                 IN THE COURT OF APPEALS OF TENNESSEE
                              AT JACKSON
                                  January 18, 2005 Session

   BOBBIE D. GRAY, ET AL. v. THE CITY OF MEMPHIS, TENNESSEE,
                               ET AL.

                 Direct Appeal from the Chancery Court for Shelby County
                     No. CH-03-2455-1    Walter L. Evans, Chancellor



                   No. W2004-00976-COA-R3-CV - Filed March 22, 2005


The trial court permanently enjoined the City of Memphis from modifying its health care plan to
require enrollees to obtain prescription medications through a mail-order pharmacy plan. We affirm
in part, reverse in part, and remand.


Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed in part;
                           Reversed in part; and Remanded

DAVID R. FARMER , J., delivered the opinion of the court, in which ALAN E. HIGHERS, J. and HOLLY
M. KIRBY , J., joined.

Robert L. J. Spence, Jr., Patti C. Bowlan, and Sara L. Hall, Memphis, Tennessee, for the appellant,
The City of Memphis, Tennessee.

Blakeley D. Matthews and Ben Rose, Nashville, Tennessee, for the appellees, Bobbie D. Gray, The
Association of City Retired Employees, RX Shoppe, Inc., Rodney A. Tubbs, D.Ph., and the
Tennessee Pharmacists Association.

                                           OPINION

       This lawsuit concerns the applicability of provisions of the Tennessee Insurance Law (“Title
56"), codified at Tennessee Code Annotated § 56-1-101, et seq., to the City of Memphis
(“Memphis”), a political sub-division of the State of Tennessee. The facts pertinent to this appeal
are undisputed.

        Memphis offers two self-funded group health and medical care plans to its employees and
retirees and their families (collectively, “Enrollees”). The health plans are administered by third
party administrators. The plans offer prescription drug coverage and Memphis contracts with
Caremark, Inc., to provide mail-order prescriptions. For the past several years, Memphis has offered
a mail-order service for maintenance drugs on a voluntary basis.

        In December 2003, Memphis informed Enrollees that it was modifying the benefits program
to require Enrollees to obtain maintenance drugs through Caremark’s mail-order pharmacy. Other
providers would no longer be allowed to furnish maintenance drugs under the plan. The proposed
amendment stated that, effective January 1, 2004, “[m]ail order will be required for all maintenance
medication and any drug prescribed for more than 30 days. Maintenance medications are drugs
utilized to manage chronic conditions, such as diabetes, hypertension, and hormone therapy. One
30-day fill will be allowed, all others fills must be by mail order.”

        On December 31, 2003, Bobbie D. Gray, The Association of City Retired Employees, RX
Shoppe, Inc., Rodney A. Tubbs, D.Ph. and the Tennessee Pharmacists Association (collectively,
“Plaintiffs”) commenced a declaratory judgment action in the Chancery Court for Shelby County.
In their complaint, Plaintiffs alleged that the modification proposed by Memphis violates the Mail
Order Statute as codified at Tennessee Code Annotated § 56-7-117 and the Any Willing Pharmacy
Act as codified at 56-7-2359. Plaintiffs prayed for a declaratory judgment that the plan proposed by
Memphis violates § 56-7-117 and § 56-7-2359, for an order restraining Memphis from excluding
pharmacies from filling prescriptions for maintenance drugs, and for a temporary injunction.1

        In December 2003, the trial court issued a restraining order enjoining Memphis from
modifying its health care plans to require Enrollees to obtain maintenance drugs from mail-order
pharmacies and in January 2004 it entered a temporary injunction enjoining modifications pending
resolution of the matter. In April 2004, the trial court entered judgment for Plaintiffs and
permanently enjoined Memphis from modifying its health care plan to require Enrollees to obtain
medication through a mail-order pharmacy plan. The trial court determined that Memphis is a health
insurance issuer and/or managed health insurance issuer for purposes of the Consumer Health Act
as codified at § 56-32-2359 and § 56-32-228(a), and that it is an insurance company health insurance
issuer and/or health maintenance organization for purposes of § 56-7-117 (the Mail Order Statute).
In so determining, the trial court held,

        [t]he language of the relevant statutes, conditions surrounding passage of said laws,
        and public policy of the state establish that the Tennessee General Assembly
        “necessarily implied” its intent for the “any willing provider” provision of the
        Consumer Health Act and the Mail Order statute to apply to the Memphis plan.


