United States v. Bobby Walker

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 10-1781
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James B. Kitterman, Diane Kitterman, *
*
Appellees, *
* Appeal from the United States
v. * District Court for the
* Northern District of Iowa.
Coventry Health Care of Iowa, Inc., *
*
Appellant. *
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Submitted: December 15, 2010
Filed: February 16, 2011
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Before WOLLMAN, MURPHY, and COLLOTON, Circuit Judges.
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WOLLMAN, Circuit Judge.
In the fall of 2008, Diane Kitterman’s 1 family physician informed her that she
had ovarian cancer. He advised that she try to have the cancer removed and, to that
end, referred her to the Mayo Clinic in Rochester, Minnesota.
1Diane’s husband, James, was also named as a plaintiff in the state-court
complaint that the Kittermans filed in this action. Neither that—nor any other—court
filing identifies any cause of action he may have against Coventry Health Care of
Iowa, Inc. (Coventry). Therefore, for ease of reference, we refer to the plaintiff-
appellees, collectively, as Diane Kitterman or Kitterman.

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At that time, Kitterman was participating in a health insurance benefit plan
administered by Coventry. Prior to scheduling her procedure at the Mayo Clinic,
Kitterman contacted a customer-service representative at Coventry to discuss her
plan’s coverage. The representative told Kitterman that the Mayo Clinic was an “out-
of-network” or “non-participating” provider and that coverage thus would be limited
to out-of-network benefits, as set forth in the plan’s three-page schedule of benefits.
A chart on page two of that schedule indicated that the annual “Out-of-Pocket
Maximum” for an individual was $8,000 for non-participating providers but only
$4,000 for participating providers. See Addendum to Appellant’s Br., at 27. The
representative also advised Kitterman that the University of Iowa Hospitals and
Clinics were in-network providers of the same services Kitterman sought from the
Mayo Clinic.
Kitterman asked the Coventry representative whether she might be required to
pay more than $8,000 should she choose to schedule her procedure at the Mayo
Clinic, but the representative merely referred Kitterman back to the schedule of
benefits.
Kitterman—who had read the first two pages of the schedule of benefits, but
not the third 2 —determined that her liability for the Mayo Clinic procedure was capped
at $8,000 and had it done at a total cost of $44,458.99. Only later did she learn that
a more nuanced definition of “Out-of-Pocket Maximum” could be found on page three
of the schedule of benefits. That definition reads:
Out-of-Pocket - The individual Out-of-Pocket Maximum is a limit on the
amount You must pay out of Your pocket for specified Covered Services
in a calendar year, as specified in this Schedule of
2Kitterman did not read the third page because she did not expect a third page.
As she put it, the blank space at the bottom of page two “does not invite the
participant to continue to turn the page.” See D. Ct. Order of Mar. 15, 2010, at 6.
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Benefits. . . . Coinsurance and Deductible amounts apply to your Out-of-
Pocket Maximum. Copayments and Charges that exceed our Out-of-
Network Rate for Non-Participating Providers do not apply to your Out-
of-Pocket Maximum.
Addendum to Appellant’s Br., at 28 (emphasis in original). “Out-of-Network Rate”
is defined on that same page:
Out-of-Network Rate - The Out-of-Network Rate is the maximum
amount covered by Us for approved out-of-network services. This rate
will be derived from either a Medicare based fee schedule or a percent
of billed charges as determined by Us. You are responsible for Charges
that exceed our Out-of-Network Rate for Non-Participating Providers.
This could result in you having to pay a significant portion of your
claim. Balances above the Out-of-Network Rate do NOT apply to your
Out-of-Pocket Maximum.
Id. (emphasis in original). 3
Coventry paid $20,670.83 toward the procedure (its out-of-network rate) but
declined to pay more. That left Kitterman responsible for $23,788.16, nearly $16,000
more than the $8,000 she was expecting to pay.
3
Similar language appears in the evidence of coverage, which warns participants
that when receiving services from non-participating providers: (1) Coventry’s
“allowed amount will be the lesser of billed charges or the Out of Network Rate”; (2)
participants “are liable for any difference between the billed charge and [Coventry’s]
allowed amount”; and (3) “[t]his difference does not apply to [the] Out-of-Pocket
Maximum.” See D. Ct. Order of Mar. 15, 2010, at 10. It goes on: “You are
responsible for Charges that exceed our Out-of-Network Rate for non-participating
providers. This could result in You having to pay a significant portion of Your claim.
Balances above the Out-of-Network Rate do NOT apply to Your out-of-pocket
maximum.” See id., at 11.
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After her administrative appeals with Coventry were unsuccessful, Kitterman
filed this lawsuit in state court, which Coventry removed to the federal district court.
Kitterman argued to the district court that Coventry should be bound by the chart
found on the first two pages of the schedule of benefits, which appeared to cap
Kitterman’s liability at $8,000. As the district court observed, “[r]unning through all
of the Kittermans’ contentions is their assertion that the Schedule of Benefits is a
summary plan description (SPD),” as that term is described in 29 U.S.C. § 1022, and
that “because the Schedule of Benefits fails to meet all of the requirements of an SPD
. . . it is a ‘faulty’ SPD,” on which Kitterman relied to her detriment. D. Ct. Order of
Mar. 15, 2010, at 17-18. The district court, however, expressly declined to address
Kitterman’s summary-plan-description theory, see id., at 25, concluding instead that
a reasonable plan participant would take the term “Out-of-Pocket Maximum” at face
value as a term of “common and ordinary meaning” and expect to pay no more than
that maximum. It further concluded that the plan language purporting to exclude out-
of-network charges above the out-of-network rate from the out-of-pocket maximum
was ambiguous and therefore a reasonable plan participant would not have understood
that it might increase their out-of-pocket expense above the out-of-pocket maximum.
It therefore ordered that Coventry pay “all charges in excess of $8,000.” D. Ct. Order
of Mar. 15, 2010, at 25.
I.
“The Employee Retirement Income Security Act of 1974 (ERISA) permits a
person denied benefits under an employee benefit plan to challenge that denial in
federal court.” Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 108 (2008). We review
de novo the district court’s interpretation of the plan documents. Melvin v. Yale
Indus. Prods., Inc., 197 F.3d 944, 947 (8th Cir. 1999) (“With respect to the
interpretation of an ERISA plan which does not give the administrator discretionary
authority to construe the plan’s terms (as in the instant case), we review the district
court’s interpretation de novo.”). We begin, of course, “by examining the language
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of” those documents, keeping in mind that “[e]ach provision should be read
consistently with the others and as part of an integrated whole.” Bond v. Cerner
Corp., 309 F.3d 1064, 1067-68 (8th Cir. 2002) (emphasis omitted). Our task is to
“interpret the terms of the plan by giving the language its common and ordinary
meaning as a reasonable person in the position of the plan participant, not the actual
participant, would have understood the words to mean.” Adams v. Cont’l Cas. Co.,
364 F.3d 952, 954 (8th Cir. 2004) (quotation marks omitted).
In the district court’s view, the “common and ordinary meaning of ‘Out-of-
Pocket Maximum’ to a reasonable Plan participant . . . is the greatest amount that the
Plan participant will have to pay for medical services per calendar year.” D. Ct. Order
of Mar. 15, 2010, at 19-20. But there is more to the plan documents than the words
“Out-of-Pocket Maximum.” Specifically, both the schedule of benefits and the
evidence of coverage provide that charges in excess of Coventry’s “Out-of-Network
Rate do NOT apply to” Kitterman’s out-of-pocket maximum. Page three of the
schedule of benefits explains: “You are responsible for Charges that exceed our Out-
of-Network Rate for Non-Participating Providers. This could result in you having to
pay a significant portion of your claim.” Addendum to Appellant’s Br., at 28
(emphasis in original).
