Judge: Gregory Keosian, Case: 20STCV27757, Date: 2022-10-24 Tentative Ruling

Case Number: 20STCV27757    Hearing Date: October 24, 2022    Dept: 61

Defendant Aetna Life Insurance Co.’s Motion for Summary Judgment or Adjudication is GRANTED as to the fifth cause of action for breach of written contract and all claims related to the treatment of patient C.G. The motion is DENIED as to all other causes of action.

 

I.        OBJECTIONS

Plaintiff Healthcare Ally Management of California, LLC (Plaintiff) objects to various factual propositions put forth in Defendant Aetna Life Insurance Co.’s (Defendant’s) separate statement in support of its motion for summary judgment. Most of these objections are fairly read as targeting the testimony of Renae Hansen, an executive director of Defendant’s Provider Contact Centers, who testifies concerning the training, qualifications, and customary practices of the customer service representatives employed by Defendant to answer questions by providers concerning coverage and payment. These objections are OVERRULED, as Hansen provides sufficient foundation for her testimony concerning these practices.

 

A.     SUMMARY JUDGMENT

A party may move for summary judgment “if it is contended that the action has no merit or that there is no defense to the action or proceeding.”  (Code Civ. Proc. § 437c, subd. (a).) “[I]f all the evidence submitted, and all inferences reasonably deducible from the evidence and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law,” the moving party will be entitled to summary judgment.  (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.) A motion for summary adjudication may be made by itself or as an alternative to a motion for summary judgment and shall proceed in all procedural respects as a motion for summary judgment.  (Code Civ. Proc. § 437c, subd. (f)(2).)

 

The moving party bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact, and if he does so, the burden shifts to the opposing party to make a prima facie showing of the existence of a triable issue of material fact.  (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850; accord Code Civ. Proc. § 437c, subd. (p)(2).)

 

Once the defendant has met that burden, the burden shifts to the plaintiff to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.  (Aguilar, supra, 25 Cal.4th at 850.)  The plaintiff may not rely upon the mere allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to that cause of action or a defense thereto.  (Ibid.)  To establish a triable issue of material fact, the party opposing the motion must produce substantial responsive evidence.  (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.)

 

Defendant Aetna Life Insurance Co. (Defendant) moves for summary judgment as to all causes of action alleged in the Third Amended Complaint (TAC). Defendant argues that Plaintiff Healthcare ally Management of California, LLC’s (Plaintiff’s) claims are dependent upon the terms of various self-insurance plans that are covered by the federal Employment Retirement Income Security Act (ERISA) and therefore preempted by the same Act. (Motion at pp. 10–11.) Defendant further argues that communications with its customer service representatives concerning coverage are not promises that form the foundation for an oral contract between itself and a medical provider, and that the provider in this case — Keith Feder, M.D. (Feder) — could not reasonably rely on such assurances for the purposes of establishing a promissory estoppel or negligent misrepresentation claim. (Motion at pp. 12–15, 18–19.) Defendant further argues that its purported violations of the Knox-Keene Act cannot provide the foundation for a claim under California’s Unfair Competition Law (UCL), because the Act did not regulate the plans in question, and because the alleged violations are too vague to be actionable. (Motion at pp. 15–17.) As to Plaintiff’s claim for breach of written contract, Defendant argues that neither Plaintiff nor Feder had any written contract with Defendant, and that any contract claims between the individual patients treated by Feder and Defendant are preempted by ERISA. (Motion at pp. 19–20.) Finally, Defendant argues that the claims related to one particular patient, C.G., fail because Defendant did not administer his plan. (Motion at p. 20.)

 

B.      ERISA PREEMPTION

ERISA is a “comprehensive regulation of employee welfare and pension benefit plans.” (New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co. (1995) 514 U.S. 645, 650.) The Act contains a preemption provision, stating that it supersedes “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” (29 U.S.C. § 1144, subd. (a).)

