Feder v. Blue Cross
Filed 3/21/13 Feder v. Blue Cross CA2/8
PUBLISHED IN THE 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opinion has not been certified for publication or ordered published for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.
IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND
APPELLATE DISTRICT
DIVISION
EIGHT
RICHARD FEDER,
Plaintiff
and Appellant,
v.
BLUE CROSS OF CALIFORNIA,
Defendant
and Respondent.
B239534
(Los Angeles
County
Super. Ct.
No. BC427943)
APPEAL
from the judgment of the Superior Court
of
County. John Shepard
Wiley, Jr., Judge. Affirmed.
Kiesel
Boucher Larson, William L. Larson, Shehnaz Bhujwala; Herbert L. Greenberg
for Plaintiff and Appellant.
Morgan,
Lewis & Bockius, Brian M. Jazaeri, Molly M. Lane,
and Thomas M. Peterson for Defendant and Respondent.
* *
* * * * * * * *
Plaintiff
and appellant Richard Feder appeals from the entry of summary judgment in favor
of defendant and respondent Blue Cross of California, doing business as Anthem
Blue Cross (Blue Cross). For
approximately two years, plaintiff was a subscriber to an individual health
insurance plan with Blue Cross. Plaintiff
contends Blue Cross violated Health and Safety Code sections 1399.805, 1399.811
and 1399.815 by charging him premiums that exceeded the statutory rate
limitations for his type of individual policy.
Plaintiff filed suit, on behalf of himself and a putative class, stating
claims for unlawful business practices under Business and Professions Code
section 17200 et seq., and fraud by omission.
The trial court granted Blue Cross’s motion for summary judgment,
essentially concluding there was no showing Blue Cross engaged in unlawful
conduct. We conclude summary judgment
was properly entered in favor of Blue Cross, and therefore affirm.
BACKGROUND
The
parties submitted a significant amount of supporting and opposing
evidence. However, resolution of this
appeal turns largely on the legal question of the construction of the relevant
statutes. We therefore summarize only
those material facts pertinent to an understanding of the statutory issue, as
well as additional facts for context, keeping in mind our standard of review
and accepting plaintiff’s evidence and Blue Cross’s undisputed evidence as
true. (Raghavan v. Boeing Co. (2005) 133 Cal.App.4th 1120, 1125.)
General
Background Law
We begin with a
brief summary of the pertinent federal and state statutes regarding health
insurance which provide a framework for understanding the factual issues. In 1996, Congress enacted the Health
Insurance Portability and Accountability Act (HIPAA). (Pub. L. 104-191, 110 Stat. 1936, codified in
part at 42 U.S.C. § 300gg et seq.) As
relevant here, HIPAA requires health care service plans that offer individual
policies to guarantee availability of health care coverage (sometimes referred
to as “guaranteed issue productsâ€) to certain defined eligible individuals
following exhaustion of their COBRA
name="_ftnref1" title="">[1] benefits.
HIPAA allows states to enforce the federal mandate or enact and enforce
an “acceptable alternate mechanism†that provides comparable coverage in
accordance with HIPPA. (See 42 U.S.C. §
300gg-44.)
The
Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act) at Health and
Safety Code section 1340 et seq.
name="_ftnref2" title="">[2] is a “ ‘comprehensive system of licensing
and regulation’ †covering the operation of health care service plans in
California. (Prospect Medical Group, Inc. v. Northridge Emergency Medical Group
(2009) 45 Cal.4th 497, 504.) Under the
Knox-Keene Act, health care service plans operating in California,
like Blue Cross, fall under the jurisdiction of the California Department of
Managed Health Care (Department). (See §
1341 [the Department “has charge of the execution of the laws of this state
relating to health care service plans and the health care service plan
businessâ€].)
In
2000, the Legislature passed Senate Bill No. 265, implementing an “acceptable
alternative mechanism†within the meaning of HIPAA to ensure California’s
compliance with the federal mandate. The
bill amended the Knox-Keene Act and became effective January 1, 2001 (codified in part at §§ 1366.35,
1399.801 et seq.). Sections 1399.805 and
1399.811 include premium rate limitations for HIPPA products in California,
and also limit the rate of annual increases for such premiums. Section 1399.815 requires participating
health care service plans to file an annual statement with the Department
certifying that their rates for HIPAA products comply with sections 1399.805 and
1399.811.
