Roberts v. United Healthcare Servs., Inc.

• Decision Date: 04 August 2016
• Docket Number: B266393
• Citation: 2 Cal.App.5th 132,206 Cal.Rptr.3d 158
• Court: California Court of Appeals Court of Appeals
• Parties: Edward J. ROBERTS, Plaintiff and Appellant, v. UNITED HEALTHCARE SERVICES, INC., Defendant and Respondent.

2 Cal.App.5th 132

206 Cal.Rptr.3d 158

Edward J. ROBERTS, Plaintiff and Appellant

v.UNITED HEALTHCARE SERVICES, INC., Defendant and Respondent.

B266393

Court of Appeal, Second District, Division 2, California.

Filed August 4, 2016

Kabateck Brown Kellner, Brian S. Kabateck, Los Angeles, Joshua H. Haffner, Marina Del Rey, Kevin S. Conlogue, San Pedro, Justin F. Spearman and Drew R. Ferrandini, Los Angeles, for Plaintiff and Appellant.

Hogan Lovells US, Michael M. Maddigan, Poopak Nourafchan and Vassiliki Iliadis, Los Angeles, for Defendant and Respondent.

HOFFSTADT

, J.

Plaintiff Edward J. Roberts (plaintiff) enrolled in a private health plan offering benefits to persons 65 and over as well as disabled persons under the federally funded Medicare Advantage program (42 U.S.C. § 1395w–21 et seq.

), and went to an urgent care center outside of the plan's network for medical services; as a result, he was forced to pay a $50 copayment instead of the $30 copayment for in-network centers. Alleging that the plan's marketing materials misled him (and other enrollees) as to the availability of in-network urgent care centers (and their smaller copayments) and that the absence of any in-network urgent care centers in California rendered the plan's network inadequate, plaintiff filed this class action for unfair competition, unjust enrichment and financial elder abuse.

This appeal presents two questions: (1) Are plaintiff's misrepresentation and adequacy-of-network based claims expressly preempted by the preemption clause applicable to Medicare Advantage plans (42 U.S.C. § 1395w–26(b)(3)

), or implicitly preempted by the requirement that the plan's marketing materials and adequacy of plan coverage be preapproved by the Center for Medicare and Medicare Services (Center); and (2) are plaintiff's claims, to the extent they challenge a denial of benefits, subject to dismissal because plaintiff did not first exhaust his administrative remedies under the Medicare Act (42 U.S.C. §§ 405(g), (h) & 1395ii )? We conclude that the answer to the first question is yes. In ruling that plaintiff's claims are expressly preempted, we part company with Cotton v. StarCare Medical Group, Inc. (2010) 183 Cal.App.4th 437, 447–454, 107 Cal.Rptr.3d 767

(Cotton ) and Yarick v. PacifiCare of California (2009) 179 Cal.App.4th 1158, 1165–1167, 102 Cal.Rptr.3d 379 (Yarick ), and join with the later-decided Do Sung Uhm v. Humana, Inc. (9th Cir. 2010) 620 F.3d 1134, 1148–1157 (Uhm ). We further conclude that the answer to the second question is yes. We accordingly affirm the trial court's dismissal of plaintiff's complaint.

FACTS AND PROCEDURAL BACKGROUND

I. Facts

We draw these facts from the allegations in plaintiff's complaint as well as from documents subject to judicial notice (Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 924, 199 Cal.Rptr.3d 66, 365 P.3d 845

), resolving any conflicts in favor of the judicially noticed documents (Sciar

r

atta v. U.S. Bank National Assn. (2016) 247 Cal.App.4th 552, 561, 202 Cal.Rptr.3d 219 ).

Defendant United Healthcare Services, Inc. (United Healthcare) offers to persons eligible for Medicare benefits—chiefly, persons 65 and over or who are disabled (42 U.S.C. § 1395c

)—several different health care plans under the Medicare Advantage program. As described more fully below, the Medicare Advantage program allows eligible Medicare beneficiaries the right to obtain the statutorily mandated benefits, as well as a variety of additional benefits, through privately run health plans. (See generally In re Avandia Marketing (3d Cir. 2012) 685 F.3d 353, 357–358

(Avandia ).)

United Healthcare advertised its various Medicare Advantage plans with written materials; it submitted those materials, as well as materials regarding the plan's benefits coverage, to the Center for preapproval and the Center had no objection to those materials. In the marketing materials for its AARP Medicare Complete Secure Horizons Plan 1 (Secure Horizons Plan 1), United Healthcare represented that the plan “offer[ed] one of the nation's largest networks, made up of local doctors, clinics and hospitals who know your community.” In light of this representation, plaintiff “reasonably believed that there would be an in-network, urgent care healthcare provider within a reasonable distance of his home.”

Plaintiff enrolled in the Secure Horizons Plan 1 in April 2013. United Healthcare sent him a “Welcome Book” listing all providers within the plan's network and specifying that the patient copayment for in-network visits was $30 and for out-of-network visits was $50. The closest urgent care center to plaintiff's residence was outside of the plan's network; in fact, the plan had no in-network urgent care centers anywhere in California.