 

This preemption does not apply to “any law of any State which regulates insurance, banking, or securities.” (29 U.S.C. § 1144, subd. (b)(2)(A).) But Defendant argues that the plans at issue here were self-funded plans not included within this provision. (Motion at pp. 10–11, citing Rush Prudential HMO, Inc. v. Moran (2002) 536 U.S. 355, 371 fn. 6; see 29 U.S.C. § 1144, subd. (b)(2)(B).) Defendant argues that because Plaintiff’s suit is an attempt to recover amounts owed under Plaintiffs’ self-funded employee benefit plans, the claims are therefore preempted. (Motion at p. 11.)

 

Plaintiff in opposition presents an instructive case: Morris B. Silver M.D., Inc. v. International Longshore & Warehouse etc. (2016) 2 Cal.App.5th 793, 801. That case, like the present case, involved an out-of-network medical provider suing a health plan for failing to pay for care provided to patients according to earlier representations made to the provider by the plan. (Morris B. Silver M.D., Inc., supra, 2 Cal.App.5th at p. 796–797.) When the defendant plan argued that the claims were barred by ERISA, the court noted that state law causes of action “based on alleged improper processing of a claim for benefits under an employee benefit plan, undoubtedly meet the criteria for pre-emption under § 514(a).” (Id. at p. 801.) However, the court distinguished “between claims by a plan participant for additional benefits and claims by third-party medical providers,” whose claims are subject to a two-factor test to determine whether they are preempted: “(1) the state law claims address areas of exclusive federal concern, such as the right to receive benefits under the terms of an ERISA plan; and (2) the claims directly affect the relationship among the traditional ERISA entities—the employer, the plan and its fiduciaries, and the participants and beneficiaries.” (Id. at pp. 803–804.) The court embraced the reasoning of prior federal cases, which held: that disallowing claims by third-party providers would frustrate the purposes of ERISA by deterring them from offering care to covered employees; that such claims in any event did not expand the rights of any patient in relation to their plan; and finally that the relationship between a third-party provider and a plan was not among the core relationships that ERISA sought to regulate. (Id. at pp. 804–805.)

 

Similar logic applies here. Plaintiff’s claims arise from representations made by Defendant to a medical provider prior to the provision of care to Defendant’s plan members. The relationship between provider and plan, and the representations made in the course of that relationship, do not implicate the core purposes or protections of ERISA, which primarily concern the relationship among “the employer, the plan, the plan fiduciaries, and the beneficiaries.” (Id. at p. 805.) Precluding providers from relying on plan statements given prior to medical treatment would, as noted in Morris B. Silver, M.D., Inc. and its cited authority, harm the policies that ERISA seeks to promote, by placing obstacles between plan beneficiaries and care. (Id. at p. 805.) The claims raised here do not address the right of beneficiaries to receive ERISA benefits, and do not directly affect the relationship among traditional ERISA entities.

 

C.     ORAL CONTRACTS

“[T]he elements of a cause of action for breach of contract are (1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) “[T]he vital elements of a cause of action based on contract are mutual assent (usually accomplished through the medium of an offer and acceptance) and consideration.” (Pacific Bay Recovery, Inc. v. California Physicians' Services, Inc. (2017) 12 Cal.App.5th 200, 215.)

 

Defendant argues that no oral contracts were formulated in this case between itself or the medical provider at issue because of the limited authority and training given to its customer service representatives (CSRs), which permits them merely to verify a patient’s insurance information, not to opine upon how payment for that service will ultimately be calculated. (Motion at pp. 12–13; Hansen Decl. ¶¶ 5–20.) Defendant further argues that even if its CSRs were authorized to make binding promises concerning payment, there was in the present case a lack of mutual assent to what was understood by the term “usual, customary, and reasonable” (UCR) rates, which could implicate a number of different methods of calculation. (Motion at p. 14.)

