Health Care Service Corp. v. Methodist Hospitals o

Case: 15-10154 Document: 00513375166 Page: 1 Date Filed: 02/10/2016

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit

FILED
February 10, 2016
No. 15-10154
Lyle W. Cayce
Clerk
HEALTH CARE SERVICE CORPORATION, an Illinois Mutual Legal Reserve
Company,

Plaintiff - Appellee

v.

METHODIST HOSPITALS OF DALLAS, a Texas Corporation doing business
as Methodist Health System,

Defendant - Appellant

Appeal from the United States District Court
for the Northern District of Texas

Before SMITH, WIENER, and GRAVES, Circuit Judges.
WIENER, Circuit Judge:
A Texas statute—Chapter 1301 of the Texas Insurance Code 1—requires
healthcare insurers to make coverage determinations and pay claims made by
preferred healthcare providers within a specified time or face penalties.
Plaintiff-Appellee Health Care Service Corporation (“HCSC”) filed this action
for a declaratory judgment against Defendant-Appellant Methodist Hospitals
of Dallas (“Methodist”), seeking inter alia a declaration that (1) Chapter 1301
does not apply to HCSC as the administrator of particular health plans, and

1 TEX. INS. CODE § 1301.
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No. 15-10154
(2) the Federal Employee Health Benefits Act of 1959 (“FEHBA”), 5 U.S.C. §
8901, et seq., preempts application of the statute to its administration of claims
under the Federal Employees Health Benefits Program (“FEHBP”). The
district court granted summary judgment in favor of HCSC, holding that
Chapter 1301 does not apply to HCSC as the administrator of the plans at issue
and that FEHBA preempts Chapter 1301’s application to claims under FEHBP
plans administered by HCSC. We affirm.
I.
A.
Texas Insurance Code, Chapter 1301 applies exclusively to preferred
provider plans. 2 It requires insurers receiving a “clean claim” to determine,
within specified times, whether the claim is payable: 45 days for non-electronic
claims and 30 days for electronic claims. Within these times, such insurers
must either (1) pay the claim, (2) partially pay and partially deny the claim
and notify the provider in writing of the reason for partial denial, or (3) deny
the claim in full and notify the provider in writing of the reason for denial. 3
The Texas statute imposes a range of penalties for late payments of claims
determined to be payable. 4
The statute’s express applicability provision—section 1301.0041—states
that “this chapter applies to each preferred provider benefit plan in which an

2 Together, Texas Insurance Code Chapters 843 (applicable to health maintenance
organizations) and 1301 (applicable to preferred provider plans) comprise the Texas Prompt
Pay Act. The instant case implicates only Chapter 1301.
3 TEX. INS. CODE § 1301.103.
4 Id. § 1301.137(a) (imposing penalties when “a clean claim submitted to an insurer is

payable and the insurer does not determine . . . that the claim is payable and pay the claim
on or before the date the insurer is required to make a determination or adjudication of the
claim”). The statute does not provide any recourse for coverage determinations that occur
after the 30- or 45-day deadlines but result in a determination that the claim is not payable.
Accordingly, the statute imposes penalties only for late payment of approved claims.
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insurer provides, through the insurer's health insurance policy, for the
payment of a level of coverage that is different depending on whether an
insured uses a preferred provider or a nonpreferred provider.” 5 Separately,
section 1301.109 extends the statute’s coverage to administrators with whom
insurers contract: “This subchapter applies to a person, including a pharmacy
benefit manager, with whom an insurer contracts to: (1) process or pay claims;
(2) obtain the services of physicians and health care providers to provide health
care services to insureds; or (3) issue verifications or preauthorizations.” 6
The statute defines “preferred provider benefit plan” as “a benefit plan
in which an insurer provides, through its health insurance policy, for the
payment of a level of coverage that is different from the basic level of coverage
provided by the health insurance policy if the insured person uses a preferred
provider.” 7 It defines “insurer” as “a life, health, and accident insurance
company, health and accident insurance company, health insurance company,
or other company operating under Chapter 841, 842, 884, 885, 982, or 1501,
that is authorized to issue, deliver, or issue for delivery in this state health
insurance policies.” 8 The statute defines “health insurance policy” as “a group
or individual insurance policy, certificate, or contract providing benefits for
medical or surgical expenses incurred as a result of an accident or sickness.” 9
B.
HCSC is a mutual legal reserve company that operates in Texas as Blue
Cross and Blue Shield of Texas (“BCBSTX”), a division of HCSC. Methodist is
a healthcare provider that has a preferred provider agreement with HCSC,

