Kimberly Bruun v. PRUDENTIAL HEALTH CARE PLAN, INC., a Texas Corporation aka PRUCARE, THE PRUDENTIAL…

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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 03-4459
KIMBERLY BRUUN; ASHLEY R. EMANIS,
on behalf of themselves and all
other similarly situated persons
Appellant,
v.
PRUDENTIAL HEALTH CARE PLAN, INC.,
a Texas Corporation aka PRUCARE, THE
PRUDENTIAL INSURANCE COMPANY OF
AMERICA dba PRUCARE; AETNA, INC;
TROVER SOLUTIONS, INC., a
Delaware Corporation
Appellee.
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 02-cv-05241)
District Judge: Honorable Harold A. Ackerman
Argued: September 23, 2004
Before: MCKEE , ALDISERT and GREENBERG, Circuit Judges.
(Filed: February 16, 2005)

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DAVID A. McKAY, Esq. (Argued)
Herman Mathis Casey Kitchens & Gerel
2300 Peachtree Street, Suite 2260
Atlanta, Georgia 30303
Attorneys for Appellants Bruun
NEAL S. MANNE (Argued)
J. HOKE PEACOCK, III
CAROLYN P. COURVILLE
SUSMAN GODFREY L.L.P.
1000 Louisiana, Suite 5100
Houston, Texas 77002
Attorneys for Appellees Prudential Health Care
OPINION OF THE COURT
ALDISERT, Circuit Judge.
Kimberly Brunn and Ashley Emanis (Appellants) appeal from a dismissal of their
complaint by the district court under Rule 12 (b)(6) of the Federal Rules Civil Procedure.
Under the Rule, the court must accept as true all well-pleaded allegations of the
complaint, and construe them in the light most favorable to the plaintiff; dismissal may
result only if the plaintiff alleges no set of facts which, if proved, would entitle him to
relief. Labov v. Lalley, 809 F.2d 220, 221 (3d Cir. 1987.)
Because we write only for the parties who are familiar with the facts and the
proceedings below, our discussion will be limited.
Although Appellants present many contentions, we will discuss what we consider
to be the two major issues that control our disposition, to-wit: (1) whether the Federal

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Health Maintenance Organization Act (HMO Act), 41 U.S.C. § 300 (2000), permits
PruCare to subrogate recoveries received from third parties; and (2) whether PruCare
was properly entitled reimbursement of the reasonable cash value of benefits instead of
the actual costs paid by PruCare. We begin with the language of the relevant portion of
the Plan.
I.
The Plan contains a Right of Reimbursement under the Group Health Care
Coverage:
A. . . . . Each covered person agrees to reimburse PruCare as described in these
provisions in return for PruCare’s providing services, supplies or benefits for a
covered person’s sickness or injury;
1) for which another person, corporation or other entity (called third party below)
is considered responsible; or
2) that arises out of or in the course of any work for wage or profit and is covered
by any worker’s compensation law, occupational disease law or similar law.
Immediately upon receipt of any payments or collection of damages (as a
settlement, award, judgment or in any other way) with respect to such sickness or
injury, the covered person involved, or if incapable, that person’s legal
representative) will reimburse PruCare for :
a) the reasonable cash value of any benefits provided directly by PruCare as the
result of the sickness or injury; and
b) the actual cost paid by PruCare for medical services required by the covered
person as the result of the sickness or injury.
(App. at 128.)
The Plan defines “reasonable cash value” as “the cash value assigned to a service

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or supply provided ordered or authorized by a participating health provider, as
determined by PruCare.” (App. at 111.)
II.
Appellants contend that PruCare violated the terms of the ERISA Plan in
recovering reimbursement from its members when third parties were liable for medical
expenses paid by PruCare. Appellants contend that the HMO Act provides that no HMO
can seek subrogation or reimbursement from a third party whether for reasonable value
or any amount. In rejecting this contention, the district court reasoned:
[t]he HMO Act provision regarding collections from participants reads in
part: “The requirements for this paragraph respecting the basic health
services payment shall not apply to the provision of basic health services to
a member for an illness or injury for which the member is entitled to
benefits under a workman’s compensation law or an insurance policy but
only to the extent such benefits apply to such services.” 41 USC
§300(e)(b)(1). Thus, the HMO specifically accepts its general prepayment
requirement ( and implicitly allows for subrogation and reimbursement)
when a participant’s injury or sickness entitles them to benefits under an
insurance policy. The HMO Act does not require the participants be
insured under that policy, nor does it restrict the application of the
exception to coordination of benefits.
(App. at 19-20.)
Although there were differences between the Senate and House versions of the
Act, the House Amendment prevailed and the legislative history left no doubt about its
application to third-party insurers:
[t]he reported bill, while continuing to require that basic health service be
provided would allow an HMO to seek reimbursements for services
provided to a member who is entitled to benefits under a workmen’s