The key provision
at issue here is the rate limitation set forth in sections 1399.805 and
1399.811 which provides that any premium for a HIPPA guaranteed issue PPO
paid†by subscribers in the Major Risk Medical Insurance Program (MRMIP) of the
same age and living in the same geographic region as the applicant for the
HIPPA policy. (§§ 1399.805, subd.
(a)(1)(A), 1399.811, subd. (a)(1).)
The MRMIP is California’s
state-sponsored program, established in 1990, providing subsidized health
insurance to Californians who are unable to obtain coverage in the individual
health insurance market due to preexisting conditions. (Ins. Code, § 12700 et seq.) The Managed Risk Medical Insurance Board
(Board), appointed by the governor, administers the MRMIP. (Ins. Code, §§ 12710, 12710.1.) For purposes of establishing subscriber rates
for the MRMIP, the Board adopted a regulation dividing the state into six
geographic regions and 12 age groups, ranging from “[u]nder 15 years of
age†to “75 years of age and over.†(Cal.
Code Regs, tit. 10, § 2698.400.)
Under the MRMIP, a limited number of eligible high-risk subscribers are
covered by participating health plans, with the subscribers paying a portion of
the premiums, and the balance subsidized by state funds.
2.
Facts
Following
enactment of sections 1399.805 and 1399.811, the Board reviewed the premiums
paid by subscribers of the MRMIP throughout the state. The Board collected the data concerning the
premiums paid by MRMIP subscribers and, according to its interpretation of the
statutory language, calculated the “average premium paid†using its age and
geography categories in a weighted average formula. Starting in 2001, the Board prepared annual
schedules reflecting these calculations and forwarded them to the Department’s
Division of Licensing. There was some
dispute as to if, and when, the calculations for years 2003, 2004 and 2005 were
transmitted to the Department.
The Board’s annual
calculations were not routinely made public or forwarded as a matter of course
to any health care service plans.
However, if a plan requested copies of the rate calculations or “premium
schedules,†the Board would provide copies.
Before January 2010, the Board had no written agreement with the
Department to provide such data or to calculate the “average premium
paid.†The Board simply sent the
information voluntarily to the Department.
Blue
Cross is a health care service plan operating in California,
regulated by the Department. Blue Cross
participates in the individual health insurance market and is therefore
required to make HIPAA guaranteed issue products available to individual
subscribers who meet the HIPAA eligibility requirements. (See § 1399.801, subd. (c) [“federally
eligible defined individual†means someone with 18 months of prior coverage
with certain enumerated types of group plans, not presently able to qualify for
group coverage, Medicare or Medi-Cal or other health insurance, not terminated
from prior coverage due to fraud or nonpayment, and who has exhausted all COBRA
or Cal-COBRA coverage].)
In
addition, pursuant to an administrative
contract with the state, Blue Cross is the administrator of the MRMIP
program, reviewing applications and connecting applicants with health care
service plans providing state-subsidized MRMIP coverage.
Blue
Cross developed a weighted average formula for calculating the “average premium
paid†by MRMIP subscribers. Blue Cross
relied on actuaries to develop the formula, using standard actuarial
principles. The actuaries obtained
publicly available MRMIP premium rates for the following year from MRMIP, by
contract type, age, bracket, area and plan.
Blue Cross maintained in its own database of MRMIP enrollment data,
which provided the number of subscribers in each age band and geographic
area. From this information, Blue Cross
determined each plan’s market share by area.
Using the market share by area as the weight for each rate cell, Blue
Cross calculated an average rate for MRMIP plans for the upcoming year. Finally, Blue Cross set its HIPAA PPO premium
rates not to increase by more than the average increase in the premiums charged
to an MRMIP subscriber. There is no
evidence suggesting Blue Cross used unreliable or unreasonable data or methods
in developing its formula.
Plaintiff enrolled
in one of Blue Cross’s individual HIPAA PPO plans as of January 1, 2006, following expiration of his COBRA
benefits. Plaintiff was a subscriber of
the plan until February 2008 when, due to changed employment circumstances, he
was able to join a group health insurance plan.
In April 2009, plaintiff received a letter from Blue Cross advising him
that it had determined errors had been made in its premium rates between the
years “2006 through January 2009,†and plaintiff had been overcharged. Shortly thereafter, Blue Cross mailed
plaintiff a refund check in the amount of $663.71, which Blue Cross stated was for
overpaid premiums of $559 on his individual HIPAA plan, plus 10 percent
interest in the amount of $104.71.
