Plavin v. Grp. Health Inc.

• Decision Date: 22 June 2018
• Docket Number: 3:17–CV–1462
• Citation: 323 F.Supp.3d 684
• Parties: Steven PLAVIN, on behalf of himself and all others similarly situated, Plaintiff, v. GROUP HEALTH INCORPORATED, Defendant.
• Court: U.S. District Court — Middle District of Pennsylvania

323 F.Supp.3d 684

Steven PLAVIN, on behalf of himself and all others similarly situated, Plaintiff,

v.GROUP HEALTH INCORPORATED, Defendant.

3:17–CV–1462

United States District Court, M.D. Pennsylvania.

Filed June 22, 2018

J. Timothy Hinton, Michael F. Cosgrove, Haggerty Hiinton & Cosgrove LLP, Scranton, PA, Arun S. Subramanian, Halley W. Josephs, William C. Carmody, Susman Godfrey LLP, Steve M. Cohen, Law Office of Steve Cohen, New York, NY, for Plaintiff.

Eric W. Shannon, Jared I. Kagan, John Gleeson, Maura K. Monaghan, Debevoise & Plimpton LLP, New York, NY, Peter H. LeVan, Jr., LeVan Law Group LLC, Philadelphia, PA, for Defendant.

MEMORANDUM OPINION

Robert D. Mariani, United States District Judge

I. INTRODUCTION AND PROCEDURAL HISTORY

This case is a putative class action against Defendant Group Health Incorporated ("Group Health") brought by Plaintiff Steven Plavin, alleging unjust enrichment and violations of New York's General Business Law and Insurance Law based on Group Health's marketing statements about coverage benefits for its health insurance plan, which was bargained for and sponsored by Plavin's employer, the City of New York. Group Health moved for dismissal of the Complaint, arguing that all claims are time barred, and in the alternative, that the General Business Law claims fail to allege consumer-oriented conduct or material misrepresentations, that the Insurance Law claim fails to allege material misrepresentations, and that the unjust enrichment claim should be precluded because it is quasi-contractual, duplicative of other claims, and fails to adequately allege the requisite elements. Doc. 31. For the reasons that follow, Defendant's motion will be granted.

II. FACTUAL ALLEGATIONS

Group Health is a not-for-profit corporation that offers health insurance plans to consumers through their employers. Doc. 1 ¶ 14. Plavin is a retired New York City police officer and a current resident of Pennsylvania. Id. ¶ 13. Prior to retirement, he was offered a choice of eleven health plans by his employer. Id. ¶¶ 19–20. Plavin enrolled in Group Health's preferred provider organization ("PPO") plan in 1984 and has chosen to re-enroll in the same plan since then. Id. ¶ 13. The Group Health plan did not require payment of out-of-pocket premiums from members, and it provided coverage for out-of-network services as well as in-network services. Id. ¶ 20. Plavin alleges that "[c]osts being equal, PPO plans are generally preferred by consumers because they provide coverage for services rendered by almost any provider, whether in-network or out-of-network." Id. Plavin alleges that "[b]y promoting itself as a PPO plan providing comprehensive in-network and out-of-network coverage that also did not require out-of-pocket premiums," the Group Health plan appeared to be an attractive plan to New York City employees, and as a result, the plan "had the highest enrollment of any health plan offered to NYC employees and retirees." Id. ¶ 25.

The open enrollment period for current New York City ("NYC") workers occurs every year, and the period for NYC retirees is every two years. Id. ¶ 21. Prior to open enrollment, New York City employees and retirees receive the NYC Summary Program Description, which includes a summary of each of the eleven plans offered, as drafted by the respective insurers. Id. ¶ 22. Plavin alleges that the "Summary Program Description (the "Description") is the only document distributed to NYC employees and retirees" prior to enrollment. Id. ¶ 24. In addition to the Description, Group Health also offered a Summary of Benefits & Coverage on its website. Id. ¶ 24. Besides these two documents, "[p]rospective members were not provided with any certificate of insurance or schedule of reimbursement rates, and such documents were not available on [Group Health's] (or its parent EmblemHealth's) website."Id.

Plavin alleges that both the Description and the Summary of Benefits & Coverage misled members by suggesting that it offered substantial reimbursement rates for out-of-network services, and that there is only a "mere possibility that reimbursements might be less than the actual fee charged by out-of-network providers." Id. ¶¶ 4–5. The materials disclosed that reimbursements for out-of-network services would be made according to the "NYC Non–Participating Provider Schedule of Allowable Charges" (the "Schedule"), which states, in relevant part:

The rate at which you will be reimbursed for particular service is contained within the Schedule. These reimbursement rates were originally based on 1983 procedure allowances and some have been increased periodically. The reimbursement levels as provided by the Schedule may be less than the fee charged by the non-participating provider. Please note that certain non-participating provider reimbursement levels may be increased if you have the optional rider. The subscriber is responsible for any difference between the fee charged and the reimbursement as provided by the Schedule. A copy of the Schedule is available for inspection at [Group Health].