In July 2013, plaintiff needed urgent care and drove to the nearby, out-of-network urgent care center and made a $50 copayment (rather than the $30 copayment).

II. Procedural History

Plaintiff sued United Healthcare on behalf of the class of “all individuals residing in California who, during the four years preceding the filing of this action, enrolled in the [Secure Horizons Plan 1] through [United Healthcare] and paid a co-pay[ment] in excess of $30 for urgent care.” Specifically, plaintiff alleged that United Healthcare's marketing materials were misleading and accordingly constituted

(1) “unlawful, unfair or fraudulent” business practices in violation of the unfair competition law (Bus. & Prof. Code, §§ 17200

& 17500 ), Insurance Code section 790.03, subdivision (b) regarding misleading advertising, and Civil Code sections 1571 and 1573 regarding constructive fraud, (2) unjust enrichment, and (3) financial elder abuse (Welf. & Inst. Code, § 15610.30 ). Plaintiff sought “full disgorgement and restitution,” “treble damages” under Civil Code section 3345, punitive damages, injunctive relief, and attorney's fees.

United Healthcare removed the case to federal court. Three months later, the federal court remanded it back to state court.

Following remand, United Healthcare demurred to plaintiff's complaint. In a seven-page written ruling, the trial court determined that plaintiff's lawsuit was “federally preempted by the Medicare Act (and alternatively, that [plaintiff's] administrative remed[ies] ha[d] not been exhausted)” and sustained the demurrer without leave to amend.

The trial court found that plaintiff's lawsuit rested primarily on his claims that United Healthcare's marketing materials misrepresented the scope of in-network services and thus the likely copayments due. Because the Center was required to (and did) preapprove all marketing materials used by the Medicare Advantage plans (42 U.S.C. § 1395w–21(h)

; 42 C.F.R. §§ 422.2260 –422.2276 ) as well as the adequacy of each plan's network (42 C.F.R. § 422.112 ), and because the Medicare Act provides that the “standards [applied by the Center] shall supersede any State law or regulation (other than State licensing laws or State laws relating to plan solvency) with respect to [Medicare Advantage] plans which are offered by [Medicare Advantage] organizations under this part” (42 U.S.C. § 1395w–26(b)(3) ), the court concluded that plaintiff's allegations “stand directly in contrast to the exclusive power Congress bestowed on the [Center] to regulate” marketing materials and the adequacy of coverage, and thus fell within the terms of the express preemption clause. The court noted that its decision was in accord with the Ninth Circuit's decision in Uhm, supra, 620 F.3d 1134. In the court's view, plaintiff's claims were also “arguably” implicitly preempted because his “marketing claims ... would stand as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.”

“To the extent plaintiff's claims ... can be characterized as being based on [United Healthcare's] failure to provide any in-network urgent care centers in California ... as opposed to ... misrepresentation of its benefits and services,” the court determined that such claims were “inextricably intertwined” with a claim for benefits, and thus had to be administratively exhausted.

The court subsequently entered a judgment of dismissal, which plaintiff has timely appealed.

DISCUSSION

I. Background Law

A. Medicare Act

The Medicare Act (Act) is “part of the Social Security Act” and “established a federally subsidized health insurance program ... administered by the Secretary of Health and Human Services [ (Secretary) ].” (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 416, 106 Cal.Rptr.2d 271, 21 P.3d 1189

(McCall ); 42 U.S.C. § 1395 et seq. ) The chief beneficiaries of Medicare insurance are eligible individuals “who are age 65 or over” and individuals suffering from a “disability.” (42 U.S.C. § 1395c.) The Act provides benefits in four parts. (Dial v. Healthspring of Alabama, Inc. (11th Cir. 2008) 541 F.3d 1044, 1046

(Dial ).)

Under Parts A and B of the Act, Medicare beneficiaries requiring medical services obtain those services directly from providers participating in the Medicare program, and the Secretary directly reimburses those providers on a “fee-for-service” basis. (42 U.S.C. §§ 1395c

–1395i–5 [Part A] & 1395j–1395w–6 [Part B]; Avandia, supra, 685 F.3d at p. 357.) Part A covers “hospital, skilled nursing, home health, and hospice care benefits,” while Part B covers “physician and other outpatient services.” (Dial, supra, 541 F.3d at p. 1046.)

In 1997, Congress added Part C to the Act. (42 U.S.C. §§ 1395w–21

–1395w–28 ; see generally Balanced Budget Act of 1997, Pub.L. No. 105–33 (Aug. 5, 1997) 111 Stat. 251, 276.) Under Part C, Medicare beneficiaries can sign up for a privately administered health care plan—originally called a “Medicare+Choice” plan, but later renamed a “Medicare Advantage” plan—that provides all of the Part A and B benefits as well as additional benefits. (42 U.S.C. §§ 1395w–21(a)(1), (d)(4)(A)(i) & 1395w–22(a)(1)-(3), (c)(1)(F) ; see also Dial, supra, 541...