In
2009, the Department, which regulates Blue Cross, brought an enforcement action
against Blue Cross (as well as another health plan not a party to this appeal)
to investigate allegations of noncompliance with the premium rate limitations
for HIPAA products. The Department
conducted an investigation and resolved the enforcement action against Blue
Cross by way of a letter agreement. The
Department made no public finding that Blue Cross violated the statutory rate
limitations for HIPAA guaranteed issue PPO products contained in
sections 1399.805 and 1399.811. The
Department found only that Blue Cross had filed, but had failed to certify in
accordance with section 1399.815, that its rates during the years 2005
through 2008 were in compliance with the statutory scheme. The Department imposed a $25,000 penalty,
which Blue Cross paid pursuant to the agreement, resolving the enforcement
action.
The
Department’s enforcement counsel testified that, during the investigation of
Blue Cross, the Department was unable to definitively determine the statutory
rate limitation because the statute does not provide any formula or method for
calculating the “average premium paid†by MRMIP subscribers. Recognizing that “[t]he phrase ‘average
premium’ has been interpreted differently by regulators, as well as regulated
entities, over the past several years,†the Department took the position that
legislation was needed to provide a clear and consistent method to calculate
the “average premium paid†for HIPAA PPO products.
The
Department, relying on an actuarial consultant, developed a methodology based
on its interpretation of what the statutes required and cooperated in drafting
proposed language for an amendment to sections 1399.805 and 1399.811 (Assem.
Bill No. 718) which would incorporate its methodology. At no time did the Department adopt the
Board’s rate calculations as its own or recommend the Board’s rate methodology
be adopted by the Legislature.
The Department’s
methodology uses a single weight factor based on the MRMIP geographic regions,
and also factors in MRMIP subscriber numbers, health care service plan market
share, and age and dependency categories.
The Department’s methodology is substantially similar to the weighted
average formula Blue Cross had been using as a benchmark for setting its rates
on its HIPAA PPO products up through 2009.
As part of the
resolution of the enforcement action, the Department ordered Blue Cross to use
the new methodology to calculate the “average premium paid†in connection with
setting its rates for all existing and future HIPAA guaranteed issue PPO
products “unless the Department approves another rate methodology, or unless
superseded by law.†In early 2010, the
Department and the Board executed an interagency agreement whereby the Board
agreed to calculate, for the Department, the “average premium paid†by
subscribers in the MRMIP, by age, area of residency, and family size (number of
dependents) on an annual basis, using the weighted average formula developed by
the Department during its investigation of Blue Cross.
Assembly
Bill No. 718 was eventually withdrawn and not enacted into law. There is no evidence the Department has
formally promulgated any regulation interpreting the statutory language or
adopting its methodology, or any other methodology, for calculating the
“average premium paid.â€
Procedural
Background
Plaintiff filed
suit against Blue Cross, stating a claim under Business and Professions Code
section 17200 et seq. (Unfair Competition Law or UCL) for unfair business
practices (charging rates in excess of the statutory caps), and a claim for
fraud by omission (failure to disclose statutory rate limitations and rates in
excess of those limitations). Blue Cross
moved for summary judgment. After
extensive briefing and oral argument, the trial court granted Blue Cross’s
motion and entered judgment in its favor.
The court did not rule on the voluminous evidentiary objections
submitted by the parties. This appeal
followed.
DISCUSSION
Plaintiff
contends the trial court erred in granting summary judgment to Blue Cross. “We independently review an order granting
summary judgment. (Aguilar v. Atlantlic Richfield Co. (2001) 25 Cal.4th 826, 860.) We determine whether the court’s ruling was
correct, not its reasons or rationale.
[Citation.] ‘In practical effect,
we assume the role of a trial court and apply the same rules and standards
which govern a trial court’s determination of a motion for summary
judgment.’ [Citation.] We review for abuse of discretion any
evidentiary ruling made in connection with the motion.†(Shugart
v. Regents of University of California (2011) 199 Cal.App.4th 499, 504-505
(Shugart).)
