Rosenberg v. Health Net, Inc., A131756

• Decision Date: 24 April 2012
• Docket Number: A131756
• Parties: JORDAN ROSENBERG, Plaintiff and Appellant, v. HEALTH NET, INC., Defendant and Respondent.
• Court: California Court of Appeals Court of Appeals

JORDAN ROSENBERG, Plaintiff and Appellant, v. HEALTH NET, INC., Defendant and Respondent.

A131756

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION TWO

Dated: April 24, 2012

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(San Francisco County Super. Ct. No. CGC-10-500277)

I. INTRODUCTION

The Medicare Act, a part of the Social Security Act, established a federally-subsidized health insurance program for older and disabled Americans. (42 U.S.C. § 1395 et seq.; McCall v. PacifiCare of California, Inc. (2001) 25 Cal.4th 412, 416 (McCall).) The program is divided into "Parts." The present case involves Medicare Part D, a voluntary prescription drug benefit program for seniors. (42 U.S.C. § 1395w-101, et seq.) "Under the Act, health insurance providers contract with the Center for Medicare Services ('CMS'), part of the Department of Health and Human Services, to offer Part D prescription drug plans ('PDPs') to Medicare beneficiaries." (Uhm v. Humana, Inc. (2010) 620 F.3d 1134, 1138 (Uhm).)

Jordan Rosenberg (Rosenberg) filed a complaint against Health Net, Inc. (Health Net) seeking restitution, damages and other equitable relief for his allegedly wrongful disenrollment from Health Net's Medicare Part D prescription drug plan. The trial court sustained demurrers to the entire complaint, finding that some of Rosenberg's claimswere subject to administrative exhaustion and that others were preempted by the Medicare Act. We affirm.

II. STATEMENT OF FACTS

A. Rosenberg's Complaint

On October 29, 2010, Rosenberg filed a complaint which sets forth the following core factual allegations: "Plaintiff Rosenberg was a customer of Healthnet, Inc, an insurer providing Rosenberg with insurance coverage under Medicare Part D, the prescription drug coverage. During the month of May 2007 defendants canceled [sic] Rosenberg's coverage without good reason and refused to re-instate it despite Rosenberg's repeated demands that they do so. As a result Rosenberg was without coverage, was without the means to obtain needed continuing medications, and was at risk for damage to his health and had his health damaged. In June, Rosenberg was able to find alternative coverage but no alternative coverage was possible under Medicare rules for May."

In his first cause of action, Rosenberg alleged Health Net is liable to him for fraud. In addition to the facts quoted above, Rosenberg alleged that Health Net made the following misrepresentations to him via its website or other promotional literature: (1) Health Net's insurance would enable Rosenberg to purchase medicines; (2) Health Net has a customer service department that is willing and able to help with problems; and (3) customers may contact Health Net by e-mail.

Relying on the same allegations used to support his fraud cause of action, Rosenberg also alleged or attempted to allege additional claims for violation of the state Consumer Legal Remedies Act (CLRA), Civil Code section 1770 et seq. (second cause of action), violation of the state unfair competition law (UCL), Business and Professions Code section 17200 et seq. (third cause of action), and intentional infliction of emotional distress (fourth cause of action).

Finally, in both his fifth and sixth causes of action, Rosenberg alleged that Health Net is liable to him for negligence. ¹ Rosenberg alleged that Health Net assumed a duty to him which it breached by canceling his insurance without cause and by refusing to restore his insurance coverage and, as a result, he was "denied his medications and so damaged."

B. The Demurrers

On November 10, 2010, Health Net filed demurrers to Rosenberg's entire complaint in which it argued that Rosenberg failed to exhaust his administrative remedies, that all of Rosenberg's claims are preempted by the Medicare Act, and that Rosenberg failed to state a cause of action under the CLRA, the UCL, or for negligence.

On January 12, 2011, a hearing on the demurrers was conducted before the Honorable Peter J. Busch. Rosenberg, who has represented himself throughout this case, has elected to omit the transcript of that hearing from the record on appeal.

On February 9, 2011, the court filed an order sustaining demurrers to all of Rosenberg's causes of action without leave to amend. The court found that Rosenberg's two negligence claims arise under the Medicare Act and Rosenberg was required to but failed to exhaust his administrative remedies. The court also found that Rosenberg's remaining causes of action are preempted by federal law.