It accordingly held that Memphis’ proposed mandatory mail-order drug plan, which requires
Enrollees to obtain medications from a mail-order pharmacy to the exclusion of licensed Tennessee
pharmacies, violates Tennessee Code Annotated § 56-7-117 and § 56-7-2359.


        1
          Plaintiffs original complaint named Cigna Healthcare of Tennessee (“Cigna”) as a Defendant. Cigna was
voluntarily dismissed in January 2004.

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      Memphis filed a timely notice of appeal to this Court on April 14, 2004. On April 22, it filed
motions for an expedited appeal and to stay the judgment of the trial court. This Court denied both
motions.


                                         Issues Presented

       Memphis raises three issues for our review:

       (1)     Does a private right of action exist to enforce violations of Tenn. Code Ann.
               56-7-117, the Mail Order Statute.

       (2)     Is Tenn. Code Ann. 56-7-117, the Mail Order Statute, applicable to the self-
               funded health benefit plans offered by the Appellant, City of Memphis,
               Tennessee, to its employees and retirees.

       (3)     Is Tenn. Code Ann. 56-7-2359, the Any Willing Pharmacy Act, applicable to
               the self-funded health benefit plans offered by the Appellant, City of
               Memphis, Tennessee, to its employees and retirees.

                                        Standard of Review

       This appeal requires us to construe Tennessee Code Annotated § 56-7-117 and § 56-7-2359.
Our objective when construing a statute is to effectuate the purpose of the legislature. Lipscomb v.
Doe, 32 S.W.3d 840, 844 (Tenn. 2000). Insofar as possible, the intent of the legislature should be
determined by the natural and ordinary meaning of the words used in the statute, and not by a
construction that is forced or which limits or extends the meaning. Id. Statutory construction is a
matter of law. Conley v. Tennessee, 141 S.W.3d 591, 595 (Tenn. 2004). We review questions of
law de novo, with no presumption of correctness afforded to the determination of the trial court. Id.;
Tenn. R. App. P. 13(d).

                                      Private Right of Action

       Subsection (b) of the Mail Order Statute codified at Tennessee Code Annotated § 56-7-
117(b) provides:

       The commissioner is authorized to promulgate regulations to implement and enforce
       the provisions of this section.

Memphis asserts that, pursuant to this subsection, no private cause of action exists to enforce the
Mail Order Statute. Memphis asserts that Plaintiffs, therefore, have no standing to assert this
lawsuit. We disagree.



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        We begin our analysis of the issues raised on appeal by noting that Title 56 is a broad title
designed to regulate insurance in Tennessee. Neff v. Cherokee Ins. Co. v. Pine Top Ins. Co., 704
S.W.2d 1, 3 (Tenn. 1986). It seeks to anticipate and address a multitude of issues. We emphasize
that this title must be read in pari materia, and that the obligation of the court is to effectuate the
purpose of the statutory scheme. Id.

         The Tennessee Supreme Court has repeatedly noted that the primary purpose of Title 56 is
to protect policy holders and the revenue of the State. North British & Merchantile Ins. Co. v. Craig,
62 S.W. 155, 160 (Tenn. 1901); Neff v. Cherokee Ins. Co., 704 S.W.2d at 4. Further, this public
policy has been reflected in every amendment to Title 56 made by the legislature. Neff v. Cherokee
Ins. Co., 704 S.W.2d at 5. Additionally, “any statute applicable to an insurance policy becomes part
of the policy and such statutory provisions override and supersede anything in the policy repugnant
to the provisions of the statute.” Sherer v. Linginfelter, 29 S.W.3d 451, 453-54 (Tenn. 2000)
(quoting Hermitage Health & Life Ins. Co. v. Cagle, 420 S.W.2d 591, 594 (1967)). Chapter 7 of
Title 56, moreover, specifically governs the relationship between policies and policy holders. Thus,
it is unfathomable that, unless specifically excluded by the legislature, no private cause of action
would exist to enforce a particular section of the chapter. See Larschan v. Aetna Life Ins. Co., No.
04-2068 MA/V, 2004 WL 1118561 at *4 (W.D. Tenn, Feb. 23, 2004)(holding private cause of action
may be maintained under Tenn. Code Ann. § 56-7-2806). Accordingly, the authority granted by the
legislature to the commissioner to promulgate regulations and to enforce the Mail Order Statute does
not deprive policy holders of the right to a private cause of action.