5 Id. § 1301.0041(a).
6 Id. § 1301.109.
7 Id. § 1301.001(9).
8 Id. § 1301.001(5).
9 Id. § 1301.001(2).

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according to which Methodist agrees to provide medical services to patients
who have health plans either insured or administered by HCSC.
BCBSTX acts in various roles, two of which are relevant in this case: (1)
It administers some plans that expressly assume the risk of medical costs and
establish their own benefit plans, and (2) it services benefit plans for federal
employees in Texas, pursuant to the FEHBP, under the Blue Cross and Blue
Shield Service Benefit Plan, known as the Federal Employee Program.
(BCBSTX also operates as a direct insurer, selling fully insured plans and
assuming the risk of medical costs. None of the claims at issue here, however,
implicate the fully insured plans offered by BCBSTX.)
In the first category, BCBSTX acts as the administrator for (1) employer
self-funded plans, (2) state government plans, and (3) claims arising under the
BlueCard program. When BCBSTX administers self-funded plans and state
government plans, it enters into administrator agreements with such plans to
perform administrative services only. Those services include processing claims,
providing customer service, linking beneficiaries to providers, and making
medical-necessity determinations. The plans, not BCBSTX, must bear the risk
of medical costs. 10
As for BlueCard claims administered by BCBSTX, the BlueCard
program allows beneficiaries covered by out-of-state Blue Cross and Blue
Shield plans to access their coverage when receiving medical services in a state

10 “Under a self-funded benefit plan, an employer assumes the risk of providing health
insurance to its employees, instead of ceding the risk to a third-party insurance company.
The employer then either sets aside funds for its employees’ covered medical expenses or pays
for such expenses out of its general accounts.” Tex. Dep’t of Ins. v. Am. Nat’l Ins. Co., 410
S.W.3d 843, 846 (Tex. 2012). See also id. at 848 (“Employers who self fund their employee
health-benefit plans are clearly not insurance companies, but they perform a similar
service.”).
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other than the one in which their plans are based. If, for example, an out-of-
state Blue Cross beneficiary receives medical care in Texas, the medical
provider submits a claim to BCBSTX, which forwards the claim to the
beneficiary’s out-of-state Blue Cross plan. That out-of-state Blue Cross plan
makes a coverage determination, then returns the claim to BCBSTX to pay the
claim if there is coverage. Finally, the out-of-state plan reimburses BCBSTX
for any payments made on its behalf.
In the second category, BCBSTX’s only obligation is to service FEHBP
plans. FEHBA provides health benefits for federal employees. 11 Under
FEHBA, the federal Office of Personnel Management (“OPM”) negotiates plans
with various insurers. Relevant here, the OPM 12 and the Blue Cross and Blue
Shield Association contracted to form the Federal Employee Program to
provide health benefits plans for federal employees. Local affiliates of Blue
Cross administer the plans within such affiliates’ states. In Texas, BCBSTX,
as a licensee of the Blue Cross and Blue Shield Association, processes claims
and provides customer service for members of the Federal Employee Program.
Under this scheme, the federal government pays about 75% of the premiums
and the enrollees pay the remainder. 13 These premiums are paid into the U.S.

11 See 5 U.S.C. §§ 8901-8914.
12 FEHBA gives the OPM the responsibility to negotiate and regulate federal
employees’ health benefit plans. See id. § 8902(a).
13 Id. § 8906(b); see also Empire Healthchoice Assur., Inc. v. McVeigh, 547 U.S. 677,

684 (2006).
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Treasury Employees Health Benefits Fund. 14 BCBSTX draws from this fund
to pay for both covered benefits and administrative costs. 15
C.
Anticipating that Methodist would seek relief under Chapter 1301 for
the late payments of its claims, HCSC filed this action for, relevantly, a
declaration that (1) Chapter 1301 of the Texas Insurance Code does not apply
to HCSC’s administration of self-funded plans, state government plans, or
claims under the BlueCard program, (2) the Employee Retirement Income
Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001, et seq., preempts Chapter
1301’s application to claims arising under self-funded ERISA plans, and (3)
FEHBA preempts Chapter 1301’s application to claims arising from FEHBP
plans. Methodist asserted a counterclaim for over $31 million in penalties,
interest, and attorneys fees under Chapter 1301 attributable to BCBSTX’s
alleged late payment of approved claims.
HCSC moved for summary judgment on all claims and counterclaims. In
granting HCSC’s motion, the district court held that (1) Chapter 1301 does not
apply to BCBSTX’s administration of the plans at issue, and (2) FEHBA
preempts application of Chapter 1301 to Methodist’s claims arising from
FEHBA-governed plans. Because it found that Chapter 1301 does not apply to
BCBSTX’s administration of the self-funded plans, the district court did not
address whether ERISA preempts such application. Methodist filed a motion
for reconsideration, which the district court denied.

