Mueller v. Wellmark, Inc.

• Decision Date: 27 July 2012
• Docket Number: No. 10–0010.,10–0010.
• Citation: 818 N.W.2d 244
• Parties: Steven A. MUELLER, Bradley J. Brown, Mark A. Kruse, Kevin D. Miller, and Larry E. Phipps, on Behalf of Themselves and Those Like Situated, Appellants, v. WELLMARK, INC. d/b/a Wellmark Blue Cross and Blue Shield of Iowa, An Iowa Corporation; and Wellmark Health Plan of Iowa, Inc., An Iowa Corporation, Appellees.
• Court: Iowa Supreme Court

818 N.W.2d 244

Steven A. MUELLER, Bradley J. Brown, Mark A. Kruse, Kevin D. Miller, and Larry E. Phipps, on Behalf of Themselves and Those Like Situated, Appellants,

v.WELLMARK, INC. d/b/a Wellmark Blue Cross and Blue Shield of Iowa, An Iowa Corporation; and Wellmark Health Plan of Iowa, Inc., An Iowa Corporation, Appellees.

No. 10–0010.

Supreme Court of Iowa.

July 27, 2012.

Glenn L. Norris of Hawkins & Norris, P.C., Des Moines; Steven P. Wandro of Wandro, Baer & McCarthy, P.C., Des Moines; and Harley C. Erbe of Erbe Law Firm, Des Moines, for appellants.

Hayward L. Draper, Thomas H. Walton, and Patrick B. White of Nyemaster Goode, PC, Des Moines, for appellees.

WATERMAN, Justice.

In this complex interlocutory appeal from a putative class action, we must decide whether the district court correctly granted several dispositive motions. Plaintiffs are doctors of chiropractic who allege they have been victimized by the discriminatory practices of Iowa's largest health insurer, Wellmark, Inc.¹ The plaintiffs claim Wellmark wrongfully imposes restrictions and pays lower rates for chiropractic services than for equivalent services offered by medical doctors or osteopathic physicians. Plaintiffs allege that Wellmark not only has violated various insurance regulatory statutes, but also has engaged in unlawful conspiracy and monopolization in violation of the Iowa Competition Law.

First, the district court granted Wellmark's motion to dismiss claims brought under Iowa's insurance regulatory statutes because no private cause of action is provided therein. We affirm that ruling based on Seeman v. Liberty Mutual Insurance Co., 322 N.W.2d 35, 42–43 (Iowa 1982). The proper forum for raising alleged violations of those regulatory statutes is through administrative proceedings in the Iowa Division of Insurance.

Second, the district court granted Wellmark's motion for summary judgment on plaintiffs' antitrust claims based on the “state action” exemption found in Iowa Code section 553.6(4) (2009). We reverse in part because the summary judgment record fails to establish the challenged conduct falls within the exemption.

Third, the district court granted summary judgment on claims alleging Wellmark breached its obligations under a judicially approved national class action settlement in Love v. Blue Cross Blue Shield Ass'n, No. 03–21296–CIV (S.D.Fla. Apr. 19, 2008). We affirm because the record contains no evidence Wellmark's implementation of the Love settlement violated the Iowa Competition Law.

Fourth, we affirm summary judgment on several specific antitrust claims for reasons explained below. We remand the remaining claims and defenses for further proceedings.

I. Background Facts and Proceedings.

This litigation began in December 2007 when Steven A. Mueller, D.C., filed a breach-of-contract claim against Wellmark over a $17,376 billing dispute. On May 20, 2008, plaintiffs filed a first amended petition adding plaintiffs, Bradley J. Brown, D.C.; Mark A. Kruse, D.C.; Kevin D. Miller, D.C.; and Larry E. Phipps, D.C. Plaintiffs are doctors of chiropractic who have billed for services provided to patients enrolled in Wellmark health insurance plans. Their amended pleading asserted class action claims on behalf of a putative “class of Iowa-licensed doctors of chiropractic who are citizens of the State of Iowa as of the date of filing.” ² Plaintiffs sought damages and injunctive relief against Wellmark, alleging discriminatory and anticompetitive practices that harmed chiropractic doctors. Division I contained the new class action claims, and Division II retained Mueller's individual claim. This appeal only concerns the class action claims in Division I.

Wellmark's business consists of selling health insurance plans to employer groups and providing administrative services to assist others who provide health insurance coverage, such as self-funded governmental entity plans. Wellmark is one of a dozen health insurers in the state, but retains the largest market share. Wellmark creates a network of preferred health care providers, including doctors of chiropractic, medical doctors, and osteopathic doctors, and incentivizes its members to use its preferred provider panel. Wellmark develops its preferred provider panel by entering into contracts with providers that govern the terms and conditions of treatment as well as fee schedules, at times on a take-it-or-leave-it basis. Preferred providers must adhere to these contracts to receive compensation from Wellmark for services provided to Wellmark's members. Preferred provider arrangements are expressly encouraged by the Iowa legislature as a health care cost control mechanism. SeeIowa Code § 514F.2. The legislature has directed the Iowa Insurance Commissioner to regulate these preferred provider arrangements. Id.§ 514F.3.