 

Defendant cites various federal cases that have embraced similar arguments. There is Community Hospital of the Monterey Peninsula v. Aetna Life Insurance Company (N.D. Cal. 2015) 119 F.Supp.3d 1042, 1049), in which the court held that no agreement was formed between a medical provider and Aetna for “100 percent payment of billed charges” based on prior authorization calls, when all parties understood the patient to be out-of-network, and therefore to be reimbursed at a discounted level. (Id. at p. 1049.) There is Vencor Hospitals v. Blue Cross Blue Shield of Rhode Island (11th Cir. 2002) 284 F.3d 1174, in which the court held that the insurer’s representations concerning whether a particular treatment was covered were distinct from “statements regarding the costs of such treatment,” and as such could not support a promissory estoppel claim based on costs. (Id. at p. 1185.) There is Cedars Sinai Medical Center v. Mid-West Nat. Life Ins. Co. (C.D. Cal. 2000) 118 F.Supp.2d 1002, 1008, in which the court held that a verification of insurance did not constitute a promise to pay, as the medical provider’s own expert witness had testified that verifications could not be interpreted in that fashion. And there is DePaul Hosp. v. Mutual Life Ins. Co. of New York (La. Ct. App. 1986) 487 So.2d 143, 146, in which the court held that no contract was formed between a hospital and an insurance company when the company sent a form to the hospital and patient merely verify the existence of benefits.

 

Plaintiff in opposition presents different evidence and authority. IT submits the declaration of the medical provider, Keith Feder, who states that it is the regular practice of his office to confirm payment from a patient’s insurer before providing treatment. (Feder Decl. ¶ 4.) Feder’s staff documents after each call whether payment is to be made according to UCR rates or Medicare rates. (Feder Decl. Exhs. A, C.) Feder states that UCR rates are customarily derived from a public Fair Health resource, and payments based on Medicare derived from the Medicare Fee Schedule. (Feder Decl. ¶ 17.) For the patients at issue, here, Feder maintains that Defendant’s representatives promised that the payment would be UCR, and was never told that the payment would be based on Medicare. (Feder Decl. ¶¶ 14–16.)

 

There is also the case of Bristol SL Holdings, Inc. v. Cigna Health and Life Insurance Company (9th Cir., Jan. 14, 2022, No. 20-56122) 2022 WL 137547, at *1, in which the court upheld a breach of oral contract claim founded upon similar facts:

 

We first conclude that the district court erred in granting Cigna's motion for summary judgment on the breach of contract and promissory estoppel claims. Grants of summary judgment are reviewed de novo, with all facts and inferences drawn in favor of the non-moving party. [Citation.] Here, we conclude that Bristol introduced sufficient evidence to create a genuine dispute of material fact regarding the potential formation of an enforceable contract. In addition to the hundreds of verification and authorization calls, Bristol introduced evidence of a prior course of dealing with Cigna, specific and individualized treatment plans, as well as agreements over specific percentages of UCR rates for the services rendered. These actions are sufficient for a reasonable factfinder to conclude that an enforceable contract had been formed under governing California law. [Citation.]

 

In reaching the opposite conclusion, the district court relied primarily on two arguments: (1) a lack of discussion between the two parties over the “usual, customary, and reasonable rate” (UCR), meaning the percentage of costs that Cigna would reimburse for Sure Haven's services, and (2) the automatic disclaimers Cigna says were played before all or most verification and authorization calls with Sure Haven. Neither argument justifies the district court's summary judgment ruling. First, Bristol did introduce evidence of discussions over UCR, which the district court improperly ignored. Cigna disputes whether the evidence Bristol introduced actually relates to UCR, but this factual dispute proves summary judgment was inappropriate. Second, the district court improperly concluded that the disclaimers Cigna played before most verification or authorization calls stating that the information provided “does not guarantee coverage or payment” established an intent not to form a contract. However, Cigna's disclaimer could be reasonably interpreted as informing providers like Sure Haven that it must fulfill the required terms of the deal (such as properly providing the healthcare services) before it could be guaranteed payment. The parties may have formed a contract, but payment was not yet “guaranteed” and still contingent on satisfactory performance of the terms of the contract. [Citation.]. This is sufficient to hold that summary judgment against Bristol on these claims was improper, and therefore we reverse. Since both parties linked the promissory estoppel claim with the implied and oral contract claims, we reverse the dismissal of the promissory estoppel claim as well.