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compensation law or an insurance policy. The Amendment seeks to assure
that financial responsibility for work related illness or injury will be borne
by workmen’s compensation programs and financial responsibility for other
illnesses and injuries covered by an insurance policy will be borne by those
policies....under the Amendment the HMO would provide the health care
services and receive payment from the workmen’s compensation carrier,
employer or other third party responsible for payment.
H.R. Rep. No. 95-1479 at 52-53 (1978).
We agree with this interpretation.
III.
The district court correctly ruled, based on persuasive authority from other courts,
that PruCare did not violate its ERISA fiduciary duty by requiring Reasonable Cash
Value reimbursement. See e.g., Ince v. Aetna Health Management, 173 F. 3d 672, 676
(8th Cir. 1999) (holding that ERISA allows an HMO to recover reimbursement for the
reasonable value of services). The district court erred, however, when it ruled that “the
Plan documents clearly allow for reimbursement of the ‘Reasonable Cash Value’ for any
service provided by a ‘Participating Health Care Provider’.” We are convinced that the
Plan’s language is ambiguous and that extrinsic evidence is required to resolve this
ambiguity.
IV.
Appellees refer us to the teachings of Franks v. Prudential Health Care Plan, 164
F. Supp. 2d 865 (W.D. Tex. 2001), where the court interpreted the Reimbursement
Clause of this very same plan. The court in Franks was convinced that the clause allowed

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PruCare to require Reasonable Cash Value reimbursement for services rendered by
Preferred Health Care Providers. The Franks court was not, however, convinced of this
on a motion to dismiss. As the Appellee admits in its brief, the court allowed plaintiffs to
present evidence to support their reading of “provided directly by PruCare.” Further, we
conclude that the analysis in Franks is confused. In part of the opinion the court holds
that “Mr. Frank’s ERISA plan gives Prudential the right to recover the reasonable value
to the medical services it provided to Mr. Franks in the event he recovers from a third-
party tortfeasor.” Id. at 882. In another place the court states “defendants have shown
they recovered from Mr. Franks the amount Prudential actually paid to its providers.” Id.
at 885. We do not consider this case persuasive.
The interpretation of the Reimbursement Clause accepted by the district court and
urged by the Appellee’s also causes considerable confusion about when subsection (b)
would apply to limit PruCare to reimbursement based on actual costs paid. If we accept
Appellee’s explanation that services rendered by PruCare’s Preferred Health Care
Providers are also provided directly by PruCare, it is difficult to conceptualize the
circumstances in which PruCare would have to pay for “medical services required.”
Under the district court’s and Appellee’s interpretation, it seems that any medical care
covered by PruCare’s HMO would be provided directly by PruCare and come under the
rubric of subsection (a). This interpretation seems to render subsection (b) superfluous.
Yet interpreting “provided directly by PruCare” in the manner proposed by the

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Appellants leads to a whole host of problems. The term “Reasonable Cash Value” is
defined in the plan as “[t]he cash value assigned to a service or supply provided, ordered
or authorized by a Participating Health Care Provider, as determined by PruCare.” It
would seem based on this definition, that PruCare could use Reasonable Cash Value
reimbursement for all services provided by Participating Health Care Providers.
Also, because PruCare does not normally (or perhaps ever) provide services
directly, under Appellants’ proposed meaning of that term subsection (a), which explains
when the Reasonable Cash Value standard is to be used, would seem to be rendered
superfluous.
V.
Without the necessity of adopting entire argument of Appellants on this particular
issue, we have concluded that when read together, subsections (a) Reasonable Cash
Value and (b) actual cash paid are hopelessly ambiguous and require extrinsic evidence
in order to be interpreted properly. The Plan contains no direct or indirect guideposts to
determine which of the provisions, and therefore which standard of reimbursement,
should be applied in a given set of circumstances. According to the Plan, a Reasonable
Cash Value standard of reimbursement is used when a benefit is “provided directly by
PruCare as a result of sickness or injury.” On the other hand, the actual cost standard for
reimbursement is used for “medical services required by the covered person.” The only
distiguishing factor between these two standards is whether the benefits are “provided

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directly by PruCare” and the Plan is unhelpful in determining what “provided directly by
PruCare” means. We find no explanation in the Plan explaining when the actual cost will
not be used in favor of Reasonable Cash Value. Accordingly, without extrinsic evidence,
any interpretation is little more than guesswork. And this will not do.
We have considered all contentions presented by the parties, but in light of the
foregoing we conclude that no further discussion is necessary.
VI.
Appellants also raised a series of arguments which we treat summarily.
They argue that the Reimbursement Clause applies only when PruCare has
mistakenly provided or paid for “services, supplies or other benefits” that should not
have been covered by the Plan. Read in context in away that avoids rendering the
majority of the Clause meaningless, however, the language of the Reimbursement Clause
clearly allows PruCare to require reimbursement of payments made by third-party
insurers to PruCare Members for health care related to an injury for which the third-party
is considered responsible.
Appellants next assert that the Plan’s definition of Reasonable Cash Value
imposes a duty on PruCare to make an independent valuation and that they are not free to
simply accept the amount billed by their providers. The Plan documents allow PruCare’s
Preferred Health Care Providers to assign the cash value for their services and
Appellant’s argument on this issue is simply not supported by the text of the Plan.

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Finally, Appellants contend that allowing PruCare to collect both reimbursement
and premiums violates ERISA and an implied term of the Plan. We find that PruCare’s
practice of charging premiums as well as requiring reimbursement is explicitly allowed
by the Plan Documents and not in violation of ERISA fiduciary duties
* * * * *
Accordingly, even though we agree with the district court that the Reasonable
Cash Value reimbursement standard is permitted under ERISA, we cannot agree that it
was clearly permitted by the terms of the Plan in this case. We agree with the Appellant
that the words “provided directly by PruCare” in the Reimbursement Clause create an
ambiguity about when the Reasonable Cash Value standard of reimbursement is allowed.
We therefore conclude that dismissal of this complaint under Rule 12(b)(6) was not
appropriate.
The judgment of the district court will be reversed and the proceedings remanded
for the purpose of receiving relevant evidence from the parties.

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