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Van Vactor v. Blue Cross Association





APPEAL from the Circuit Court of Cook County; the Hon. F. EMMETT MORRISSEY, Judge, presiding.


Plaintiffs, Mary Van Vactor, a minor daughter of a Federal employee, and the American Society of Oral Surgeons as assignee of Alma Smith, wife of a Federal employee, brought a class action on behalf of all subscribers to the Government-Wide Service Benefit Plan whose claims for oral surgical hospitalization benefits had been denied, against the insurer, defendant Blue Cross Association, seeking a declaratory judgment interpreting the Federal Employee Health Benefits contract and brochure.

Defendant appeals from the granting of summary judgment in favor of plaintiffs. The judgment grants declaratory class action relief requiring the defendant insurer to pay approximately 3,590 policyholders who had been denied benefits on oral surgical hospitalization claims.

The brochure and the contract provide, in substance, that the insurer will pay the hospital bill incident to the inpatient removal of impacted teeth where the hospitalization was medically necessary. The court construed the insurance contract to the effect that the insurer did not have authority to review the judgment of the treating physician as to the medical necessity of a hospitalization with the consequence that the insurer was required to pay the claims. At issue in the case at bar is the impact of the requirement of medical necessity and whose judgment determines whether or not that requirement has been met. Defendant questions whether the court properly construed the insurance contract and the brochure issued to policyholders pursuant to the contract and Federal statute (5 U.S.C. § 8907 (1970)). Defendant also questions whether the proof and pleadings support the judgment and whether the suit was properly maintained as a class action.

In 1960, the U.S. Civil Service Commission entered into a contract with Blue Cross Association and the National Association of Blue Shield Plans pursuant to a Federal statute (5 U.S.C. § 8903 (1970)) enabling the Commission to obtain group health insurance for Federal employees. Since all doctors' bills involved were paid, the National Association of Blue Shield Plans was not joined as a defendant. The master contract is a "service benefit plan" under which the insurer provides health services directly to the insured by reimbursing the hospital as opposed to indemnifying the insured for the cost of those services. This is accomplished by separate agreements with various hospitals and doctors to render services. Such hospitals are defined as member hospitals in the contract, and an insured merely presents his identification card to the hospital to receive benefits for covered services.

The statute requires that all civil service employees who have not yet enrolled in any of the alternative plans be provided with sufficient information to enable them to make an informed choice. The Civil Service Commission, after consultation with the carrier, provides this information. Once an employee enrolls in a plan, the statute requires that he be given a document summarizing the services, benefits, limitations, exclusions and procedures for obtaining benefits, and the principle provisions of the plan. The statute does not state who is to issue this brochure. The master contract states that the "corporations [Blue Cross and Blue Shield] shall issue or cause to be issued through the [U.S. Civil Service] Commission" an appropriate document summarizing benefits available and the procedures for obtaining benefits. Although it is unclear from the record who prepared the particular brochures at issue in this case, the evidence showed that in general the brochures were the result of a joint effort undertaken by the Civil Service Commission and Blue Cross.

The plaintiffs in the instant case filed a class action suit for a declaratory judgment respecting the proper interpretation of both the master contract and the brochure. Due to an amendment of the master contract, the judgment order is confined to claims brought during 1971 and 1972.

The master contract introduces a list of covered hospital services as follows:

"The following are covered hospital services when furnished and billed for as a regular hospital service when necessary to and rendered in conjunction with obstetrical care or the medical or surgical diagnosis or treatment of an illness or injury * * *." (Emphasis added.)

The brochure which is provided to all employees who have enrolled in this plan states under the section on "EXCLUSIONS" that:

"Basic Benefits, Maternity Benefits, and Supplemental Benefits will NOT be provided for charges incurred for: Services and supplies —

Not medically necessary for the diagnosis or treatment of an illness, injury, or bodily malfunction * * *." (Emphasis added.)

The contract provides that admission to a hospital under the medical supervision of a doctor is a precondition to making a claim for hospital benefits:

"Benefits, * * * shall be available only to a subscriber admitted to a hospital on the recommendation, and while under the active medical supervision, of a duly licensed physician who is a member of the staff of, or acceptable to, the hospital selected, and shall terminate when the ...

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