14 5 U.S.C. § 8909(a) (“There is in the Treasury of the United States an Employees
Health Benefits Fund which is administered by the Office of Personnel Management. The
contributions of enrollees and the Government described by section 8906 of this title shall be
paid into the Fund.”).
15 Id. (“The Fund is available—(1) . . . for all payments to approved health benefits

plans; and (2) to pay expenses for administering this chapter . . . .”).
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II.
A.
We review a district court’s summary judgment de novo. 16 We review the
facts in the light most favorable to the non-moving party. 17 Summary judgment
is appropriate only when there is no genuine dispute of material fact and the
moving party is entitled to judgment as a matter of law. 18
B.
We first consider whether Chapter 1301 applies to BCBSTX’s
administration of the plans at issue. HCSC contends that Chapter 1301 does
not apply to BCBSTX’s administration of self-funded plans, state government
plans, or claims under the BlueCard program because (1) BCBSTX is not an
“insurer” providing coverage through its “health insurance policy” under
Chapter 1301’s general applicability section, and (2) BCBSTX is not a “person”
with whom an “insurer” is contracting to perform administrative services
under section 1301.109.
Methodist counters that Chapter 1301’s definition of “insurer” is broad
enough to encompass BCBSTX’s activities, even when it acts only as an
administrator. Methodist further asserts that, individually or collectively,
BCBSTX’s administrator agreements and preferred-provider agreements
constitute “health insurance policies” under Chapter 1301.
We are convinced that BCBSTX neither provides for coverage through
its “health insurance policy” when it administers the plans at issue here, nor
is a “person” with whom an “insurer” contracts to perform administrative

16 Martinez v. Tex. Workforce Comm’n—Civil Rights Div., 775 F.3d 685, 687 (5th Cir.
2014).
17 Id.
18 Id. (quoting FED. R. CIV. P. 56(a)).
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services. We therefore hold that Chapter 1301 is not applicable to BCBSTX’s
activities as administrator of the self-funded plans or state government plans,
nor to those activities that it performs as administrator of claims under the
BlueCard program.
1.
Texas law governs this issue. We review determinations of state law de
novo. 19 When interpreting a Texas statute, we follow “the same rules of
construction that a Texas court would apply—and under Texas law the
starting point of our analysis is the plain language of the statute.” 20 Texas
courts aim “to determine and give effect to the Legislature’s intent” when
construing a statute. 21 When a statute is clear and unambiguous, Texas courts
“apply its words according to their common meaning in a way that gives effect
to every word, clause, and sentence.” 22 If a “statute’s words are unambiguous
and yield a single inescapable interpretation, the judge’s inquiry is at an
end.” 23 When a statute defines a term, the “court is bound to construe that term
by its statutory definition only.” 24 Further, the court should consider a
provision in the context of the broader statute because “[o]nly in the context of
the remainder of the statute can the true meaning of a single provision be made
clear.” 25

19 See Salve Regina Coll. v. Russell, 499 U.S. 225, 239 (1991) (“The obligation of
responsible appellate review and the principles of a cooperative judicial federalism
underlying Erie require that courts of appeals review the state-law determinations of district
courts de novo.”).
20 Wright v. Ford Motor Co., 508 F.3d 263, 269 (5th Cir. 2007).
21 Am. Nat’l Ins. Co., 410 S.W.3d at 853.
22 Id. (quotation marks and citation omitted).
23 Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644, 651–52 (Tex. 2006).
24 Tex. Dep’t of Transp. v. Needham, 82 S.W.3d 314, 318 (Tex. 2002).
25 Bridgestone/Firestone, Inc. v. Glyn-Jones, 878 S.W.2d 132, 133 (Tex. 1994).