 

There is also Enloe Medical Center v. Principal Life Ins. Co. (E.D. Cal., Dec. 20, 2011, No. CIV S-10-2227 KJM) 2011 WL 6396517, at *7, in which the court held that whether an insurer’s authorization of treatment constituted an offer to contract depended on “the totality of circumstances” based on facts in the record. The court went on to conclude that it could not rule in the insurer’s favor merely by reference to a disclaimer that was purportedly played during the call. (Id. at p. 7.)

 

Here, there are triable issues of fact as to whether the calls at issue here constituted contracts or promises to pay. First, it is important to note that the existence of mutual assent to contract “is determined under an objective standard applied to the outward manifestations or expressions of the parties, i.e., the reasonable meaning of their words and acts, and not their unexpressed intentions or understandings.” (Long v. Provide Commerce, Inc. (2016) 245 Cal.App.4th 855, 862.)  Second, we must note the precise promise that formed the basis for the oral contract claim here — specifically, the promise that Defendant would pay Feder at the UCR rate. (TAC ¶ 285.) Plaintiff does not allege that a promise of coverage entitled Feder to 100% payment on all charges billed, or that verification of insurance entitled him to reimbursement at a rate beyond that normal for out-of-network providers.

 

Defendant’s evidence does not foreclose the existence of triable issues of fact concerning contract formation. Renae Hansen testifies concerning the training given to CSRs and their ordinary duties, noting that their primary purpose with regard to outside providers is “to inform the provider on the benefits available to the member based on the provider’s non-participating status,” and to determine “what type of reimbursement schedule would apply,” based on the member’s plan documents. (Hansen Decl. ¶¶ 5–6.) Hansen testifies that CSRs cannot guarantee how a claim is going to be paid, offer a quote as to the amount to be paid for a given treatment, calculate UCR rates for any services, or provide opinions as to whether or not a given procedure is medically necessary. (Hansen Decl. ¶¶ 10–18.) This testimony, however, says little about CSR’s ability to state whether payment for a given treatment will be made according to UCR rates or Medicare rates. It also relies on evidence of CSR training and instruction internal to Aetna, rather than objective indications, apparent to Feder or other medical providers, that representations concerning UCR rates were not promises to pay. This is unlike Cedars Sinai Medical Center, in which the provider’s own expert testified that the verifications did not constitute promises to pay. (Cedars Sinai Medical Center, supra, 118 F.Supp.2d at p. 1008.)  And even if this evidence constituted objective indicia of a non-promissory intent, Plaintiff has presented evidence to place this evidence in dispute — namely the critical reliance that Feder and his staff place upon Defendant’s representations before determining whether to provide treatment to a patient. (Feder Decl. ¶¶ 7, 10–12.) Triable issues of fact thus remain as to the parties’ mutual assent to contract.

 

Defendant argues that even if mutual assent existed for a contract, there could be no agreement concerning the meaning of UCR. (Motion at p. 14.) But this argument is unsupported. It relies on no evidence, and only cites a case standing for the proposition that the reasonable value of a vendor’s services can be determined by “a wide variety of evidence.” (Children's Hospital Central California v. Blue Cross of California (2014) 226 Cal.App.4th 1260, 1274.) It does not stand for the proposition that parties cannot contract to pay the usual and customary rate.

 

Accordingly, the motion is DENIED as to the first cause of action.

 

D.    PROMISSORY ESTOPPEL

“The elements of a promissory estoppel claim are ‘(1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.” (Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935, 945.)

 

Here, Defendant contends that Plaintiff cannot show an unambiguous promise to pay at the UCR rate, or that there was reasonable reliance upon such a promise. (Motion at pp. 14–15.)

 

These arguments are unpersuasive. First, as explained in relation to Defendant’s arguments on the oral contract claim, triable issues of fact remain as to whether Defendant’s representations concerning the applicability of UCR rates constituted promises to pay. Such issues are equally applicable to the promissory estoppel claim.

