California Court of Appeals, Second District, Second Division
EDWARD J. ROBERTS, Plaintiff and Appellant,
v.
UNITED HEALTHCARE SERVICES, INC., Defendant and Respondent.
APPEAL
from a judgment of the Superior Court of Los Angeles County
No. BC540910. Kenneth R. Freeman, Judge.
Kabateck Brown Kellner, Brian S. Kabateck, Joshua H. Haffner,
Kevin S. Conlogue, Justin F. Spearman and Drew R. Ferrandini,
for Plaintiff and Appellant.
Hogan
Lovells US, Michael M. Maddigan, Poopak Nourafchan and
Vassiliki Iliadis, 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
(Cotton) and Yarick v. PacifiCare of
California (2009) 179 Cal.App.4th 1158, 1165-1167
(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), resolving any conflicts in favor of the
judicially noticed documents (Sciaratta v. U.S. Bank
National Assn. (2016) 247 Cal.App.4th 552, 561).
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
...