Arkansas Blue Cross Blue Shield v. Hicks, 01-916.

• Decision Date: 13 June 2002
• Docket Number: No. 01-916.,01-916.
• Citation: 349 Ark. 269,78 S.W.3d 58
• Parties: ARKANSAS BLUE CROSS AND BLUE SHIELD, A Mutual Insurance Company, v. Ollie HICKS and Higine Hicks.
• Court: Arkansas Supreme Court

Page 58

78 S.W.3d 58

349 Ark. 269

ARKANSAS BLUE CROSS AND BLUE SHIELD, A Mutual Insurance Company, v. Ollie HICKS and Higine Hicks.

No. 01-916.

Supreme Court of Arkansas.

June 13, 2002.

COPYRIGHT MATERIAL OMITTED

Horne, Hollingsworth & Parker, A Professional Association, by: Allan W. Horne and Mark H. Allison, Little Rock, for appellant.

Jackson & Foster, L.L.C., by: Sidney W. Jackson, III, Mobile, AL; Raymond Abramson, Clarendon; and Turbeville Law Firm, by: Richard Turbeville, Little Rock, for appellee.

DONALD L. CORBIN, Justice.

This appeal presents the issue whether a trial court properly certified a suit as a class action pursuant to the requirements set forth in Ark. R. Civ. P. 23. Appellant Arkansas Blue Cross and Blue Shield appeals the order of the Monroe County Chancery Court certifying the suit filed by Appellee Ollie Hicks, as wife and next friend of Higine Hicks, and Appellee Higine Hicks as a class action. Appellant raises several arguments on appeal as to why the present action was improperly certified. This case was transferred to us from the court of appeals; hence, our jurisdiction is pursuant to Ark. Sup.Ct. R. 1-2(d). We find no error and affirm.

The record reflects that Higine purchased a Medicare Supplement Policy, also known as a Medi-Pak policy, from Appellant on June 26, 1996, with the policy having an effective date of August 1, 1996. At the time that Hicks purchased the supplemental policy, he was also receiving Medicaid benefits. Appellant, when selling the Medi-Pak policy to Hicks, did not specifically inquire as to whether or not Hicks was eligible for or receiving Medicaid benefits. The Medi-Pak application did, however, ask whether the applicant had any other insurance coverage that provided benefits similar to the Medi-Pak policy. Higine answered the inquiry affirmatively and listed Medicaid as the other insurance providing similar coverage. At the end of the application was a section preceded by "IMPORTANT: PLEASE READ AND SIGN" that contained information informing the applicant that he may be eligible for Medicaid and may not need a Medicare supplement policy. It further advised the applicant that the supplemental policy could be suspended if the applicant later became entitled to Medicaid benefits.

Thereafter, Appellees filed suit against Appellant alleging that its practice of selling supplemental insurance policies to Medicaid-eligible beneficiaries violated the Arkansas Deceptive Trade Practices Act ("ADTPA"), constituted a breach of contract, and their collection of premiums constituted a conversion. The original complaint filed on April 2, 1999, alleged that Appellees were suing on their behalf, as well as all members of a class "consisting of all persons in the State of Arkansas who: (1) at any time purchased a Medicare Supplement Policy from Blue Cross and Blue Shield of Arkansas while enrolled as a Qualified Medicaid Beneficiary; and (2) paid premiums on such policy while enrolled as a Qualified Medicaid Beneficiary, at any time between August 1, 1996, and the date of Notice to the Class." Appellant filed an answer to the complaint, admitting that it may have sold supplemental policies to Arkansas residents who were entitled to, or later became entitled to, Medicaid benefits. Appellant contended, however, that there was a conflict between two federal provisions governing insurers in cases regarding Medicaid. Its answer further claimed that prior to 1996, its applications inquired as to whether or not an applicant was covered by Medicaid, but that in November 1995, the Arkansas Insurance Department ("AID") advised Appellant that under federal law, it could no longer take into account that an applicant for supplemental insurance was eligible for, or receiving, Medicaid benefits. Thereafter, Appellant removed the Medicaid question from its applications. AID subsequently learned that its directive to Appellant was erroneous and reinstated its requirement that insurers include the Medicaid question on its applications. According to Appellant's answer, however, AID did not inform it of this change until late 1996. Finally, Appellant's answer denied that a class action was appropriate, averring that the allegations in Appellees' complaint required individual determinations and that Higine Hicks could not adequately represent the interests of the class, as he was suffering from a weakened mental and physical state, was seventy years of age, and ignorant on insurance matters and uneducated.