 

Second, Plaintiff presents evidence, based on Feder’s testimony and the patient intake documents that he authenticates, that Defendant’s representatives told him that the payment rate for the procedures at issue would eb “usual and customary or UCR.” (Feder Decl. ¶ 14.) He further testifies that he relied upon these representations. (Feder Decl. ¶ 7.) Although Defendant cites the case Tenet Healthsystem Desert, Inc. v. Fortis Ins. Co., Inc. (C.D. Cal. 2007) 520 F.Supp.2d 1184, 1196, for the proposition that insurer or plan quotes concerning coverage and reimbursement cannot be reasonably relied upon, the plaintiff in that case admitted that no reasonable reliance took place, because “it would have treated [the patient] regardless of whether Defendant authorized treatment.” (Id. at p. 1196.) Here, Feder testifies that he will “refuse to provide services or make other arrangements with the patient if an insurer will not agree to pay for the procedure.” (Feder Decl. ¶ 4.)

 

The motion is DENIED as to the promissory estoppel claim.

 

E.     NEGLIGENT MISREPRESENTATION

“The elements of negligent misrepresentation are “(1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.” (National Union Fire Ins. Co. of Pittsburgh, PA v. Cambridge Integrated Services Group, Inc. (2009) 171 Cal.App.4th 35, 50.)

 

Here, Defendant argues that no claim for negligent misrepresentation exists because insurance verification calls are not tantamount to promises to pay, and are therefore not representations upon which a medical provider is entitled to rely. (Motion at pp. 18–19.) However, this argument rests on essentially the same premises as those advanced against the promissory estoppel and contract claims, and fails for the same reason: triable issues of fact exist as to whether Defendant’s representations concerning the applicability of UCR rates constituted promises upon which Feder could rely.

 

The motion is therefore DENIED as to the negligent misrepresentation claim.

 

F.     UNFAIR COMPETITION LAW (UCL)

California’s Unfair Competition Law (UCL) proscribes “any unlawful, unfair or fraudulent business act or practice.” (Bus. & Prof. Code § 17200.) “By proscribing ‘any unlawful’ business practice, section 17200 borrows' violations of other laws and treats them as unlawful practices that the unfair competition law makes independently actionable.” (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180, internal quotation marks omitted.)

 

Defendant argues that Plaintiff cannot prevail on its UCL claim under the “unlawful” prong because the provisions of the Knox Keene Act adopted to advance the claim confer only regulatory authority to enforce nonspecific standards, and do not outline a particular violation susceptible to private enforcement. (Motion at pp. 16–18.) Defendant also argues that the Knox Keene provisions do not apply to it, as it is not a “health care service plan” licensed by the Department of Managed Health Care, which are the entities that Knox Keene regulates. (Motion at p. 16.)

 

Defendant’s motion does not support this latter argument. The Knox Keene Act indeed applies to “health care service plans and specialized health care service plan contracts.” (Health & Saf. Code, § 1343, subd. (a).) The term “health care service plan” means either:

 

(1) Any person who undertakes to arrange for the provision of health care services to subscribers or enrollees, or to pay for or to reimburse any part of the cost for those services, in return for a prepaid or periodic charge paid by or on behalf of the subscribers or enrollees.

 

(2) Any person, whether located within or outside of this state, who solicits or contracts with a subscriber or enrollee in this state to pay for or reimburse any part of the cost of, or who undertakes to arrange or arranges for, the provision of health care services that are to be provided wholly or in part in a foreign country in return for a prepaid or periodic charge paid by or on behalf of the subscriber or enrollee.

 

(Health & Safety Code § 1345, subd. (f)(1), (2).) Defendant does not elaborate on how it does not fall into one or the other of these definitions.

