LD v. United Behavioral Health
| Decision Date | 26 August 2020 |
| Docket Number | CASE NO. 4:20-cv-02254 YGR |
| Parties | LD, ET AL., Plaintiffs, v. UNITED BEHAVIORAL HEALTH, ET AL., Defendants. |
| Court | U.S. District Court — Northern District of California |
Plaintiffs1 bring this putative class action against defendants United Behavioral Health ("United") and Viant, Inc. for claims arising out of United's alleged failure to reimburse non-party Summit Estate at the Usual, Customary, and Reasonable Rate ("UCR") for Intensive Outpatient Program ("IOP") services that it provided to plaintiffs. Plaintiffs allege that defendants' conduct caused them injury, because it forced them to pay out-of-pocket any amounts that United failed to reimburse Summit Estate. In the complaint, plaintiffs assert, on their own behalf and on behalf of a proposed class of similarly-situated United members, claims under the Employee Retirement Income Security Act of 1974 ("ERISA") and the Racketeer Influenced and Corrupt Organizations Act ("RICO").
Now pending are two motions to dismiss all claims in the complaint under Federal Rule of Civil Procedure 12(b)(6) on the grounds that: (1) all of the claims in the complaint are inadequately pleaded; and (2) plaintiffs lack RICO standing.
Having carefully considered the pleadings and the parties' briefs, and for the reasons set forth below, the Court GRANTS the motions to dismiss WITH LEAVE TO AMEND.
Plaintiffs allege as follows. Plaintiffs are members of active health insurance policies administered by United. Compl. ¶ 2, Docket No. 1. Every such policy "provided coverage for out-of-network benefits for mental health and substance use disorder treatment at usual, customary, or reasonable rates." Id. ¶ 6. United describes UCR rates on its website as being "based on what other health care professionals in the relevant geographic areas or regions charge for their services." Id. ¶ 8.
Before obtaining IOP services from Summit Estate, an out-of-network provider, plaintiffs signed a contract with Summit Estate that makes them "responsible for amounts not paid by United." Id. ¶ 27. Summit Estate contacted United to verify out-of-network benefits and United represented that the IOP services in question would be paid "at UCR rates" and that the claims for such services "were not subject to third-party repricing by Viant." Id. ¶ 26. Based on the "plain language" of the plans, "it was understood by all parties that 100% of UCR was equivalent to 100% of the billed charges of Summit Estate."2 Id. ¶¶ 174, 187, 200, 212, 224. United "through plan documents, marketing materials, EOBs, and other materials" represented to plaintiffs that their plans would pay for out-of-network IOP services "at the UCR amount according to an objective, empirical methodology." Id. ¶ 104.
After receiving the IOP services, claims were submitted to United for payment according to the "out-of-network rate." Id. ¶ 8. Instead of "paying UCR," United engaged defendant Viant to "negotiate" reimbursements. Id. ¶ 18. Viant has "financial incentives" to negotiate low reimbursements. Id. ¶¶ 40, 46. Viant's negotiations resulted in offers to reimburse for IOP services at an amount below the UCR, and United paid the plaintiffs' claims at the reduced Viant amount. Id. ¶¶ 36-38. Neither United nor Viant disclosed to plaintiffs the methodology they used for calculating the reimbursement rates for IOP services. Id. ¶¶ 44, 127.
No plaintiff has an agreement with Viant that permits Viant to negotiate with providers on his or her behalf. Id. ¶ 34. Yet, Viant represented "through written and oral correspondence" that it had authority to negotiate with providers on the patients' behalf. Id. ¶ 51.
"Every claim at issue in this litigation has been underpaid by United and overpaid or currently owed by the Plaintiffs and the Class." Id. ¶ 79. "United's underpayment of the claims at issue here resulted in unduly large balance bills to Plaintiffs." Id. ¶ 99.
The Explanation of Benefits ("EOB") sent to plaintiffs do not state that Viant's repricing is permitted under the plaintiffs' plans and that the repriced amount negotiated by Viant is consistent with plan terms. Id. ¶ 53. The EOBs also do not state that the repriced amount is an "adverse benefit determination" that plaintiffs have the right to appeal. Id. Accordingly, plaintiffs did not have the opportunity to appeal the "underpayment[s]." Id. ¶ 56.
