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. ยง 1001 et seq. has preempted the defendant, Insurance Commissioner of the Commonwealth of Pennsylvania, *fn2" from enforcing certain state mandated-benefit laws in connection with an employee health care plan regulated under ERISA. Defendant opposes the motion.

 The issue presented is whether contractual agreements between the Board and Blue Shield and Blue Cross (collectively sometimes referred to as the "Blues") deal with the business of insurance so that the plan can be indirectly regulated by the Commonwealth even though the plan itself is subject to the provisions of ERISA.

 II. Background.

 From the affidavits and pleadings filed by the contestants, the following is the background of this litigation. *fn3" The Board is alleged to have overall responsibility for administering the Social Insurance Plan of Bethlehem Steel Corporation and Subsidiary Companies (Plan). Several health and welfare programs are provided by the Plan. The three programs at issue in the instant case are: (1) the Comprehensive Medical Program for the benefit of certain employees and pensioners; (2) the Program of Insurance Benefits for Hourly Paid Employees; and (3) the Program of Hospital and Medical/Surgical Benefits for Eligible Pensioners and Surviving Spouses. (Affidavits of Charles F. Collins, Plan Administrator). The Board's contracts with the Blues confers responsibility on the Blues to handle participants' claims under these programs. This litigation was triggered by a letter received by Blue Shield from the Department of Insurance, dated June 6, 1985, expressing the Department's view of the deficiencies in the hourly paid employee program in light of certain requirements of Pennsylvania insurance law. *fn4"

 Plan participants receive Blue Shield and Blue Cross cards. *fn5" To use Blue Shield as an example, when participants have a claim they submit it to Blue Shield on Blue Shield benefits and claims forms. Blue Shield then uses its own staff and office procedures to process plan participant claims. It makes the initial determination as to coverage under the Plan.

 Blue Shield pays participants' claims directly. The Board is obligated to make monthly payments to Blue Shield to cover anticipated claims. The amount owed is based upon the amount of claims paid in the second preceding month before the month in which the money is due. Payment must be made by the first of the month for claims submitted during that month. If Blue Shield does not receive payment by the fifth, it will no longer process or pay claims. It also is no longer obligated on claims not processed and paid by it when the Board has ceased to make its monthly payment.

 The Board's payment also includes certain administrative fees, $3.20 per participant per month for hourly paid employees and $2.05 per participant per month for eligible pensioners. These fees are due by the twentieth of the month preceding the month for which the payment is due.

 At the end of a contract term, Blue Shield prepares a settlement. If the amount of claims paid plus administrative fees exceeds the payments made by the Board, the Board must pay the difference to Blue Shield within thirty days of being notified of the deficiency. If the payments exceed the claims paid plus administrative fees, Blue Shield must remit the excess to the Board. The same conditions apply if the contract is terminated in mid-term. Blue Cross has a similar arrangement with the Board for programs it administers.

 III. Discussion.

 A. Abstention.

 Defendant renews the contention made in his motion to dismiss that this court should abstain from this controversy because there is an on-going administrative proceeding being conducted by the Department of Insurance. It is argued that plaintiffs should be required to present their claims in that forum out of respect for federal-state comity. We rejected this assertion in disposing of the motion to dismiss, concluding that abstention was inappropriate when plaintiffs' position was that the state cannot regulate ERISA plans at all. See Hotel and Restaurant Employees and Bartenders International Union Local 54 v. Danziger, 709 ...


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