Read together, these and other provisions in the plan documents temper the
effect of the words “Out-of-Pocket Maximum.”4 We therefore conclude that a
reasonable plan participant, reviewing the policy as a whole, would understand that
4We note also that the phrase “Out-of-Pocket Maximum” is capitalized, and that
the evidence of coverage begins with a warning that “[m]any words used in this
Agreement have special meanings” and “will appear capitalized and are defined for
You.” This puts a reasonable participant on notice that “Out-of-Pocket
Maximum”—like the other capitalized words in the plan documents—is a term with
a “special,” perhaps non-obvious, meaning.
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out-of-network charges above Coventry’s out-of-network rate would not be applied
toward satisfaction of the participant’s “Out-of-Pocket Maximum.”
The district court was not persuaded that a reasonable participant would
understand that the language “do not apply to” could increase the out-of-network, out-
of-pocket expenditure above $8,000, finding “that the bold language in these
definitions is, at best, ambiguous.” D. Ct. Order of Mar. 15, 2010, at 22. In its view,
the phrase “do not apply to your Out-of-Pocket Maximum” must not mean “do not
‘count in’ or are ‘excluded from’” that maximum, because that construction of the
word “apply” is “irreconcilably contrary to the common and ordinary meaning of
‘Out-of-Pocket Maximum.’” Id. at 23. We disagree.
When read in context with accompanying statements in the plan documents
warning that the participant is “responsible for Charges that exceed [Coventry’s] Out-
of-Network Rate for non-participating providers,” which “could result in [the
participant] having to pay a significant portion of [the] claim,” we believe a reasonable
participant would reach only one conclusion: Out-of-network charges above the out-
of-network rate may result in out-of-pocket expenditures above the “Out-of-Pocket
Maximum.”
Indeed, the district court itself—discussing a provision excluding copayments
and penalties from the out-of-pocket maximum—acknowledged that both it and
Kitterman understood the words “do not apply to” to mean “do not count in” or “are
excluded from” the out-of-pocket maximum. See id. at 17 (“[Kitterman] point[s] out
that the Schedule of Benefits does expressly state on page two that ‘[p]enalties do not
apply to out-of-pocket maximums,’ so that Coventry clearly knew how to and could
indicate when charges did not apply to out-of-pocket maximums.” (alteration in
original)), and at 21 (“Even though the last two sentences of § 1.7 [of the evidence of
coverage] do explain that the participant ‘will be responsible for office visit
Copayments throughout the Calendar Year,’ and that ‘Copayments and financial
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penalties do not apply to Your Out-of-Pocket Maximum,’ these limitations do not
suggest that ‘Out-of-Pocket Maximum’ is riddled with exclusions . . . .”). We are not
persuaded that “do not apply to” should be construed one way with respect to
copayments and financial penalties, and another way with respect to charges that
exceed Coventry’s out-of-network rate.
Kitterman, of course, never read the limitations with respect to her “Out-of-
Pocket Maximum” found on page three of the schedule of benefits. But when
interpreting the terms of the plan, we cannot ignore provisions or rewrite the plan
documents to conform with what Kitterman actually read. See Adams v. Cont’l Cas.
Co., 364 F.3d at 954; Adams v. LTV Steel Mining Co., 936 F.2d 368, 371 (8th Cir.
1991) (“[O]ur role is to assure the plan is fairly administered, not to rewrite plan
provisions.”). We must consider the documents as an “integrated whole,” and “give[]
effect” to “all parts of the contract.” Bond, 309 F.3d at 1068. And the language in the
plan documents is clear (and in bold type): “Charges that exceed [the] Out-of-
Network Rate for Non-Participating Providers do not apply to [the] Out-of-Pocket
Maximum.” Addendum to Appellant’s Br., at 28 (emphasis omitted).
Because we are required to view the plan language in its totality, and because
the term “Out-of-Pocket Maximum” is specifically defined not to include out-of-
network charges above the out-of-network rate, we conclude that a reasonable plan
participant would give the term “Out-of-Pocket Maximum” the meaning ascribed to
it by the plan.
II.
For these reasons, we vacate the judgment of the district court and remand for
further proceedings.
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