United States District Court, S.D. Indiana, Evansville Division
ENTRY ON DEFENDANT WEBTPA'S MOTION TO
RICHARD L. YOUNG, JUDGE
Memorial Hospital and Health Care Center, filed a Complaint
alleging in part that WebTPA breached the parties'
contract. WebTPA moves to dismiss the Complaint for failure
to state a claim under Federal Rule of Civil Procedure
12(b)(6). For the reasons set forth below, the motion is
Hospital sponsors an ERISA self-funded employee welfare
benefit plan that provides benefits to qualified employees
(the “Plan”). During the relevant time period,
the Hospital purchased a stop-loss medical insurance policy
from Defendant Great Midwest Insurance Company, the coverage
of which was triggered upon the exhaustion of the
Hospital's self-insured retention in a given year. The
Hospital also had an Administrative Services Agreement
(“ASA”) with Defendant WebTPA, the third-party
administrator which performed claims-processing services
related to the Plan.
2016 stop-loss policy contained Exclusion No. 5 which
provided that the policy would not pay for treatments,
services, and the like for which an eligible claim for
payment was paid in excess of the reasonable and customary
charge. The policy was changed prior to issuance to limit the
application of Exclusion No. 5 to out-of-network claims.
December 2015, a covered employee of the Hospital delivered
twins who were born premature with multiple serious health
conditions. Both infants required extensive stays in neonatal
intensive care units and acute care admissions at hospitals
located in Cincinnati and Chicago. The infants' medical
bills totaled $2, 300, 000 (which apparently exceeded the
Hospital's self-insured retention for 2015). The Hospital
submitted claims for reimbursement from Great Midwest.
Defendant HIIG Accident & Health, an affiliate of Great
Midwest, performed an audit of the medical care received by
the twins. The audit resulted in a 70% reduction in
reimbursement to the Hospital. The Hospital appealed the
decision and lost.
Hospital brings claims for breach of contract against Houston
International Insurance Group and its subsidiaries HIIG
Accident & Health, and Great Midwest for their failure to
honor Exclusion No. 5 and for improperly denying or reducing
claims based upon a flawed audit process. The Hospital also
brings a claim for breach of contract against WebTPA for its
failure to carry out its obligations and duties under the
ASA. The present motion relates only to the Hospital's
claim against WebTPA.
Complaint alleges that WebTPA “breached the terms of
the ASA by failing to properly carry out its obligations and
duties under the Agreement.” (Filing No. 1, Compl.
¶ 34). In its motion, WebTPA argues the Hospital fails
to allege that WebTPA had any obligation or duty concerning
the processing or payment of medical stop-loss claims under
the Great Western stop-loss policy. The Hospital
responds that its claim is this: “WebTPA had a duty
under the ASA to properly provide utilization review
and to determine whether bills submitted to the Hospital by
the healthcare providers were appropriate for payment by the
Hospital in the first instance.” (Filing No. 21,
Response at 4) (emphasis added).
the terms of the ASA, WebTPA's administrative
responsibilities included the determination of
“benefits payable per claim in accordance with the
Plan.” (ASA, §§ 2.2(d)). In other words, if
the claim was payable, it was paid by WebTPA according to the
Plan document. (See id., § 2.3(c)). While
WebTPA was obligated to use its best efforts to notify the
Hospital of any overpayment for claims paid, those payments
were issued at the sole direction and authority of the
Hospital. (Id., §§2.3(e), §
3.2(a)). “Financial liability for all
payments made under the Plan” remained with the
Hospital. (Id., § 3.2(c); see also
id., § 1.5 (“The [Hospital] has total
responsibility for payment of claims under the Plan and all
expenses incidental to the Plan.”)). Thus, even if
WebTPA's role was to determine whether healthcare bills
submitted to the Hospital were appropriate-a claim WebTPA
denies-WebTPA may not be held liable for those payments
pursuant to the terms of the APA.
WebTPA argues that under the explicit terms of the ASA, the
Hospital has no right to recover against it for the damages
alleged. The damages at issue here are the losses incurred by
the Hospital due to Great Midwest's denial of its
stop-loss medical claims. Pursuant to the terms of §
2.7(c) of the ASA, WebTPA is not responsible, financially or
otherwise, “for the payment or denial of a stop loss
claim.” (Filing No. 1-2, ASA, § 2.7(c)). Section
2.7(c), the Hospital argues, is an affirmative defense which
is an inappropriate basis to grant a motion to dismiss.
a complaint does not have to anticipate an affirmative
defense. Bausch v. Stryker Corp., 630 F.3d 546, 561
(7th Cir. 2010). Nevertheless, courts may dismiss a complaint
if its allegations establish the affirmative defense. See
Collins v. Vill. of Palatine, Ill., 875 F.3d 839, 842
(7th Cir. 2017) (upholding dismissal based on statute of
limitations because the “complaint contain[ed]
everything necessary to establish that the claim [wa]s
untimely”). Here, the ASA, which is attached to the
Complaint and central to its claims, plainly establishes that
WebTPA may not be held legally responsible for Great
Midwest's denial of the Hospital's stop loss claims.
Accordingly, the Hospital fails to allege a plausible claim
for relief for breach of the ASA.
court finds the Complaint against WebTPA should be dismissed
pursuant to Rule 12(b)(6). Accordingly, WebTPA's ...