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2.
We first determine whether Chapter 1301’s express applicability
provision makes that statute applicable to BCBSTX’s relevant roles in this
case. Chapter 1301 applies expressly “to each preferred provider benefit plan
in which an insurer provides, through the insurer’s health insurance policy, for
the payment of a level of coverage . . . .” 26 Thus, we must determine whether
BCBSTX, acting in its capacity as an administrator, is an “insurer” and
whether it provides coverage through its “health insurance policy.”
Chapter 1301 defines “insurer” as “a life, health, and accident insurance
company, health and accident insurance company, health insurance company,
or other company operating under Chapter 841, 842, 884, 885, 982, or 1501,
that is authorized to issue, deliver, or issue for delivery in this state health
insurance policies.” 27 The parties agree that BCBSTX operates generally as a
licensed insurance carrier under Chapter 841 and that it is authorized to issue
health insurance policies in Texas. Thus, BCBSTX would seem to fit Chapter
1301’s definition of “insurer.” BCBSTX insists, however, that it is not an
“insurer” under Chapter 1301 when, as here, it acts only as an administrator.
Instead, notes BCBSTX, it operates under a different chapter—Chapter 4151
of the Texas Insurance Code—when only administering plans. It observes that
Chapter 4151 is not one of the chapters enumerated in Chapter 1301’s
definition of insurer. Resolving the parties’ opposing contentions is not
necessary, however, because we conclude that Chapter 1301 is inapplicable for
a different reason.

26 TEX. INS. CODE § 1301.0041(a).
27 Id. § 1301.001(5).
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Even if BCBSTX is an “insurer” under Chapter 1301, it does not provide
payments through its “health insurance policy” when it is administering the
plans here at issue. Methodist insists that subsection 1301.0041(a)’s
“provides . . . for . . . payment” language is broad enough to encompass the
actions of an administrator that merely facilitates payment and does not have
the financial burden of payment. Under this reasoning, Methodist relies on the
common definition of “provide” because the statute does not define this term.
Methodist contends further that BCBSTX maintains a “health insurance
policy” under Chapter 1301. It urges us to hold that, individually or
collectively, BCBSTX’s administrator agreements and preferred provider
network agreements constitute a “health insurance policy.” 28
First, Methodist reads Chapter 1301’s “provides . . . for . . . payment”
language too broadly. When referring to payments made by administrators,
Chapter 1301 does not use these quoted words, but instead describes those acts
of administrators with the words, “process or pay claims.” 29 This suggests that
subsection 1301.0041(a)’s “provides . . . for . . . payment” language does not
encompass payments by others that are merely distributed by an
administrator.
But even accepting, arguendo, Methodist’s insistence that subsection
1301.0041(a)’s “provides . . . for . . . payment” language is broad enough to
encompass an administrator’s payment of claims on behalf of a self-funded
plan, Methodist’s reasoning still fails: BCBSTX does not make payments

28 In support of its argument to read the two agreements as a single contract,
Methodist relies on a federal district court decision in which the court relied on a “single
unified contract theory” to conclude that a claims administrator was in privity of contract
with a healthcare provider. See Baylor Univ. Med. Ctr. v. Epoch Group, L.C., 340 F. Supp. 2d
749 (N.D. Tex. 2004).
29 See TEX. INS. CODE § 1301.109.

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through its “health insurance policy” as defined by Chapter 1301. Under that
chapter, a “health insurance policy” means “a group or individual insurance
policy, certificate, or contract providing benefits for medical or surgical
expenses incurred as a result of an accident or sickness.” 30 Importantly, a
health insurance policy must provide benefits for medical or surgical expenses.
Here, as the parties agree, BCBSTX’s preferred provider agreements set out,
inter alia, the reimbursement rate for services rendered by providers to
beneficiaries, and the administrator agreements establish BCBSTX’s duties as
administrator, consisting of, for example, making coverage determinations and
paying claims. Whether read together or separately, the provider and
administrator agreements provide no benefits for medical or surgical expenses.
Instead, any benefits furnished to beneficiaries derive from the plans of others,
wholly independent of any contractual relationship with BCBSTX. Simply put,
BCBSTX, as an administrator, does not confer any benefits for medical
expenses on beneficiaries and therefore does not provide for payment through
its “health insurance policy.” 31
Our conclusion that BCBSTX does not provide benefits through its
administrator and preferred provider agreements, but instead merely
distributes claim payments from plans to providers, is consistent with the text
of Chapter 1301. That text clearly distinguishes between the provision of
“benefits” to beneficiaries and the payment of “claims” to providers, by using
the word “benefit” in relation to insureds, not providers. For example,