III. DISCUSSION

A. Standard of Review

"A demurrer tests the legal sufficiency of the factual allegations in a complaint. We independently review the sustaining of a demurrer and determine de novo whether the complaint alleges facts sufficient to state a cause of action or discloses a complete defense. [Citation.] We assume the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded, and matters of which judicial notice has been taken. [Citation.] We construe the pleading in a reasonablemanner and read the allegations in context. [Citation.] We must affirm the judgment if the sustaining of a general demurrer was proper on any of the grounds stated in the demurrer, regardless of the trial court's stated reasons. [Citation.]" (Vitkievicz v. Valverde (2012) 202 Cal.App.4th 1306, 1310-1311.)

B. The Negligence Claims

The trial court sustained demurrers to Rosenberg's fifth and sixth causes of action for negligence on the ground that these claims are subject to the administrative exhaustion provisions of the Medicare Act and that Rosenberg failed to exhaust his administrative remedies.

The Medicare Act establishes an administrative scheme for determining entitlement to benefits under the Act which is administered by the Commissioner of Social Security. (42 U.S.C. § 405.) That process establishes the " 'sole avenue' " for judicial review for all claims " 'arising under' " the Medicare Act. (Heckler v. Ringer (1984) 466 U.S. 602, 614-615; see also Kaiser v. Blue Cross of California (9th Cir. 2003) 347 F.3d 1107, 1111 ["Jurisdiction over cases 'arising under' Medicare exists only under 42 U.S.C. § 405(g), which requires an agency decision in advance of judicial review."].) "Judicial review of a claim for benefits is available only after the [Commissioner] has rendered a ' "final decision" ' on the claim, and only in the manner provided for claims for old age and disability benefits arising under the Social Security Act." (McCall, supra, 25 Cal.4th at pp. 416-417, quoting Heckler, supra, 466 U.S. at p. 605.)

A claim " 'arises under' " the Medicare Act and therefore requires exhaustion when (1) the " 'standing and the substantive basis for the presentation' " of the claim is the Medicare Act, or (2) the claim is " 'inextricably intertwined' " with a claim for Medicare benefits. (Heckler, supra, 466 U.S. at pp. 614-615.) Cases applying this test establish that the remedy sought by a complaint is not determinative. The claim may still arise under the Act even if the complaint does not seek payment or reimbursement of a Medicare claim or benefit. (McCall, supra, 25 Cal.4th at pp. 417-418.) Thus, for example, " ' "[c]leverly concealed claims for benefits" ' " are subject to exhaustion. (Uhm, supra, 620 F.3d at p. 1141.) On the other hand, "a claim that is 'wholly"collateral" ' to a claim for benefits under the Act is not subject to the administrative process . . . ." (McCall, supra, 25 Cal.4th at p. 417.)

Applying these rules to the present case, we affirm the trial court's finding that Rosenberg's fifth and sixth causes of action for negligence arise under the Medicare Act. Rosenberg has alleged that Health Net had a duty to him which it breached by cancelling and refusing to restore his Medicare Part D insurance "without cause," and that this alleged breach of duty harmed Rosenberg by depriving him of his medication. In other words, Rosenberg is claiming that he was entitled to benefits under Medicare Part D and that Health Net wrongfully deprived him of those benefits by terminating and then refusing to reinstate his coverage.

The substantive basis for this claim, and Rosenberg's standing to bring it, is the Medicare Act itself which provides that the "Secretary shall establish a process for the enrollment, disenrollment, termination, and change of enrollment of part D eligible individuals in prescription drug plans . . . ." (42 U.S.C. § 1395w-101(b).) Pursuant to this statutory directive, the CMS has established a regulatory scheme governing eligibility and enrollment in Part D plans which includes, among other things, rules for "Involuntary disenrollment from Part D coverage." (42 C.F.R. § 423.44.)

By the same token, Rosenberg's negligence causes of action are inextricably intertwined with a claim for benefits under the Act. Rosenberg's allegations that Health Net breached its duty by terminating his coverage without cause necessarily and directly implicate the process for disenrollment established by the Act. Furthermore, the denial of a Medicare benefit is the only harm that Rosenberg allegedly suffered as a result of the claimed breach of duty.

Rosenberg contends that none of his claims arise under the Medicare Act because his complaint does not seek the payment of any Medicare benefits. As a factual matter, we cannot determine whether Rosenberg seeks payment for or reimbursement of an actual claim for benefits because his prayer for relief is so general and so broad (e.g., "[c]ombined monetary relief not more than $10,000,000.00"). We do note, however, that the first item of relief listed in the prayer of the complaint...