In a pair of decisions involving the same health insurer, the Dallas Court of Appeals has ruled that neither the Texas Insurance Code nor the Texas Administrative Code create an implied cause of action for out-of-network health care providers against an HMO or Medicaid Managed Care Organization (MCO).

The cases, Texas Medicine Resources, LLP v. Molina Healthcare of Texas, Inc., 620 S.W.3d 458 (Tex. App.—Dallas, 2021, pet. filed) and Dallas Medical Center, LLC d/b/a/ Dallas Medical Center, Prime Healthcare Services-Mesquite, LLC d/b/a Dallas Regional Medical Center, and Knapp Medical Center (No. 05-19-01583-CV), were brought by physician groups and hospitals against Molina, an insurer that offers HMO health benefit plans through the federal Affordable Care Act exchange and Medicaid managed care benefit plans to Medicaid-eligible individuals. The plaintiffs provided out-of-network emergency care to numerous Molina insureds and alleged that Molina did not adequately reimburse them for their services pursuant to the relevant sections of the Insurance Code and Texas Administrative Code. Molina answered in both cases and filed a plea to the jurisdiction that the providers had no standing to assert their claims. The trial court granted Molina’s plea and dismissed the cases with prejudice. The providers appealed.

In both cases the providers argued that §1271.155, Insurance Code, which requires an HMO to reimburse emergency care performed by an out-of-network physician or provider at “the usual and customary rate or at an agreed rate,” implies a private cause of action permitting them to sue Molina for inadequate reimbursement. They further alleged violations of the Insurance Code’s unfair settlement and prompt pay provisions, equitable relief under a theory of quantum meruit, and a declaratory judgment. The hospital providers also claimed that Molina violated §353.4, TAC, which sets the reimbursement rate for out-of-network emergency care at 95% of the Medicaid fee for service rates at the time of the service. The hospitals further sought unjust enrichment, breach of contract damages as assignees of Molina’s insureds’ contractual rights, and attorney’s fees.

The court of appeals affirmed the trial court’s dismissal of both suits for lack of subject matter jurisdiction based on lack of standing. The court rejected the providers’ argument that either the statute or administrative rule implied a cause of action against a health insurer, stating that “separation of powers principles obligate us ‘to exercise restraint, strictly construe statutory enforcement schemes, and imply a private cause of action to enforce such statutes only when the legislature’s intent is clearly expressed from the language as written.’” No such intent could be identified in this case because (1) the Insurance Code “provides a ‘distinct and comprehensive scheme’ to enforce the statute that is not directed at the courts, (2) the language of [the statute] does not provide any textual entitlement of payment to the physicians, (3) Texas courts do not adhere to ‘necessary implication test’ to determine whether a private right of action exists, and (4) the legislative history confirmed the statute was intended to function as part of a broader regulatory scheme.” [The “necessary implication test” holds that courts will imply a cause of action to enforce a statute when the statutory scheme does not “adequately protect” its beneficiaries.] Similarly, the administrative regulation governing MCO’s establishes a dispute resolution process through the Health and Human Services Commission, a scheme “not directed to the courts.”

As to the remaining claims for equitable and declaratory relief, the court of appeals disposed of them on the basis that they merely “repackaged a statutory claim that the legislature declined to create” (citations omitted). Because the underlying statutory claims sought the same relief for the same reasons, the court of appeals held that the providers had no standing for their quantum meruit, unjust enrichment, and declaratory claims. The breach of contract attorney’s fee claims failed for the same reason. Finally, the court of appeals declined to find that the trial court abused its discretion by dismissing the claims with prejudice, since the hospitals could not make an argument that “they can take any action that would either cure the jurisdictional impediment inherent in this suite or create jurisdiction in the future.”

These opinions usefully analyze rules of statutory interpretation when a party seeks to convince a court to imply a private cause of action. Note also that the trial court and court of appeals connected the plaintiffs’ failure to establish an implied right of action with a lack of standing to bring the lawsuit in the first place. Is standing a jurisdictional issue, as the court of appeals considered it here, or a dispositive motion, such as traditional or no-evidence summary judgment?

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