Doc. 13–1 (Complaint Exhibit A) at 1 (emphasis added). Plavin alleges that "[n]othing in the two documents indicated that reimbursement rates for virtually every out-of-network service would be a fraction of the actual cost of that service." Doc. 1 ¶ 5. The Complaint concedes that the Description disclosed that reimbursement levels "may be less than the fee charged by the [out-of-network] provider," but alleges that it was presented as "a mere possibility—not a certainty—that members would be required to pay out-of-pocket for out-of-service services." Id. ¶ 31. The Complaint further alleges that Group Health "did not explain that the reimbursement rates were extraordinarily low when measured against other reimbursement methodologies typically used by PPOs." Id. ¶ 32. In addition, Plavin alleges that the Description's statements about the 1983 Schedule were misleading, because "out of thousands of procedures and services listed [in the Schedule], only a tiny number had been adjusted." Id. Finally, Plavin alleges that contrary to Group Health's representations, the Schedule was never made available to its members. Id. ¶ 7.

In addition to alleging misrepresentations regarding the reimbursement rates, Plavin also alleges that Group Health misleadingly touted the plan's "Catastrophic Coverage" feature. The Complaint alleges that the feature is advertised as covering "100% of the Catastrophic Allowed Charge as determined by [Group Health]" for out-of-network expenses in excess of $1500. Id. ¶ 6. Compare Doc. 13–1 at 1 (Description describing Catastrophic Coverage as follows: "If you choose non-participating providers for predominantly in-hospital care and incur $1,500 or more in covered expenses[,] you are eligible for additional Catastrophic Coverage"). However, Plavin alleges that the term "Catastrophic Allowed Charge" simply meant "the same thing as ‘Allowed Charge’ does," that is, it "provides for reimbursement of the exact same Allowed Amount set forth in the Schedule that [Group Health] was already required to pay regardless of whether the member was above or below the $1,500 ‘Catastrophic Coverage’ threshold." Id. ¶ 10. Plavin claims that labeling the "Catastrophic Coverage" as a key benefit was misleading, because it "provides for reimbursement of the exact same Allowed Amount set forth in the Schedule that [Group Health] was already required to pay regardless of whether the member was above or below the $1,500 ‘Catastrophic Coverage’ threshold"; in other words, it "added literally nothing to the basic coverage." Id.

The Complaint also alleges that there were misleading examples set forth in the Summary of Benefits & Coverage, which was made available on Group Health's website, including examples of out-of-network procedures that required "0% co-insurance" and a hypothetical illustrating how coverage might be calculated. Id. ¶¶ 31–32. Plavin alleges that the coverage calculation hypothetical was misleading because it showed a 66% reimbursement rate, while the actual "[r]eimbursement rates across all services averaged roughly 23% of actual cost ... [and] for some types of services, reimbursement rates were as low as 9% of actual cost" Id. ¶ 19. Finally, the Complaint takes issue with the optional rider, which was offered for an additional fee under the plan, under which reimbursement rates would be based on an "enhanced schedule for certain services [that] increases the reimbursement of the basic program's non-participating provider fee schedule, on average, by 75%." Id. ¶ 7. Plavin has purchased the optional rider since he became a member of the Group Health plan in 1984. Id. ¶¶ 13, 41. He alleges that Group Health failed to disclose that the rider only applied to in-patient services, not out-patient services, when the latter category accounted for "65% of total out-of-network charges." Id. ¶ 11.

Most of the Complaint's misrepresentation allegations are based on a settlement agreement arising out of the New York Attorney General's investigation, i.e. an Assurance of Discontinuance. According to the Complaint, the Attorney General's Office found that Group Health failed to "accurately describe limitations of out-of-network reimbursement" rates, misrepresented "the frequency with which the Schedule was updated," failed to "sufficiently describe the circumstances by which members unknowingly encounter out-of-network providers," and failed "to make the Schedule available to members." Id. ¶ 39. The Complaint also alleges that the Attorney General found that Group Health's materials "do not accurately set forth the potentially wide gap between the out-of-network reimbursement and out-of-network charges, and potentially substantial out-of-pocket amounts for which [Group Health] Plan members will be responsible," and that "it was deceptive for [Group Health] to merely suggest that it is only a possibility that members will be required to pay...