Stated simply, the plaintiffs in this lawsuit allege Wellmark has employed preferred provider arrangements in an unlawfully discriminatory and anticompetitive manner in violation of statutory insurance provisions and state antitrust laws.

Division I of the first amended petition contains five counts, spanning forty pages. Count I provides factual background for the claims that follow. Count II seeks declaratory relief based upon allegations that Wellmark engages in discriminatory practices that violate insurance regulatory provisions contained in the Iowa Code that prevent health insurers from taking actions “on a basis solely related to the [chiropractor's] license.” Iowa Code § 514F.2; accordIowa Code §§ 509.3(6), 514.7, 514.23(2), 514B.1(5). Count III pleads Wellmark entered into a contract, combination, or conspiracy to unlawfully restrain trade against chiropractors in violation of section 553.4 of the Iowa Competition Law. Count III seeks money damages. Count IV also seeks money damages, alleging Wellmark “abused [its] monopoly power in the relevant geographic and product markets” to injure plaintiffs in violation of section 553.5 of the Iowa Competition Law.³ Count V repleads the statutory insurance violations alleged in Count II, but seeks injunctive relief.

Division I of the first amended petition alleges Wellmark engaged in substantially similar unlawful conduct for each count in ways that

(a) violate the various provisions of H.F. 2219 (1986 (71 G.A.) ch. 1180) in their contracts and dealings with chiropractors and chiropractic patients in order to diminish and restrict the care for human ailments by chiropractors for which payment will be made by the Wellmark Defendants;

(b) impose definitions of “chiropractic” and “medical necessity” contrary to Chapter 151, Code of Iowa (2007) in order to diminish and restrict the care for human ailments by chiropractors for which payment will be made by the Wellmark Defendants;

(c) usurp the authority of the Iowa General Assembly, to the detriment of Iowa chiropractors and the treatment and therapy offered to their patients, in requiring the use of and promulgating standards and rules of practice for “Chiropractic Assistants,” a category of health care practitioner found nowhere in the present Code of Iowa in Chapters 147 through 158 or elsewhere, and in limiting the employment of certain modes of physiotherapy if not applied by chiropractors or “chiropractic assistants;”

(d) impose maximum fee schedules to which chiropractors must agree with defendants and with each other in order to provide diagnostic and treatment services for their patients in Iowa;

(e) prescribe fees for chiropractic services which are discriminatory to doctors of chiropractic in relation to the fees for other health care practitioners for the same or similar services;

(f) prescribe limitations upon and make optional the coverage of diagnostic and treatment services of chiropractors while not imposing the same standards and practices to the coverage of diagnostic and treatment services of other practitioners of health care in Iowa licensed under the chapters of Title IV, subtitle 3, of the Code of Iowa [Chapters 147 through 158];

(g) agree with over 95% of all Iowa Doctors of Medicine (M.D.'s) and Doctors of Osteopathy (D.O.'s) in active practice to numerous items of preferential treatment, discriminatory to plaintiff, as found in Section 7 of a Settlement Agreement dated April 27, 2007, ... [ See Love, No. 03–21296–CIV (S.D.Fla. Apr. 19, 2008) ];

(h) enter into agreements with various subdivisions of the State of Iowa to limit or exclude chiropractic coverage from health plans offered to employees of various subdivisions of the State of Iowa, based upon the encouragement of and false information provided by the Wellmark Defendants.

Wellmark moved to dismiss plaintiffs' class action claims on several grounds. Wellmark asserted plaintiffs' insurance claims were within the exclusive jurisdiction of the Iowa Insurance Commissioner and the insurance provisions plaintiffs relied upon do not create a private cause of action. As to plaintiffs' Iowa Competition Law claims, Wellmark alleged (1) it was immune from liability pursuant to Iowa Code section 553.6(4), which exempts “activities or arrangements expressly approved or regulated” by the state; (2) plaintiffs “failed to adequately plead an antitrust injury and therefore lack standing”; and (3) plaintiffs “failed to adequately plead facts plausibly suggesting the existence of an agreement to restrain trade.” Plaintiffs resisted all grounds.⁴

On October 22, 2008, the district court granted Wellmark's motion to dismiss plaintiffs' statutory insurance claims, but not their antitrust claims. As to the statutory insurance claims, the district court found no implied cause of action:

The second, third, and fourth factors of the Seeman test establish that there is no implied right of action under these statutes. Thus plaintiffs' request for declaratory ruling based on alleged violations of these statutes, their request for injunctive relief based on these statutes, and any damages claims based...