30 Id. § 1301.001(2).
31 Methodist also contends that in subsection 1301.001(2)’s definition of “insurer,” the
word “insurance” modifies only “policy,” and that therefore any “certificate” or “contract” can
also be a “health insurance policy” under Chapter 1301. Even if this reasoning is correct, this
argument ignores that definition’s operative words: “providing benefits for medical or
surgical expenses.”
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subsection 1301.001(1) refers to “benefits to an insured.” Likewise, section
1301.005 requires that “preferred provider benefits and basic level benefits are
reasonably available to all insureds . . . .” In contrast, when describing
payments of claims to providers, Chapter 1301 uses the term “payment of
claims,” not “payment of benefits.” 32
Methodist also argues that BCBSTX provides coverage through its
“health insurance policy” because it acts as a stop-loss insurer for some of the
plans it administers and therefore acts as a direct insurer. In Brown v.
Granatelli, 33 we cautioned in dicta that a stop-loss insurance policy could
qualify as an accident-and-sickness policy subject to regulation as direct
insurance if its coverage kicked in at an unreasonably low dollar amount. 34
Here, HCSC provides stop-loss insurance for some of the self-funded plans
from which Methodist’s claims for penalties arise. Methodist now speculates
that if HCSC’s stop-loss insurance is triggered at unreasonably low amounts,
it should be considered an “insurer” under Chapter 1301.
Methodist’s argument fails on the facts. Methodist points to no evidence
in the record suggesting that HCSC’s stop-loss insurance triggers at
unreasonably low amounts.

32 See, e.g., TEX. INS. CODE § 1301.139 (using the language “payment of claims to
preferred providers”); id. § 1301.109 (using the language “pay claims”); id. § 1301.103
(referring to “whether the claim is payable”); id. § 1301.137(a) (using “claim is payable” and
“pay the claim” language to describe payments to providers).
33 897 F.2d 1351 (5th Cir. 1990).
34 Id. at 1355 (“We do not suggest that Article 3.70-2(E) can be avoided by naming an

employee benefit plan as the insured on a policy which in reality insures the plan
participants. If, for example, a plan paid only the first $500 of a beneficiaries’ health claim,
leaving all else to the insurer, labeling its coverage stop-loss or catastrophic coverage would
not mask the reality that it is close to a simple purchase of group accident and sickness
coverage.”).
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We conclude that BCBSTX does not provide for payment through its
health insurance policy when it only administers the plans at issue. We
therefore hold that subsection 1301.0041(a) is inapplicable.
3.
Having determined that Chapter 1301’s express applicability section
does not apply to BCBSTX when it administers self-funded plans or state
government plans, or when it processes claims under the BlueCard program,
we next examine whether Chapter 1301 applies to BCBSTX by virtue of section
1301.109. That section extends Chapter 1301 “to a person . . . with whom an
insurer contracts to” perform certain administrative services. 35 Thus, for
section 1301.109 to apply, the self-funded plans, state government plans, and
out-of-state BlueCard plans must operate as “insurers” under Chapter 1301.
The self-funded plans and state government plans are not insurers under
subsection 1301.001(5) because they do not operate under any of that
subsection’s enumerated provisions. Neither are they authorized to issue,
deliver, or issue for delivery health insurance policies in Texas. 36 Accordingly,
BCBSTX is not an entity with which an “insurer” contracts in relation to these
plans, and section 1301.109 is therefore inapplicable. This reasoning applies
with equal force when BCBSTX administers claims under the BlueCard
program for out-of-state Blue Cross plans administered or insured by out-of-
state insurers.

35 TEX. INS. CODE § 1301.109 (emphasis added) (extending Chapter 1301 “to a
person . . . with whom an insurer contracts to: (1) process or pay claims; (2) obtain the
services of physicians and health care providers to provide health care services to insureds;
or (3) issue verifications or preauthorizations”).
36 Id. § 1301.001(5); see also Am. Nat’l Ins. Co., 410 S.W.3d at 849 (“[S]elf-funded