Plaintiffs allege that United and other insurers were required as part of the settlement of an unrelated litigation ("Ingenix litigation") to underwrite the creation of a database called the "FAIR health" database, which contains rates for the reimbursement for IOP treatment. Id. ¶ 20. Plaintiffs allege that United and the other insurers were not required by the Ingenix litigation settlement to use the FAIR health database.3 Id.
Plaintiffs assert the following on their own behalf and on behalf of a proposed class of members "of a health benefit plan either administered or insured by United" whose claims for out-of-network IOP services "were underpaid or repriced by United and Viant," id. ¶ 233: a claim against (1) both defendants under RICO, 18 U.S.C. § 1962(c); (2) United for underpaid benefits under ERISA, 29 U.S.C. § 1132(a)(1)(B); (3) United for breach of plan provisions under ERISA, 29 U.S.C. § 1132(a)(1)(B); (4) United for ERISA disclosure violations under 29 U.S.C. § 1132(c)(1); (5) United for breach of fiduciary duties under 29 U.S.C. § 1109 and 29 U.S.C. § 1132(a)(3); (6) United for violations of ERISA's full and fair review statute, 29 U.S.C. § 1133; and (7) two claims against both defendants for equitable relief under 29 U.S.C. § 1132(a)(3).
To survive a Rule 12(b)(6) motion to dismiss, a complaint must contain sufficient factual matter that, when accepted as true, states a claim that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. While this standard is not a probability requirement, "[w]here a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." Id. (internal quotation marks and citation omitted). In determining whether a plaintiff has met this plausibility standard, the Court must "accept all factual allegations in the complaint as true and construe the pleadings in the light most favorable" to the plaintiff. Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005). "[A] court may not look beyond the complaint to a plaintiff's moving papers, such as a memorandum in opposition to a defendant's motion to dismiss." Schneider v. California Dep't of Corr., 151 F.3d 1194, 1197 n.1 (9th Cir. 1998). A court should grant leave to amend unless "the pleading could not possibly be cured by the allegation of other facts." Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911 F.2d 242, 247 (9th Cir. 1990).
As noted, defendants move to dismiss all claims in the complaint under Federal Rule of Civil Procedure 12(b)(6) on the grounds that: (1) all of the claims in the complaint are inadequately pleaded; and (2) plaintiffs lack RICO standing.
The Court addresses these arguments in turn.
Under Section 502(a)(1)(B) of ERISA, an ERISA plan "participant or beneficiary" may bring an action "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B). To state a claim under Section 502(a)(1)(B), "a plaintiff must allege facts that establish the existence of an ERISA plan as well as the provisions of the plan that entitleit to benefits." Almont Ambulatory Surgery Ctr., LLC v. UnitedHealth Grp., Inc., 99 F. Supp. 3d 1110, 1155 (C.D. Cal. 2015) (citation and internal quotation marks omitted).
Plaintiffs assert two claims under Section 502(a)(1)(B) against United, one for "underpaid benefits," and another for breach of the "plan provisions." Compl. ¶¶ 292-311. Both claims are predicated on the theory that United underpaid plaintiffs' claims for out-of-network IOP services in contravention of the provisions of plaintiffs' plans. Id. ¶¶ 301, 305. Plaintiffs seek "underpaid benefits" as relief for both claims. Id. ¶¶ 302, 311.
United moves to dismiss these claims on the grounds that plaintiffs have failed to identify the plan provisions that require it to reimburse for the IOP services at issue at the UCR rate.4
In their opposition, plaintiffs do not distinguish the authorities that United cites for the proposition that they are required to identify the relevant plan provisions to state a claim under Section 502(a)(1)(B).
The Court concludes that United's motion is well-taken given the allegations in the complaint. Plaintiffs' claims are predicated on allegations that United under-reimbursed Summit Estate for IOP services it provided to plaintiffs. Plaintiffs aver that, pursuant to the "plain language" of their healthcare plans, United was required, but failed, to reimburse Summit Estate based on UCR, with UCR being "equivalent to 100% of the billed charges of Summit Estate." Compl. ¶¶ 174, 187, 200, 212, 224. Plaintiffs, however, do not identify the terms of their plans that require United to reimburse Summit Estate for IOP services based on UCR or at 100% of Summit Estate's billed charges. In the absence of allegations that identify the plan terms at issue, plaintiffs fail to raise the reasonable inference that United breached the terms of their plans. See Almont Ambulatory, 99 F. Supp. 3d at 1155 (...
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