MSP Recovery Claims Series LLC v. Auto Club Ins. Ass'n

Decision Date10 November 2021
Docket Number21-11606
PartiesMSP RECOVERY CLAIMS, SERIES LLC, MSPA CLAIMS 1, LLC, and MSP RECOVERY CLAIMS SERIES 44, LLC, Plaintiffs, v. AUTO CLUB INSURANCE ASSOCIATION and AUTO CLUB GROUP INSURANCE COMPANY, Defendants.
CourtU.S. District Court — Eastern District of Michigan
OPINION AND ORDER DENYING DEFENDANTS' MOTION TO DISMISS AMENDED COMPLAINT AND TO STRIKE CLASS ALLEGATIONS (ECF NO. 14)

GEORGE CARAM STEEH UNITED STATES DISTRICT JUDGE

This case is brought under the Medicare Secondary Payer provisions of the Social Security Act (the “MSP Act”), 42 U.S.C. § 1395y. Plaintiffs, MSP Recovery Claims Series LLC; MSPA Claims 1, LLC; and MSP Recovery Claims Series 44 LLC (collectively Plaintiffs), assert claims on behalf of themselves and a class of similarly situated persons against defendants Auto Club Insurance Association and Auto Club Group Insurance Company (collectively Defendants). Plaintiffs seek reimbursement from Defendants under the MSP Act for conditional payments for medical expenses resulting from injuries sustained in automobile and other accidents that were paid by Medicare Advantage Plans (“MA Plans”).

Plaintiffs initiated this case on December 1, 2020 in the United States District Court for the Southern District of Florida asserting claims against five Defendant insurance companies. In response to Defendants' motion to dismiss, Plaintiffs filed an Amended Complaint on June 9, 2021. Plaintiffs then agreed to an order severing the counts asserted against Michiganbased Defendants, Auto Club Insurance Association and Auto Club Group Insurance Company and transferring those counts to this Court.

The matter is before the Court on Defendants' second motion to dismiss Plaintiffs' Amended Complaint and to strike class allegations (ECF No. 14). Upon a careful review of the written submissions, the Court deems it appropriate to render its decision without a hearing pursuant to Local Rule 7.1(f)(2). For the reasons set forth below, Defendants' motion to dismiss and to strike class allegations is DENIED. Plaintiffs shall file a Second Amended Complaint that includes only allegations and claims related to the Defendants named in this removed action.

BACKGROUND

Plaintiffs' claims arise from their alleged rights as assignees of Medicare Advantage Organizations (“MAOs”) and other MA Plans to recover from no-fault insurers who are primary payers under the MSP Act. The MSP Act makes Medicare the secondary payer and designates certain private entities, such as automobile or liability insurance plans, as primary payers. The MSP Act provides that where the primary payer “has not made or cannot reasonably be expected to make payment with respect to the item or service promptly, ” Medicare may make a conditional payment and then recover the paid amount from the primary payer “if it is determined that such primary plan has or had a responsibility to make payment with respect to such item or service.” § 1395y(b)(2)(B)(i).

The determination whether a primary plan has or had responsibility to pay for a medical item or service can arise from “a judgment, a payment conditioned upon the recipient's compromise, waiver or release (whether or not there is a determination or admission or liability) of payment for items or services included in a claim against the primary plan or the primary plan's insured or by other means.” § 1395y(b)(2)(B)(ii). The MSP Act authorizes Medicare to recover double damages against primary payors who were responsible to pay under a primary plan. The MSP Act also authorizes “a private right of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement).” § 1395y(b)(3)(A).

Medicare Part C governs the Medicare Advantage Act, wherein private insurers, operating as MAOs, may provide Medicare benefits to eligible Medicare participants (“Enrollees”). The Centers for Medicare & Medicaid Services (“CMS”) subsidizes Medicare Part C health insurance by paying MAOs a fixed fee per Enrollee. Part C includes a secondary payer provision allowing MAOs to recover expenses paid on behalf of an Enrollee from a primary plan. § 1395w-22(a)(4). CMS regulations confer upon an MAO the “same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations in subparts B through D of part 411 of this chapter.” 42 C.F.R. §108(f). Therefore, MAOs are authorized to make conditional payments for covered services and then recoup from primary payers when they have paid for services that fall within overlapping insurance maintained by Enrollees. In the event the primary plan fails to reimburse the MAO for benefits it was obligated to provide, the MSP Act establishes a private right of action that permits the MAO to sue for double damages. 42 U.S.C. § 1395y(b)(3)(A).