employee health-benefit plans . . . are not regulated like insurance companies.”); id. at 849
n.5 (noting that Texas law exempts self-funded plans of governmental entities from
regulation).
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In its reply brief, Methodist contends—for the first time—that section
1301.109 applies to BCBSTX’s administration of an indeterminate subset of
BlueCard claims in which an out-of-state division of HCSC—as opposed to a
separate independent licensee of the Blue Cross and Blue Shield Association—
administers or insures the out-of-state plan. 37 Under this reasoning, Methodist
contends that section 1301.109 applies to such claims because the out-of-state
plan is issued by an “insurer” under Chapter 1301, given that HCSC is a
licensed Texas insurer through its BCBSTX division.
We note initially that Methodist points to no evidence in the record
demonstrating that any of its claims for late payment arise from claims that
BCBSTX administered on behalf of out-of-state plans insured by one of HCSC’s
other operating divisions. At this late stage, Methodist points only to the fact
that HCSC administers and insures Blue Cross plans in Illinois, Montana,
New Mexico, and Oklahoma.
More problematic is the fact that Methodist’s initial appellate brief
challenges only the district court’s determination that Chapter 1301 does not
apply to BCBSTX’s administration of self-funded plans. It raises no challenge
to the district court’s holding that Chapter 1301 does not apply to BCBSTX’s
processing of claims under the BlueCard program. This alone constitutes a
waiver of the right to have us review this issue. 38 Furthermore, Methodist
never advanced this argument or presented evidence on this issue before the
district court, either in its motion for summary judgment or its motion for

37 Because HCSC operates in only five states—Texas, Illinois, Montana, New Mexico,
and Oklahoma—Methodist’s new theory would implicate only BlueCard claims processed by
BCBSTX on behalf of one of HCSC’s divisions in those states.
38 See DSC Commc’ns Corp. v. Next Level Commc’ns, 107 F.3d 322, 327 n.2 (5th Cir.

1997) (“[I]t is clear that a party who fails to raise an issue in its initial brief waives the right
to review of that issue . . . .”).
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reconsideration. 39 In fact, Methodist never even invoked section 1301.109 as a
basis for applying Chapter 1301 to BCBSTX or attempted to draw any
distinction between out-of-state Blue Cross plans operated by independent
licensees and those operated by divisions of HCSC. Raising this new theory
now, Methodist attempts to take a prohibited additional bite of the apple. It
suffices that, because it failed to raise this argument until filing its appellate
reply brief, Methodist has waived it.
4.
Finally, we observe that Methodist’s construction of Chapter 1301 is
incredibly strained in light of the overall structure of the statute. Chapter
1301’s express applicability section—section 1301.0041—applies generally to
“insurers,” and another section—section 1301.109—extends Chapter 1301 to
administrators with whom “insurers” contract. Methodist does not urge that
Chapter 1301 applies directly to the plans at issue; neither does it urge that
Chapter 1301 applies to administrators of self-funded plans under Chapter
1301’s provision that extends the statute to administrators. Instead, Methodist
claims that Chapter 1301 applies to administrators of the plans only when
those administrators also happen to operate as insurers. Under Methodist’s
proffered construction, Chapter 1301 (1) would apply to administrators that
are not otherwise insurers of insured plans under section 1301.109, (2) would
apply to administrators that are otherwise insurers of self-funded plans under

39 See Singleton v. Wulff, 428 U.S. 106, 120 (1976) (“It is the general rule, of course,
that a federal appellate court does not consider an issue not passed upon below.”); Celanese
Corp. v. Martin K. Eby Const. Co., 620 F.3d 529, 531 (5th Cir. 2010) (“The general rule of this
court is that arguments not raised before the district court are waived and will not be
considered on appeal.”); Local Union No. 59 v. Namco Elec., Inc., 653 F.2d 143, 146 (5th Cir.
1981) (“We are constrained to review only those exhibits, depositions, and affidavits that were
presented to, and considered by, the trial court. The court of appeals is not the proper forum
in which to present new facts or proffer new evidence.”).
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section 1301.0041(a), and (3) would not apply to administrators that are not
otherwise insurers of self-funded plans.
This result makes no sense. First, Methodist leaves unexplained why the
legislature would choose to expressly extend Chapter 1301 to administrators
of insured plans under section 1301.109, but not extend it to administrators of
self-funded plans in the same way. Section 1301.109 could, for example, apply
to “a person . . . with whom an insurer [or self-funded plan] contracts.” Second,
Methodist also leaves unexplained why the legislature would extend Chapter
1301 to administrators of insured plans, regardless of whether the
administrator otherwise operates as an insurer, but choose to extend Chapter
1301 to administrators of self-funded plans only when such administrators
otherwise operate as insurers.
Based on our plain reading of the statute, we affirm the district court’s
ruling that Chapter 1301 is inapplicable to BCBSTX when it administers self-
funded plans, state government plans, and claims under the BlueCard
program. 40
C.
We turn finally to the separate question whether FEHBA preempts
Chapter 1301’s application to claims arising under FEHBP plans processed by
BCBSTX.
FEHBA contains an express preemption provision:

40 The parties also point to the legislative history of Chapter 1301 and the Texas
Department of Insurance’s interpretation of Chapter 1301. Finding that the statute is
unambiguous, we do not rely on these interpretative aids. See City of Round Rock v.
Rodriguez, 399 S.W.3d 130, 137 (Tex. 2013) (“When a statute is clear and unambiguous, we
do not resort to extrinsic aides such as legislative history to interpret the statute.”). For the
same reason, we decline Methodist’s invitation to certify this issue to the Texas Supreme
Court.
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The terms of any contract under this chapter which relate to the
nature, provision, or extent of coverage or benefits (including
payment with respect to benefits) shall supersede and preempt any
State or local law, or any regulation issued thereunder, which
relates to health insurance or plans. 41

“The policy underlying § 8902(m)(1) is to ensure nationwide uniformity of the
administration of FEHBA benefits.” 42 But, “Section 8902(m)(1)’s text does not
purport to render inoperative any and all state laws that in some way bear on
federal employee-benefit plans.” 43 As articulated by the Second Circuit,
preemption occurs under FEHBA when (1) “the FEHBA contract terms at issue
‘relate to the nature, provision, or extent of coverage or benefits,’” and (2) the
state law relates to health insurance or plans. 44 The parties dispute only
whether the second prong of this test is met.
Holding that FEHBA preempts Methodist’s Chapter 1301 claims arising
out of FEHBP plans, the district court determined that Chapter 1301 relates
to the plans because Methodist asserts its rights to statutory penalties under
Chapter 1301, application of which depends on the way that such claims are
processed under the Federal Employee Program. The district court relied on
the declaration of an HCSC employee who indicated that when a provider
submits a claim, the Federal Employee Program Direct System makes a
coverage determination, which is then communicated to BCBSTX. Only then
does BCBSTX process the claim in accordance with that determination. 45 On

41 5 U.S.C. § 8902(m)(1).
42 Burkey v. Gov’t Emps. Hosp. Ass’n, 983 F.2d 656, 660 (5th Cir. 1993).
43 McVeigh, 547 U.S. at 698.
44 Empire HealthChoice Assur., Inc. v. McVeigh, 396 F.3d 136, 145 (2d Cir. 2005), aff’d,

547 U.S. 677 (2006) (quoting 5 U.S.C. § 8902(m)(1)).
45 The affidavit also provides that the Federal Employee Program is subject to “claims

timeliness requirements,” including the OPM’s requirement that 95% of claims be paid
within 30 days.
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No. 15-10154
this basis, the district court concluded that Methodist’s demand for penalties
under Chapter 1301 for claims paid through this mechanism relates to and
depends on the provisions of the FEHBP plan.
In Burkey v. Government Employees Hospital Ass’n, we addressed a
similar issue. There, a beneficiary asserted a Louisiana state-law claim for
unreasonable delay in paying health and accident insurance claims against an
authorized insurance carrier under FEHBA. We rejected the beneficiary’s
argument that the claim was not preempted because it related only to remedies
and not to the nature or extent of coverage of benefits: “No such distinction can
sensibly be made. Tort claims arising out of the manner in which a benefit
claim is handled are not separable from the terms of the contract that governs
benefits.” 46 In sum, “[i]nsofar as the . . . claim for statutory delay damages
necessarily refers to [the] plan to determine coverage and whether the proper
claims handling process was followed, it refers to the plan, ‘relates to’ it and is
therefore preempted.” 47 We also noted that preemption was required because
“imposition of Louisiana statutory penalties would invariably expand [the
carrier’s] obligations under the terms of its plan and would foster interstate
conflicts in coverage.” 48
Attempting to distinguish Burkey, Methodist argues that Chapter 1301
does not “relate to” FEHBP plans because it permits a claim for statutory
penalties only after an affirmative coverage decision and therefore requires no
inquiry into any substantive coverage determination. 49 But this reasoning