Appellees also filed a motion seeking conditional class certification, alleging therein that a class action was a superior method for handling their cause of action and that all of the requirements of Rule 23 had been met. In connection with the motion for class certification, Appellees submitted various exhibits and affidavits in an effort to support their contention that a class action was a superior method for litigating their claims. Included in these documents was an affidavit of Ollie that her husband was enrolled in Arkansas's Medicaid program on September 17, 1993, and was on Medicaid at the time that he applied for and received the Medi-Pak insurance. According to Ollie, her husband purchased the supplemental policy despite her advice to him that he did not need extra insurance since he was covered by both Medicare and Medicaid. She learned that her husband had purchased a Medi-Pak policy only after receiving a bill from Appellant. She stated that she attempted to contact Appellant and inquire as to why her husband was paying for insurance, but claimed that the person whom she called would not answer her question.

Appellees also submitted a transcript from the deposition of Ron DeBerry, Director of Marketing for Appellant. In his deposition, DeBerry explained the methods utilized by Appellant in marketing and selling its Medi-Pak policies. DeBerry stated that the policies were predominantly sold through direct-response advertising, specifically in newspapers and television commercials, and telemarketing. DeBerry stated that the company did not make cold calls, but instead followed up on written leads or leads phoned into the company. DeBerry also testified that individuals on Medicaid are not eligible for Medi Pak, but admitted that there was no written manual instructing telemarketers on how to handle specific Medicaid questions. Finally, DeBerry stated that Appellant has the ability to produce a computer disc containing the social security numbers of each of its Medi-Pak customers that could in turn be given to Arkansas Medicaid in order to perform a crossreference to determine how many Medicaid recipients had purchased Medi-Pak policies.

Joseph Smith, Vice President of Private Programs and Chief Information Officer for Appellant, was deposed and testified that he was responsible for overseeing Appellant's claims, which were handled almost exclusively electronically. Smith stated that typically the only way a claims' representative would know that a claimant was Medicaid eligible was if they received a telephone call from the individual consumer alerting them to their dual coverage. According to Smith, once Appellant learned of a person's Medicaid coverage, they would verify that information and suspend the Medi-Pak policy if notification was made within a ninety-day time period. The premium would then be refunded from the date of notice, rather than the date the claimant became Medicaid eligible. If the customer called after the ninety-day time period, there was no premium refund. Smith also stated that the claims department could become aware of Medicaid coverage if a claim was returned from Medicaid.

Harris Shearer, a policy analyst with AID, filed an affidavit stating that the sale of Medi-Pak insurance to persons already on Medicaid is prohibited, because Medicaid typically pays for expenses covered by Medi-Pak. Thus, there is a requirement that an insurer ask persons applying for Medi-Pak coverage whether they are eligible for Medicaid. According to Shearer, in 1995, the AID was informed that insurers could no longer consider an applicant's Medicaid status in determining whether to issue Medi-Pak coverage. In November 1995, Appellant submitted its proposed Medi-Pak application for the year 1996, and Shearer instructed Appellant to remove the question "Are you covered by Medicaid?" as a result of the previous information. A new application form was then approved by Shearer in January 1996. Later in 1996, AID learned that insurers should continue to ask about an applicant's Medicaid eligibility, but Shearer did not inform Appellant of this change until after it submitted its proposed application for 1997.

The affidavit of Wayne Olive, Director of the Third Party Liability Unit of the Arkansas Medicaid Program, was also submitted by Appellees in support of their motion for class certification. Therein, he discussed the details of Medicaid coverage, including the fact that a person may move in and out of Medicaid eligibility from month to month, depending on the person's income and assets. Olive stated that during the initial Medicaid enrollment process, an applicant is asked whether he or she has any other health insurance. Any such insurance is recorded, and if a claim is submitted to Medicaid for which there is other health insurance, the Medicaid system will deny that claim until the provider seeks payment from the insurer. According to Olive, the Medicaid system did not have the capability to independently determine the number of Medicaid recipients who have Medi-Pak coverage, unless the insurance carrier engages in a data match of files or shares data. Finally, he stated that his statement in a previous affidavit that 4,174 persons with Medicaid benefits and Medi-Pak coverage through Appellant was not edited to reflect whether those persons were presently eligible for Medicaid or whether the Medi Pak coverage was current, terminated, or suspended.

Ap...