The Amended Complaint alleges that Defendant auto insurers issued no-fault coverage policies to their insureds, which include Medicare Part C Enrollees. Pursuant to their contractual obligations with their insureds, and under state law, Defendants agreed to provide coverage for their insureds' accident-related medical expenses without regard to fault. In other instances, Defendants are alleged to have provided third-party liability on behalf of their insureds, and sometimes enter settlements on behalf of such insureds, when they were liable for injuries to Enrollees. Under both scenarios, the Amended Complaint alleges that Defendants are considered primary plans under the MSP Act, with a primary obligation to pay for accident-related medical expenses on behalf of Enrollees relative to the MAOs' obligation to pay for those same expenses. As assignees of receivables by MAOs, Plaintiffs seek to reconcile Defendants' alleged failures to honor their primary payer obligations under the MSP Act.

In the Amended Complaint, Plaintiffs plead five exemplar claims involving policies allegedly issued by the Michigan insurance companies which are the Defendants in this case. Plaintiffs allege specific instances in which their assignors paid for the medical services or items of Medicare Part C Enrollees, and that one of the Defendants, as a primary payer, bore the responsibility for the medical expenses but failed either to pay for them or to reimburse the MA Plan. The exemplar claims identify the injured Medicare Enrollee, the date of the accident, the medical items and services rendered, the insurance policy number, the MA Plan that made payment, the diagnosis codes and injuries, the date services were provided, the amounts billed, the amounts paid, the dates on which the payments were made, and what is known of the primary payer responsibility report made by Defendants to CMS.

The Amended Complaint also includes Exhibit B, which lists 244 instances where Defendants reported to CMS that they were obligated pursuant to an insurance policy to provide primary payment on behalf of an Enrollee. Plaintiffs describe Exhibit B as “a fraction of the potential claims at issue” because Defendants are difficult to identify when they fail to report their primary payer responsibility to CMS, or where they later remove their reporting. Plaintiffs also attach Exhibit C to the Amended Complaint to support the inference of non-reporting by identifying 223 loss instances indicating Defendants held primary payer status but where there is no record of reporting these claims to CMS.

Federal regulations promulgated under the MSP Act place an obligation on primary payers to: (i) identify whether their insureds or claimants are Medicare beneficiaries; (ii) identify whether claimants with whom they enter settlements are Medicare beneficiaries; and (iii) report their primary payer responsibility to CMS. § 1395y(b)(8). Plaintiffs contend that primary payers often do not honor their identification and reporting obligations, making it difficult for MA Plans, or their assignees, to obtain reimbursement. For this reason, despite engaging in pre-suit investigation, Plaintiffs explain they are not able to definitively allege which Defendant is the responsible primary payer for which claims.

STANDARD OF REVIEW

Rule 12(b)(6) allows the Court to make an assessment as to whether the plaintiff has stated a claim upon which relief may be granted. Under the Supreme Court's articulation of the Rule 12(b)(6) standard in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 554-56 (2007), the Court must construe the complaint in favor of the plaintiff, accept the allegations of the complaint as true, and determine whether plaintiff's factual allegations present plausible claims. A'[N]aked assertion[s]' devoid of 'further factual enhancement'' are insufficient to Astate a claim to relief that is plausible on its face''. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 557, 570). To survive a Rule 12(b)(6) motion to dismiss, plaintiff's pleading for relief must provide Amore than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.'' D'Ambrosio v. Marino, 747 F.3d 378, 383 (6th Cir. 2014) (quoting Twombly, 550 U.S. at 555) (other citations omitted). Even though the complaint need not contain Adetailed'' factual allegations, its Afactual allegations must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true.'' New Albany Tractor, Inc. v. Louisville Tractor, Inc., 650 F.3d 1046, 1051 (6th Cir. 2011) (citing Twombly, 550 U.S. at 555).

LAW AND ANALYSIS

Defendants argue that Plaintiffs' Amended Complaint must be dismissed for failure to state a claim because it fails to identify the...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT