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Restrictions in Eye Care Insurer

Restrictions in Eye Care Insurer's Provider Contract With Optometrists Violated Georgia Eye Care Act

ERISA and Life Insurance News
(August 21, 2012)

Three optometrists, Wilson, McMurray, and Summers, entered into contracts with Spectera, an eye care insurer, to be members of Spectera’s panel of approved eye care providers and to provide eye care services to Spectera’s members. A fourth optometrist, Price, also applied to join the panel, but he was not accepted.

Wilson and McMurray’s contract with Spectera was a “Patriot Contract,” which allowed them to prepare eyeglasses in their own laboratory and to obtain materials from any source. Summers’s contract was an “Independent Participating Provider Agreement” (“IPP agreement”), which required him to purchase materials from Spectera’s optical laboratory.

In late 2010, Spectera notified Wilson and McMurray that it intended to convert the Patriot Contracts with individual eye care providers to IPP agreements. However, retail eye care providers such as Wal-Mart which contracted with Spectera would still be allowed to purchase materials from any source.

Wilson sued Spectera, asserting that the IPP agreement violated the Georgia Eye Care Act. Spectera then notified Wilson, McMurray, and Summers that it was terminating their provider agreements, and that it would “not contract with any of them in the future.”

McMurray, Summers, and Price filed separate lawsuits. All of the lawsuits were consolidated into a single action, and the parties filed cross-motions for summary judgment. The trial court granted the motion of the optometrists, and Spectera appealed.

On appeal, the optometrists argued that the IPP agreement violated several provisions of the Georgia Eye Care Act, which provides:

A health care insurer providing a health benefit plan which includes eye care benefits shall …

(2) not preclude a covered person who seeks eye care from obtaining such service directly from a provider on the health benefit plan provider panel who is licensed to provide eye care;

(3) not promote or recommend any class of providers to the detriment of any other class of providers for the same eye care service; …

(5) allow each eye care provider on a health benefit plan provider panel, without discrimination between classes of eye care providers, to furnish covered eye care services to covered persons to the extent permitted by such provider’s licensure;

(6) not require any eye care provider to hold hospital privileges or impose any other condition or restriction for initial admittance to a provider panel not necessary for the delivery of eye care upon such providers which would have the effect of excluding an individual eye care provider or class of eye care providers from participation on the health benefit plan….

O.C.G.A. § 33-24-59.12(c).

In a case of first impression, the optometrists argued that requiring them to purchase materials from Spectera violated subsection (c)(2) of the Act, because when a laboratory was required to provide “services and products” such as eyeglasses and contact lenses, the provider would be required to use Spectera’s “optical materials fulfillment system.” The providers would not receive co-pays from their patients or payment from Spectera for this work. Consequently, their patients effectively would be required to purchase eyeglasses directly from Spectera.

The Georgia Court of Appeals determined that “[a]mong the eye care services Georgia law allows optometrists to provide is the preparation and dispensing of eyeglasses and contact lenses.” Thus, the court held, because the IPP agreement would prohibit Spectera’s insureds from obtaining at least some of these eye care services directly from the optometrists, the IPP agreement violated subsection (c)(2) of the Act.

The optometrists next argued that the IPP agreement violated subsections (c)(3) and (c)(5) of the Act, because Spectera limited the ability of individual eye care providers to procure materials from any other source, while not imposing the same restriction on retail providers. The optometrists asserted that this amounted to a discriminatory practice that served to promote retail providers, as a class, to the detriment of the class of independent providers. Spectera argued that the term “class of providers,” which is not defined by the statute, referred to the three levels of eye care providers in Georgia – ophthalmologists, optometrists, and opticians.

The court of appeals found Spectera’s definition unpersuasive, and determined that the phrase, given its ordinary meaning under principles of statutory construction, should be interpreted as “a group sharing common attributes.” Applying this meaning, the court determined that the statutory language was broad enough to encompass a class of independent providers versus a class of retail chain providers.

The court determined that the term “promote” in subsection (c)(3) of the Act meant to advertise, rather than to further or advance one class over another. Without any evidence suggesting that Spectera would advertise retail providers over independent providers, the court determined that the IPP agreement did not violate subsection (c)(3). However, the IPP agreement violated subsection (c)(5) of the Act, because it limited an independent provider’s ability to prepare and dispense eyeglasses, but did not limit a retail provider’s ability to do the same.

Price contended that Spectera’s refusal to allow him to become a member of the panel based on his refusal to sign the materials requirement violated subsection (c)(6) of the Act, because it imposed a restriction on admittance to the panel that was not necessary for the delivery of eye care. The court of appeals agreed, rejecting Spectera’s argument that Price had merely failed to complete the application process by refusing to agree to the materials provision.

Finally, Spectera argued that the injunction preventing it from enforcing the IPP agreement with any of its providers was overly broad, because the action was not brought as a class action and its other providers were not parties to the lawsuit. The court of appeals concluded, however, that the trial court could prohibit Spectera from enforcing unlawful provisions of the IPP agreement against non-parties. Nonetheless, because the court had only considered the IPP agreement with respect to optometrists, it reversed the injunction as it applied to ophthalmologists and opticians.

Click here to view the full August 2012 Edition of the ERISA and Life Insurance News.

H. Sanders Carter
T (404) 962-1015
F (404) 962-1220
Kenton J. Coppage
T (404) 962-1065
F (404) 962-1256
Dorothy H. Cornwell
T (404) 962-1096
F (404) 962-1246

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