                              Applicability of the Mail Order Statute

       The Mail Order Statute provides:

       (a) No group medical benefit contract issued by an insurance company, a hospital
       service corporation, a hospital and medical service corporation, a medical service
       corporation, a health maintenance organization or a health care center, which
       provides coverage for prescription drugs, may require any person covered under such
       contract to obtain prescription drugs from a mail-order pharmacy in order to obtain
       benefits for such drugs, or to pay an additional fee or be subjected to any other
       penalty for failing to utilize any mail-order pharmacy designated by the insurance
       company or other issuing organization.

Tenn. Code Ann. § 57-7-117(2000).

         The trial court determined that “[b]ecause Memphis is an insurance company, health
insurance carrier, and/or a health maintenance organization and issues a group medical benefit
contract, Memphis is covered by the requirements of the Mail-Order Statute.” It further held that
the legislative history of the statute “shows the General Assembly’s intent to make the law applicable
to all health plans, including Memphis’ health plan.” Plaintiffs additionally refer us to the compiler’s
notes to the section, which state, the provisions of this section apply “to all group medical benefit


                                                  -4-
contracts delivered, issued for delivery or renewed in this state on or after July 1, 1990.” Memphis,
on the other hand, asserts that it is not one of the entities enumerated in the section and that the
section, therefore, unambiguously does not apply to Memphis. We agree with Memphis that the
Mail Order Statute is not applicable to its health benefit plans.

        We do not look beyond the face of an unambiguously worded statute to ascertain legislative
intent. Neff. v. Cherokee Ins. Co., 704 S.W.2d at 3. Rather, when the language of a statute is
unambiguous, we apply the plain and ordinary meaning of the words used by the legislature. Conley
v. Tennessee, 141 S.W.3d 591, 595 (Tenn. 2004). The language of the Mail Order Statute
unambiguously makes it applicable to benefit contracts which are issued by “an insurance company,
a hospital service corporation, a hospital and medical service corporation, a medical service
corporation, a health maintenance organization or a health care center.” The compiler’s notes
indicate that the section applies to “all group medical benefit contracts” issued by these enumerated
entities. Contrary to Plaintiff’s assertion, however, the section clearly does not apply to all such
contracts issued by any entity. The list included by the legislature would be rendered meaningless
if we were to read the section as suggested by Plaintiffs.

        We disagree with the trial court, moreover, that Memphis is “an insurance company, health
insurance carrier, and/or a health maintenance organization.” Although Memphis provides health
benefit plans, it is not an insurance company any more than it is a trash removal company when it
provides residents with trash removal services. Memphis is a municipal corporation which provides
its employees and residents with a variety of services.

        The legislature has unambiguously confined the applicability of the Mail Order Statute to six
specific types of entities. We note that legislation currently is pending in the general assembly to
broaden the scope of the statute.2 However, it is not within the province of this Court to stretch the
statute’s application beyond the language chosen by the legislature.

                             Applicability of the Any Willing Pharmacy Act

       The Any Willing Pharmacy Act provides:

       (a) No health insurance issuer and no managed health insurance issuer may:
              (1) Deny any licensed pharmacy or licensed pharmacist the right to participate
       as a participating provider in any policy, contract or plan on the same terms and
       conditions as are offered to any other provider of pharmacy services under the policy,
       contract or plan; provided, that nothing herein shall prohibit a managed health
       insurance issuer or health insurance issuer from establishing rates or fees that may
       be higher in non-urban areas, or in specific instances where a managed health
       insurance issuer or health insurance issuer determines it necessary to contract with



