APPEAL from a judgment of the Superior Court of Los Angeles County. Emilie Elias, Judge. Reversed and remanded. (Los Angeles County Super. Ct. No. BC388689)
The opinion of the court was delivered by: Zelon, J.
CERTIFIED FOR PUBLICATION
The California Mental Health Parity Act (Health & Saf. Code,*fn1 § 1374.72) mandates that every health care service plan provide coverage for the diagnosis and medically necessary treatment of severe mental illnesses, including autism, under the same terms and conditions applied to other medical conditions. Appellant Andrew Arce ("Arce"), by and through his guardian ad litem Guillermo Arce, brought a class action suit under the Unfair Competition Law ("UCL") (Bus. & Prof. Code, § 17200 et seq.) against respondents Kaiser Foundation Health Plan, Inc., The Permanente Medical Group, Inc., and Southern California Permanente Medical Group, Inc. (collectively "Kaiser"). In his second amended complaint, Arce alleges that Kaiser breached its health plan contract and violated the Mental Health Parity Act by categorically denying coverage for behavioral therapy and speech therapy to plan members with autism spectrum disorders.
The trial court sustained Kaiser's demurrer to the UCL claim without leave to amend based on the doctrine of judicial abstention and the lack of commonality among class members. We conclude that the trial court erred in sustaining the demurrer because there is a reasonable possibility that Arce can establish the requisite community of interest for a class action suit under the UCL, and resolution of the UCL claim would not require the court to make individualized determinations of medical necessity or to decide complex issues of economic policy or other matters over which an administrative agency has exclusive jurisdiction. We accordingly reverse.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
I. Kaiser's Denial of Coverage for Behavioral and Speech Therapy to Arce
Arce is a four-year-old boy with autism. According to a 2007 report of the California Legislative Blue Ribbon Commission on Autism,*fn2 "[a]utism spectrum disorders are complex neurological disorders of development that onset in early childhood." (Cal. Legis. Blue Ribbon Commission on Autism, An Opportunity to Achieve Real Change for Californians with Autism Spectrum Disorders (Sept. 2007) p. 7.) These disorders, which include full spectrum autism, "affect the functioning of the brain to cause mild to severe difficulties, including language delays, communication problems, limited social skills, and repetitive and other unusual behaviors." (Id. at p. 8.) Nationally, autism spectrum disorders affect an estimated one in every 150 children across all racial, ethnic, and socioeconomic backgrounds. (Ibid.)
Arce is, and has been, a member of a health care service plan provided by Kaiser. According to Kaiser's 2008 Evidence of Coverage for the Kaiser Permanente Traditional Plan, Kaiser provides coverage for the "Services" described and defines the term "Services" as "Health care services or items." Among other exclusions, Kaiser's Evidence of Coverage contains an exclusion from coverage for "Custodial care," which is defined as "assistance with activities of daily living (for example: walking, getting in and out of bed, bathing, dressing, feeding, toileting, and taking medicine), or care that can be performed safely and effectively by people, who in order to provide the care, do not require medical licenses or certificates or the presence of a supervising licensed nurse."
Before the age of two, Arce displayed certain symptoms associated with autism, including a lack of speech and lack of affection. In October 2007, Arce's pediatrician referred him to speech and occupational therapists for an assessment as to whether autism was the cause of his symptoms. Over the objections of Arce's father, Kaiser repeatedly cancelled and rescheduled the assessment appointment. In February 2008, after a delay of approximately four and one-half months, Kaiser's interdisciplinary team diagnosed Arce with autism and recommended two hours of occupational therapy per month to address his difficulty with swallowing food. Kaiser denied coverage for any other therapies to treat Arce's autism, including behavioral therapy and speech therapy requested by Arce's father. Kaiser informed Arce's father that it was denying coverage for these other therapies because they "were behavioral in nature, not medical, and could be provided by the Regional Center."*fn3
In a March 14, 2008 letter to Arce's father, Kaiser addressed its denial of coverage for a behavioral therapy known as Applied Behavior Analysis. Kaiser stated that, following a review by its Regional Appeals Committee, it was denying coverage for the requested therapy because "Applied Behavior Analysis has been identified as an educational intervention that can be performed by a non-licensed person." Kaiser explained that the "[p]hysician's review has identified Applied Behavioral Analysis as one form of intervention that can be used to improve the behavior of a patient who has been diagnosed with autism. However, because ABA can be performed by a non-licensed individual, health plan coverage of ABA is an exclusion of [Arce's] health plan benefits." Kaiser specifically referred to the "Custodial care" exclusion set forth in its 2008 Evidence of Coverage.
Arce's father filed an administrative grievance with the Department of Managed Health Care ("DMHC") and requested an Independent Medical Review of Kaiser's denial of coverage. The physician reviewer responsible for conducting the Independent Medical Review overturned Kaiser's decision to deny coverage for the requested therapies. The reviewer determined that Kaiser was required to provide coverage for Applied Behavior Analysis therapy at 20 hours per week, occupational therapy at 10 hours per week, and speech therapy twice per week to treat Arce's autism. On April 21, 2008, the DMHC adopted the Independent Medical Review findings.
