Coventry Health Care, Inc. v. Caremark, Inc.

705 F. Supp. 2d 921, 2010 U.S. Dist. LEXIS 32405, 2010 WL 1408663
CourtDistrict Court, M.D. Tennessee
DecidedApril 1, 2010
DocketCivil Action 3:09-cv-01009
StatusPublished
Cited by2 cases

This text of 705 F. Supp. 2d 921 (Coventry Health Care, Inc. v. Caremark, Inc.) is published on Counsel Stack Legal Research, covering District Court, M.D. Tennessee primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Coventry Health Care, Inc. v. Caremark, Inc., 705 F. Supp. 2d 921, 2010 U.S. Dist. LEXIS 32405, 2010 WL 1408663 (M.D. Tenn. 2010).

Opinion

MEMORANDUM OPINION

THOMAS A. WISEMAN, JR., Senior District Judge.

Before the Court is a motion to remand filed by Plaintiffs Coventry Health Care, Inc. and twenty-two of its subsidiaries, all insurers and health maintenance organizations (“HMOs”). (The subsidiaries are referenced herein, collectively, as the “Coventry Health Plans.” All the plaintiffs, collectively, are referred to as “Coventry.”) For the reasons specified below, Coventry’s motion to remand will be denied.

I. FACTUAL AND PROCEDURAL HISTORY

In 1999 Coventry and Defendant Care-mark, Inc. (“Caremark”) 1 entered into the Managed Prescription Drug Program Agreement, subsequently amended in 2006 (the “Agreement”). (Compl. ¶¶ 27-28.) Pursuant to this Agreement, Caremark manages the prescription drug programs for the Coventry Health Plans. (Compl. ¶ 30.) The Agreement includes a summary of the prescription drug benefits offered under each individual Coventry Health Plan. (Compl. ¶ 31.) Among its other contractual obligations, Caremark provides Claims Processing Services for Coventry’s drug plans in accordance with the Agreement and the plan design for each Coventry Health Plan. (Compl. ¶ 32.) Caremark’s management of the Coventry Health Plans’ prescription drug programs requires it to administer the prescription claims of Coventry members submitted by Department of Defense (“DoD”) pharmacies (“DoD Pharmacy Claims”). (Compl. ¶ 34.) Pursuant to the Agreement, Care-mark is authorized to process DoD Pharmacy Claims in accordance with Coventry’s written direction, which, under the Agreement, is required to be in accordance with all applicable laws and regulations. (Compl. ¶ 35.)

The DoD is a “government agency” as that term is defined by the Agreement. (Compl. ¶ 36.) DoD Pharmacy Claims typically occur when an insured or the family member of an insured who is a member of the military fills a prescription at a DoD pharmacy located on a military base or other DoD facility. (Compl. ¶ 37.) After the member fills his or her prescription, the DoD submits a claim for reimbursement to Caremark, as the manager of Coventry’s prescription plans. (Compl. ¶ 38.) Under the Agreement, according to Coventry, Caremark is contractually obligated to pay only those DoD Pharmacy Claims that are covered by the member’s applicable Coventry Health Plan, “except as otherwise required by an overriding law or regulation.” (Compl. ¶ 39.) Pursuant to the Agreement, after Caremark processes and pays DoD Pharmacy Claims, Care-mark then invoices Coventry, typically on a weekly basis, so that Coventry can reimburse Caremark for the paid DoD Pharmacy Claims. (Compl. ¶ 40.)

But certain of the Coventry Health Plans do not provide pharmacy benefits for out-of-network pharmacy claims. (Compl. ¶ 42.) Coventry alleges that some of the DoD pharmacies are out-of-network and that Caremark, under the Agreement, is not authorized to reimburse claims submitted for prescriptions filled by out-of-network DoD pharmacies unless the insured’s pharmacy plan provides benefits for out- *924 of-network claims. Coventry alleges it discovered in or around March 2009 that Caremark had been wrongfully paying out-of-network DoD Pharmacy Claims and wrongfully seeking reimbursement for payment of those claims from Coventry. Coventry estimates that Caremark wrongfully paid uncovered DoD Pharmacy Claims, and sought reimbursement from Coventry for those uncovered claims, totaling between $600,000 and $1,000,000. (Compl. ¶¶ 45^16.) It is Coventry’s position that Caremark’s payment of the out-of-network DoD Pharmacy Claims constitutes a breach of the Agreement and that it is entitled to damages arising from that breach. (Compl. ¶ 65.)

In addition to its breach-of-contract claim, Coventry also seeks a declaratory judgment to resolve an “actual controversy” that has arisen between the parties, which Coventry characterizes as follows:

Coventry contends that Caremark improperly paid out-of-network DOD Pharmacy Claims, which are not covered by Coventry’s Health Plans and are not required to be covered by law. On the other hand, Caremark contends that, by law, Coventry Health Plans must cover these DOD Pharmacy Claims.

(Compl. ¶ 68.) Coventry contends that a declaratory judgment will resolve that dispute and settle the “legal relations at issue in this case.” (Id. ¶ 69.) It therefore seeks a declaration that “Caremark must deny all out-of-network DoD Pharmacy claims that are not covered by Coventry Health Plans.” (Id. ¶ 70.)

Generally applicable exclusions in Health Maintenance Organization (HMO) plans of non-emergency or non-urgent services provided outside the HMO (or similar exclusions) are permissible. However, HMOs may not exclude claims or refuse to certify emergent and urgent services provided within the HMO’s service area or otherwise covered non-emergency services provided out of the HMO’s service area. In addition, opt-out or point-of-service options available under an HMO plan may not exclude services otherwise payable under 10 U.S.C. 1095 or this part.

Coventry asserts in its Complaint that “no overriding law or regulation ... requires that out-of-network DoD Pharmacy Claims be paid by Caremark and, ultimately, by Coventry.” (Compl. ¶ 43.) Coventry premises its authority to deny the disputed DoD Pharmacy Claims as out-of-network on 32 C.F.R. § 220.4(c)(3), 2 which allows HMOs to exclude non-urgent, out-of-network services, including, Coventry contends, DoD Pharmacy Claims. (Compl. ¶ 44.)

Caremark timely removed the suit from state court on the basis of federal-question jurisdiction. In its Notice of Removal, Caremark asserts that the parties’ dispute arises from disagreement between the parties over the processing of DoD claims under 32 C.F.R. § 220, upon which Coventry relies, and the statute implemented by that regulation, 10 U.S.C. § 1095. (Id.) In its motion to remand, Coventry asserts that its contract-related claims are based solely on state law, over which this Court lacks subject-matter jurisdiction. In response, Caremark contends that it fulfilled its contractual obligations by paying the DoD Pharmacy Claims because overriding federal laws and regulations required it to do so. Specifically, Caremark contends that, under 10 U.S.C. § 1095 and the implementing regulations 3 neither the Coventry Health Plans nor other HMOs are permitted to characterize DoD claims as *925 out-of-network or to deny DoD Pharmacy Claims as out-of-network.

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705 F. Supp. 2d 921, 2010 U.S. Dist. LEXIS 32405, 2010 WL 1408663, Counsel Stack Legal Research, https://law.counselstack.com/opinion/coventry-health-care-inc-v-caremark-inc-tnmd-2010.