46 Burkey, 983 F.2d at 660.
47 Id.
48 Id.
49 Methodist also relies on a number of cases in which courts conducted complete

preemption analyses under FEHBA. Because complete preemption relates to federal
jurisdiction and requires an inquiry different from that present here, Methodist’s reliance on
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No. 15-10154
ignores the effect of Chapter 1301: By imposing penalties for late payments of
approved claims, Chapter 1301 also imposes claims-processing deadlines on
FEHBP carriers. 50 As in Burkey, imposition of Chapter 1301’s penalties would
expand FEHBP carriers’ duties under the plans and force them to comply with
divergent state deadlines for claims processing and payment. Further, any
inquiry under Chapter 1301 requires an inquiry into how an FEHBP carrier
administers a plan under its contract with the OPM.
Although Methodist fails to acknowledge the effect of Chapter 1301, its
impact on FEHBP carriers is clear. As noted above, section 1301.103 requires
insurers receiving a “clean claim” first to “make a determination of whether the
claim is payable” within 45 days for nonelectronic claims and 30 days for
electronic claims, then either (1) pay the claim, (2) partially pay and partially
deny the claim and notify the provider in writing of the reason for partial
denial, or (3) deny the claim and notify the provider in writing of the reason for
denial. 51 By imposing penalties for late payments, Chapter 1301 mandates
that insurers process and pay claims within the set time periods. 52

these cases is unavailing. See Pellicano v. Blue Cross Blue Shield Ass'n, 540 F. App'x 95, 99
(3d Cir. 2013) (disregarding a party’s reliance on cases concerning “§ 8902(m)(1)'s effect on
federal jurisdiction, not whether FEHBA preemption provides a substantive defense to a
particular state law claim that is properly brought in federal court”).
50 See America’s Health Ins. Plans v. Hudgens, 742 F.3d 1319, 1331 (11th Cir. 2014)

(rejecting the argument that Georgia’s prompt pay statute is not preempted by ERISA
because it does not impact substantive coverage determinations because although the
“requirements will not necessarily directly alter the coverage decision-making process, . . .
they will compel certain action (prompt benefit determinations and payments) by plans and
their administrators” (emphasis in original)).
51 TEX. INS. CODE § 1301.103 (emphasis added).
52 See America’s Health Ins. Plans v. Hudgens, 915 F. Supp. 2d 1340, 1359 (N.D. Ga.

2012), aff’d, 742 F.3d 1319 (11th Cir. 2014) (“The Prompt Pay Statute . . . requires health
plans, including ERISA plans, to process and to pay provider claims, or to send notices
denying the claims, within 15 or 30 days, depending on whether the claim is submitted
electronically or in paper. Although not explicit, the statute necessarily requires that benefit
eligibility determinations (i.e., determinations as to whether the claim is covered) also be
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No. 15-10154
Consequently, Chapter 1301 would directly affect the operation of the plans
and expand FEHBP carriers’ duties under the plans. On this basis, Chapter
1301 does relate to FEHBP plans. 53
Our holding comports with the purpose of FEHBA. As stated in Burkey,
“[t]he policy underlying § 8902(m)(1) is to ensure nationwide uniformity of the
administration of FEHBA benefits.” 54 Allowing states to regulate the timing of
claims administration by FEHBP administrators clearly conflicts with this
purpose. Importantly, Chapter 1301 does not present a case when the effect on
plans is too remote or tenuous to “relate to” the plans. Although the direct
result of Chapter 1301 is an increased cost to carriers, this does not provide
the basis for our decision. Rather, preemption is supported by the recognition
that the penalties compel coverage determinations and payments within state-
imposed time periods, thereby affecting the administration of the plans and
altering FEHBP carriers’ obligations under their contracts with the OPM. 55 In
as much as application of Chapter 1301 to FEHBP carriers would disrupt the
uniformity of FEHBP plan administration, we hold that FEHBA preempts
Chapter 1301’s application to the claims processed by BCBSTX under FEHBP
plans.

made within 15 or 30 days, in time to satisfy the payment or notice timing requirement.
These requirements, when applied to ERISA plans, have at least a ‘connection’ with the
plans.”).
53 Performing a similar inquiry, the Eleventh Circuit recently held that ERISA

preempts application of Georgia’s prompt-pay statute to self-funded plans. See Hudgens, 742
F.3d at 1331 (holding that ERISA preempts application of Georgia’s prompt pay statute to
self-funded employer plans because “employers offering self-funded health benefit plans
would be faced with different timeliness obligations in different states, thereby frustrating
Congress’s intent”).
54 Burkey, 983 F.2d at 660.
55 As stated, the OPM requires 95% of claims to be paid within 30 working days.

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III.
We affirm the district court’s judgment declaring that Chapter 1301 does
not apply to BCBSTX’s administration of the plans at issue here and that
FEHBA preempts application of Chapter 1301 to claims administered by
BCBSTX under the FEHBP.
AFFIRMED.

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