II. Arce's Civil Action against Kaiser
Acting through his father as his guardian ad litem, Arce filed a civil action against Kaiser in Los Angeles County Superior Court. In the operative second amended complaint, Arce alleged a cause of action for violation of the UCL on behalf of himself and a proposed class.*fn4
The proposed class consisted of all California residents who were Kaiser policyholders or health plan members and were "wrongfully" denied coverage for Applied Behavior Analysis therapy or speech therapy for an autism spectrum disorder on the grounds that the therapies are "non- health care services," "academic or educational interventions," or "custodial care." Arce alleged that Kaiser has a pattern and practice of refusing to provide coverage for Applied Behavior Analysis therapy and speech therapy for autism spectrum disorders on these grounds, and that Kaiser's denial of coverage constitutes an unlawful, unfair and fraudulent business practice in violation of the UCL. Among other allegations, Arce asserted that Kaiser's conduct is unlawful under the Mental Health Parity Act because Kaiser has "refus[ed] to provide coverage for diagnosis and treatment of autism under the same terms and conditions applied to other medical conditions." Arce requested injunctive and declaratory relief on behalf of the alleged class.
Kaiser demurred to the UCL cause of action, arguing that resolution of the UCL claim would require the trial court to make individualized determinations of medical necessity, which would defeat the commonality requirement for class claims under Code of Civil Procedure section 382. Kaiser also asserted that the trial court should equitably abstain from deciding which forms of therapy are properly subject to exclusion under Kaiser's health care plan and should instead leave such issues of economic policy to the Legislature or the DMHC to decide. On January 29, 2009, the trial court sustained Kaiser's demurrer to the UCL claim without leave to amend. In its written order, the trial court set forth its conclusions:
"The Court finds that the doctrine of abstention precludes the UCL cause of action. In addition to the reasons stated on the record during oral arguments, the Court sustains the demurrer to the UCL claim for the following reasons: [¶] The relief that the Plaintiffs seek is an injunction which would require the Court to take over the function of determining what treatments are `medically necessary.' The Court declines to do this. [¶] Plaintiffs argue that they are not seeking such relief. However, if that is not the relief sought, then the only injunction that Plaintiffs seek is to force Kaiser to honor the contract. Thus, a breach of contract action stands. [¶] Plaintiffs have made no showing that the contract violates Health & Safety Code § 1374.72. The Code provides that treatment shall be provided if `medically necessary.' Again, this Court cannot determine what is `medically necessary.' [¶] Further, the determination of what is or is not `medically necessary' would require an individual analysis of each putative class member's claim and thus the common questions do not predominate to warrant class action treatment of this issue."
Following the trial court's ruling on the demurrer, Arce filed a motion for reconsideration. In support of his motion, Arce submitted four letters from Kaiser to health plan members in 2007 and 2008 in which Kaiser allegedly denied coverage for Applied Behavior Analysis therapy and speech therapy for an autism spectrum disorder on the grounds that such therapies are "non-health services," "academic" or "educational" interventions, or "custodial care." Arce argued that the denial letters demonstrated that Kaiser categorically denied coverage for these therapies irrespective of any individual issues of medical necessity that might be involved for a particular plan member. On April 1, 2009, the trial court denied the motion for reconsideration. The court stated on the record that "[t]here is nothing new for reconsideration. There is nothing here that would change my mind so there we are." On April 23, 2009, Arce filed a timely notice of appeal.
In reviewing the sufficiency of a complaint against a demurrer, we "treat the demurrer as admitting all material facts properly pleaded," but we do not "assume the truth of contentions, deductions or conclusions of law." (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.) We liberally construe the pleading to achieve substantial justice between the parties, giving the complaint a reasonable interpretation and reading the allegations in context. (Code Civ. Proc., § 452; Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) When a demurrer is sustained, we must determine de novo whether the complaint alleges facts sufficient to state a cause of action under any legal theory. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415.) When a demurrer is sustained without leave to amend, we must also decide whether there is a reasonable possibility that the defect can be cured by amendment. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) If the complaint can be cured, the trial court has abused its discretion in sustaining without leave to amend. (Ibid.)
In cases where the trial court dismisses a cause of action based on the doctrine of judicial abstention, the standard of review is abuse of discretion. (Alvarado v. Selma Convalescent Hospital (2007) 153 Cal.App.4th 1292, 1297 (Alvarado); see also Desert Healthcare Dist. v. PacifiCare, FHP, Inc. (2001) 94 Cal.App.4th 781, 795 (Desert Healthcare) ["because the remedies available under the UCL, namely injunctions and restitution, are equitable in nature, courts have the discretion to abstain from employing them"].) "The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason. When two or more inferences can reasonably be deduced from ...