       2
           H. B. 2871, 2004 Reg. Sess. (Tenn. 2004).

                                                       -5-
a particular provider in order to meet network adequacy standards or patient care
needs.
        (2) Prevent any person who is a party to or beneficiary of any policy, contract
or plan from selecting a licensed pharmacy of such person's choice to furnish the
pharmaceutical services offered under any contract, policy or plan; provided the
pharmacy is a participating provider under the same terms and conditions of the
contract, policy or plan as those offered any other provider of pharmacy services;
        (3) [Deleted by 2001 Pub. Acts, c. 236, § 4, eff. July 1, 2001].
        (b) Notwithstanding any provision of this chapter to the contrary, a health
insurance issuer or managed health insurance issuer may restrict an abusive or heavy
utilizer of pharmacy services to a single pharmacy provider for non-emergency
services, so long as the individual to be restricted has been afforded the opportunity
to participate in the process of selection of the pharmacy to be used, or has been
given the right to change the pharmacy to be used to another participating provider
of pharmacy services prior to such restriction becoming effective. After a restriction
is effective, the individual so restricted shall have the right to change a pharmacy
assignment based on geographic changes in residence or if the member's needs
cannot be met by the currently assigned pharmacy provider.
        (c) If a managed health insurance issuer or health insurance issuer revises its
drug formulary to remove a drug from a previously approved formulary, the health
insurance issuer or managed health insurance issuer shall allow a subscriber or
enrollee an opportunity to file a grievance relative to the decision to remove such
drug. The grievance must be filed within sixty (60) days after notification to the
provider that the drug is being removed. If the grievance is filed with a managed
health insurance issuer or health insurance issuer within ten (10) days after the
subscriber or enrollee knows or should have known that the drug is being removed,
the subscriber or enrollee may continue to receive the drug that is being removed
from the formulary until the managed health insurance issuer or health insurance
issuer completes the grievance process. The provisions of this subsection shall not
apply to any drug removed from a previously approved formulary when the reason
for such removal is due to patient care concerns or other potentially detrimental
effects of the drug. Nothing contained in this section shall be construed or interpreted
as applying to the TennCare programs administered pursuant to the waivers approved
by the United States department of health and human services.
        (d) The term "managed health insurance issuer" has the same meaning as such
term is defined in § 56-32-228(a).
        (e) Each health insurance issuer or managed health insurance issuer shall
apply the same coinsurance, co-payment, deductible and quantity limit factors within
the same employee group and other plan-sponsored group to all drug prescriptions
filled by any licensed pharmacy provider, whether by a retail provider or a mail
service provider; provided, that all pharmacy providers comply with the same terms
and conditions. Nothing in this section shall be construed to prohibit the health
insurance issuer or managed health insurance issuer from applying different


                                          -6-
       co-insurance, co-payment, and deductible factors within the same employer group
       and other plan-sponsored group between generic and brand-name drugs nor prohibit
       an employer or other plan-sponsored group from offering multiple options or choices
       of health insurance benefit plans including, but not limited to, cafeteria benefit plans.

Tenn. Code Ann. § 56-7-2359(Supp. 2004). A “managed health insurance issuer” is defined as:

       (a) As used in this section "managed health insurance issuer" means an entity that:
               (1) Offers health insurance coverage or benefits under a contract that restricts
       reimbursement for covered services to a defined network of providers; and
               (2) Is regulated under this title or is an entity that accepts the financial risks
       associated with the provision of health care services by persons who do not own or
       control, or who are not employed by, such entity.

Tenn. Code Ann. §56-32-228(a)(2000).

        The trial court determined that the Any Willing Pharmacy Act is applicable to the health
benefit plans offered by Memphis because Memphis is a “health insurance issuer and/or managed
health insurance issuer” for the purposes of the Act. Memphis asserts it is not governed by the Act
because Memphis is not a “health insurance issuer” or “managed health insurance issuer” as defined
by § 56-32-228, and because the Act is not applicable to the state or a political subdivision of the
state. It asserts that, because the language of the statute does not explicitly include the state or its
political subdivisions, Memphis is exempt from the Act. Memphis further asserts that it is not
regulated under Title 56 of the Code.