 

Defendant argues that another Knox Keene provision exempts it from coverage; namely an exception stating that the Act does not apply to “A person organized and operating pursuant to a certificate issued by the Insurance Commissioner unless the entity is directly providing the health care service through those entity-owned or contracting health facilities and providers, in which case this chapter shall apply to the insurer's plan and to the insurer.” (Health & Saf. Code, § 1343, subd. (e)(1).) But although Defendant claims that it is an insurance provider registered with the California Department of Insurance, it cites no evidence in support of this fact. (Motion at p. 16, fn. 10.)

 

Defendant further argues that the laws that furnish the basis for Plaintiff’s UCL claim does not target sufficiently specific conduct. Defendant relies on the case Samura v. Kaiser Foundation Health Plan, Inc. (1993) 17 Cal.App.4th 1284, which discussed the authority of private parties to sue under certain provisions of the Knox Act’s implementing regulations. The court noted that authority to enforce the law “has been entrusted exclusively to the Department of Corporations, preempting even the common law powers of the Attorney General.” (Id. at p. 1299.) At the same time, the court noted that private parties could still use Business & Professions Code § 17200  “to enjoin acts which are declared to be unlawful under a statutory enforcement scheme.” (Id. at p. 1299.) Under this authority, a private party may sue upon a law that “defines an unlawful act that may be enjoined as unfair competition under the Business and Professions Code,” but not statutes that “pertain to the exercise of the Department of Corporation's regulatory power.” (Id. at p. 1300.)

 

Here, this argument is unpersuasive, as the laws that support Plaintiff’s UCL claim proscribe specific conduct, and do not merely confer broad regulatory authority. Specifically, Plaintiff’s claims are supported by Health & Safety Code § 1371.31, subd. (b), which states that out-of-network providers providing certain services to covered individuals shall be reimbursed “the amount set forth in the enrollee's evidence of coverage.” (Health & Saf. Code, § 1371.31, subd. (b).) The claim thus relies on provision of law that proscribes or mandates certain conduct.

 

The motion is therefore DENIED as to the third cause of action under the UCL.

 

G.    BREACH OF WRITTEN CONTRACT

Defendant argues that Plaintiff’s claim for breach of written contract fails, as there were no written contracts between Defendant and Feder. (Motion at pp. 19-20.) Plaintiff in opposition contends that it is entitled to payment under the patients’ plans, pursuant to the provisions of the Knox Keene Act discussed above. (Opposition at pp. 19–20.)

 

Defendant’s argument is the more persuasive. There exists no written contract between Plaintiff or Feder and Defendant, save for the alleged oral contracts formed by Defendant’s representatives. Although Plaintiff argues that it may assert the medical provider’s right to payment under Knox Keene, the authority cited suggests the opposite: that the Knox Keene Act may entitle “an out-of-network, nonemergency service provider” to reimbursement on specified terms, and that claims based upon this statutory guarantee are not founded in a common law breach of contract claim. (Pacific Bay Recovery, Inc. v. California Physicians' Services, Inc. (2017) 12 Cal.App.5th 200, 216 [affirming demurrer against implied-in-fact contract claim asserted alongside Knox Keene claim].)

 

Plaintiff further argues that it has been assigned the claims of the patients in this case, and may pursue breach of contract claims on their behalf. (Opposition at pp. 19–20.) But Plaintiff specifically disclaims that it is bringing any breach of contract claims assigned to it by the individual patients. (Opposition at p. 1, fn. 1.)

 

The motion is therefore GRANTED as to the fifth cause of action for breach of contract.

 

H.    C.G.’S COVERAGE

Defendant argues that it cannot be held liable for non-payment of charges incurred for patient C.G., because C.G.’s health benefits plan was administered by Meritain Health, Inc., a separate entity from Defendant Aetna. (Motion at p. 20; Losel Decl. ¶ 5, Exh. 10.)

 

This argument is persuasive. Separate corporations are presumed to have separate existences. (Mid-Century Ins. Co. v. Gardner (1992) 9 Cal.App.4th 1205, 1212.) Plaintiff in opposition presents no evidence or argument to contravene Meritain’s presumed separateness.

 

The motion is therefore GRANTED as to the claims based on C.G.’s treatment.