In Texas Medicine Resources, LLP v. Molina Healthcare of Texas, Inc., the plaintiffs were physician groups who staff emergency departments. These physicians did not contract with the defendant, an HMO, but they claimed to have provided emergency care to patients who had health care coverage through the defendant. As a result, the physicians contended that the HMO was required to, but did not, pay them “at the usual and customary rate” under Tex. Ins. Code Ann. section 1271.155(a). The physicians sued the HMO for violation of the Insurance Code, and also brought claims for quantum meruit and unfair settlement practices.
The HMO challenged the physicians’ standing to bring these claims, and the trial court agreed, dismissing the lawsuit. On appeal, the court of appeals affirmed, and the physicians sought a petition for review in the Texas Supreme Court, which the court granted.
At that same time, a similar suit (ACS Primary Care Physicians Sw., P.A. v. UnitedHealthcare Ins. Co.) was pending in federal court raising similar issues. In that case, a federal court in the Southern District of Texas considered whether out-of-network emergency care physicians could bring suit under the Texas Insurance Code sections that concern emergency care payment (sections 1271.155(a), 1301.0053(a), and 1301.155(b), which the Texas Supreme Court collectively referred to as the “Emergency Care Statutes”). Reaching a different conclusion than the lower courts in Texas Medicine Resources, the federal court denied the defendants’ motion to dismiss, but granted a request for permissive interlocutory appeal to the Fifth Circuit. While on appeal, the Fifth Circuit granted the physicians’ motion to certify a question to the Texas Supreme Court on whether these emergency care statutes authorize providers to bring a private right of action. The Texas Supreme Court accepted that certified question and consolidated the cases for argument.
Supreme Court rejects a private right of action under the Emergency Care Statutes
In its opinion, the Texas Supreme Court began by reviewing its prior decisions on when an unexpressed private cause of action may be implied, finding that the court had a narrow view on the issue and holding that to imply a cause of action when it was not expressly created risked having the court “legislate from the bench” in violation of the separation of powers. The court then addressed the plaintiffs’ argument that a private cause of action must be implied if the statute provides for a method of compensation but does not impose any penalty for failing to comply. The court rejected that argument, noting that it did not overcome the separation-of-powers concerns that were the underpinnings of the narrow view on implied causes of action.
In addition, the court noted that the Texas Department of Insurance had broad authority to regulate the insurance business in Texas, which further supported its decision to decline to recognize a private cause of action for violation of the Emergency Care Statutes.
Finally, the court considered whether the 2019 amendments to Insurance Code chapter 1467, which established an independent dispute resolution framework for certain types of claims, indicated that the legislature had previously authorized doctors to file suit under the Emergency Care Statutes. Rejecting this argument, the court noted that the language in chapter 1467 applying to emergency claims was not effective until the 2019 amendments, and so could not have authorized a private cause of action prior to the effective date of the amendments. Further, the court noted that, while chapter 1467 does recognize that an out-of-network doctor may file suit (following the arbitration that is also required for post-January 1, 2020, claims under the statute), this provision merely permitted a suit to determine whether the arbitrator’s decision was proper based on a substantial evidence standard of review. As the court noted, the 2019 amendments indicated that the Texas legislature intended “that determining the amount that an out-of-network provider should be paid by an insurer is a technical exercise to be performed by a subject-matter expert – not an issue to be decided by a jury of laymen.”
Based on all of the above, the court held that the Texas Insurance Code does not create a private cause of action for claims under the Emergency Care Statutes.
Texas Supreme Court also foreclosed the ability of out-of-network providers to seek relief under quantum meruit
Out-of-network providers frequently argue that they are entitled to recover from insurers under a quantum meruit theory, asserting that they provide benefits to insurers by treating their members. Consistent with multiple Texas appellate and federal courts, the Texas Supreme Court definitively rejected this argument. In doing so, the court considered the elements of a quantum meruit claim, noting that the second element requires that the services rendered by the plaintiff must have been for the defendant, which the court further recognized meant that the plaintiff’s efforts had to have been undertaken for the defendant.
Therefore, in the context of an out-of-network provider treating a patient, the court held that since that treatment is not being provided “for an HMO or any other kind of insurance company,” the provider cannot sue the insurance company under quantum meruit.
Practical effects of opinion
This opinion provides a significant opportunity for health insurers and Managed Care companies to seek dismissal of lawsuits brought by non-contracting providers who allege that they provided emergency care to their members and were improperly compensated.
Client Alert 2023-016