        We first address Memphis’ assertion that it is not subject to Title 56. We disagree with this
assertion. Generally, a sovereign, particularly the State, is not bound by a statute unless the statute
so provides. Davidson County v. Harmon, 292 S.W.2d 777, 779 (Tenn. 1956). With respect to Title
56, however, the legislature’s intent regarding whether the Title binds the State or a political
subdivision thereof is ambiguous. As we have noted, the Title regulates insurance broadly to protect
both policy holders and the State. Section 56-4-207 expressly does not apply to county or municipal
governments. Section 56-7-2361, on the other hand, provides that every health benefit plan,
including plans administered by third parties administrators for self insured plans and state
administered plans, shall issue to each insured a card containing at least a minimum amount of
information. Part 23 of chapter 7, moreover, is entitled “Mandated Insurer or Plan Coverage” and
painstakingly details what insurance plans must include. In light of the language of Title 56 in its
entirety, and in light of the purpose of the Title to protect Tennessee policy holders and the State, we
believe the legislature intended that the Title would regulate the State and its political subdivisions
unless as otherwise provided in sections such as § 56-4-207.

       Having determined that Memphis is regulated by Title 56, we now turn to whether it is a
“health insurance issuer” or “managed health insurance issuer” for purposes of the Any Willing
Pharmacy Act. We agree with the trial court that Memphis is subject to the Act.


                                                  -7-
        As Memphis points out, “health insurance issuer” is not defined in the Any Willing Pharmacy
Act, and the Act does not explicitly include or exclude governments which provide health care
benefits. Section 56-7-2606, however, defines “insurer” to include a health care plan; § 56-7-
2702(5) defines “health insurance coverage” as including a group health plan. In light of the above
discussion of Title 56, the Act is ambiguous regarding whether self-funded benefit plans offered by
municipalities are within its purview. We must, therefore, look beyond the words of the Act itself
to determine whether the legislature intended that it should apply to municipalities. See Neff v.
Cherokee Ins. Co., 704 S.W.2d 1, 2 (Tenn. 1986).

        When construing an individual section of a comprehensive act, we must construe the section
together with other sections and “in light of the general purpose and plan, evil to be remedied, and
object to be attained.” Id. at 3(quoting State v. Netto, 486 S.W.2d 725, 729 (Tenn. 1972)). The Any
Willing Pharmacy Act is “part of a broadly conceived scheme for the regulation of insurance in
Tennessee.” Id. The legislature’s primary focus in Title 56 in its entirety, moreover, is to benefit
the insured. Id. at 4.

       Memphis issues health benefit plans to Enrollees who pay a premium. Although Memphis
is not an insurance company, it issues health insurance coverage, including prescription drug
coverage, through a self-funded benefit plan. Such plans are clearly within the contemplation of the
Act, which is applicable to any “policy, contract or plan.” Tenn. Code Ann. § 56-7-
2359(a)(1)(emphasis added). Enrollees are clearly beneficiaries of the plan as provided by §56-7-
2359(a)(2). Construing the Act in its entirety and in pari materia with the rest of chapter seven, we
hold the self-funded health benefit plans issued by Memphis are governed by the Any Willing
Pharmacy Act as codified at §56-7-2359.

                                            Conclusion

        Memphis is not exempt from regulation under Title 56, the Tennessee Insurance Law. The
self-funded health benefit plans offered by Memphis to Enrollees are not within the purview of the
Mail Order Statute because Memphis is not one of the six entities to which the plain language of the
statute specifically applies. We reverse the judgment of the trial court on this issue. The plans
offered by Memphis are subject to the Any Willing Pharmacy Act, however, because Memphis is
a health insurance issuer for the purposes of the Act. We accordingly affirm the judgment of the trial
court on this issue. This cause is remanded. Costs of this appeal are taxed one-half to Appellees,
Bobbie D. Gray, The Association of City Retired Employees, RX Shoppe, Inc., Rodney A. Tubbs,
D.Ph. and the Tennessee Pharmacists Association, and one-half to Appellant, the City of Memphis,
and its surety, for which execution may issue if necessary.



                                                       ___________________________________
                                                       DAVID R. FARMER, JUDGE



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