Plaintiff’s
operative third amended complaint stated a claim under the UCL and a claim for
fraud by omission. Plaintiff alleged
that Blue Cross engaged in unlawful business practices by overcharging
plaintiff premiums for a HIPAA guaranteed issue PPO plan in violation of the
rate limitation set forth in sections 1399.805 and 1399.811. Plaintiff also alleged Blue Cross failed to
disclose the rate limitation and fraudulently certified that its rates were
lawful and compliant with the statutory scheme.
Specifically, plaintiff alleged Blue Cross “knowingly employed rate
calculation methodologies†that violated the statutory rate caps, including by
using “area-wide†weighted averages “in violation of the statutory requirement
to use weights for each separate age-range rate cell.â€
Blue
Cross moved for summary judgment contending, in essence, that it had not
engaged in any unlawful conduct. In
opposing the motion, plaintiff argued Blue Cross failed to discharge its
movant’s burden, failed to submit admissible evidence warranting judgment as a
matter of law, that the evidence was undisputed the Department adopted the
Board’s annual calculations of the “average premium paid†by MRMIP subscribers
in order to set the maximum rate ceiling for HIPAA products, and that Blue
Cross’s rates unequivocally exceeded those maximum rates in violation of the
statutory scheme. Plaintiff reasserts
those arguments here, none of which is availing.
First,
despite plaintiff’s argument to the contrary, Blue Cross did not fail to
discharge its movant’s burden of proof.
The gist of Blue Cross’s motion was that plaintiff could not show its
conduct was unlawful, an essential element of plaintiff’s cause of action under
the UCL. (See Bus. & Prof. Code, §
17200; Cel-Tech Communications, Inc. v.
Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180;
Cal.App. 4th 965, 968-969.) Under the
summary judgment statute, a defendant has met its “burden of showing that a
cause of action has no merit if that party has shown that one or more elements
of the cause of action, even if not separately pleaded, cannot be established,
or that there is a complete defense to that cause of action. Once the defendant or cross-defendant has met
that burden, the burden shifts to the plaintiff or cross-complainant to show
that a triable issue of one or more material facts exists as to that cause of
action or a defense thereto.†(Code Civ.
Proc., § 437c, subd. (p)(2).)
The
record establishes plaintiff cannot show the requisite unlawfulness as a matter
of law, and that the bulk of the evidence presented by both parties, admissible
or not, is simply not relevant or material to resolving the motion. As we explain below, these points doom both
of plaintiff’s causes of action, and summary judgment was therefore properly
granted.
Construction
of the Phrase “Average Premium Paidâ€
The determination
whether defendant acted unlawfully, as alleged by plaintiff, depends largely on
the purely legal issue of interpreting the phrase “average premium paid†in
sections 1399.805 and 1399.811. As
plaintiff concedes, it is not a question of how Blue Cross internally
calculated its rates, but whether the premium rates it charged its HIPAA PPO
subscribers violated applicable law. In
other words, plaintiff’s claims fail unless it can be shown Blue Cross charged
premiums in excess of the “average premium paid†within the meaning of the
statutory scheme.
The rules of
statutory construction are well-settled.
“[W]e must look first to the words of the statute, ‘because they
generally provide the most reliable indicator of legislative intent.’ [Citation.]
If the statutory language is clear and unambiguous our inquiry ends. ‘If there is no ambiguity in the language, we
presume the Legislature meant what it said and the plain meaning of the statute
governs.’ [Citations.]†(Murphy
v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1103 (
“ ‘permits more than one reasonable interpretation, courts may consider
other aids, such as the statute’s purpose, legislative history, and public
policy. [Citations.]’ [Citations.]â€
(Joyce v. Ford Motor Co.
(2011) 198 Cal.App.4th 1478, 1490 (Joyce);
accord, Murphy, at p. 1103;
Irrigation Dist. (2000) 80 Cal.App.4th 1403, 1424-1425 (
words are to be given their plain and commonsense meaning.†(Murphy,
not to be viewed in isolation, but rather, “ ‘read in context, considering
the nature and purpose of the statutory enactment.’ [Citation.]â€
(Torres v. Automobile Club of So.
California (1997) 15 Cal.4th 771, 777.)
Sections 1399.805
and 1399.811 are lengthy provisions, both of which contain the same premium
rate limitation language. We set forth
the statutes in their entirety to show the context in which the rate limitation
language is used, highlighting the key language in italics.
Section 1399.805 provides:
“(a) (1) After the federally eligible defined
individual submits a completed application form for a plan contract, the plan
shall, within 30 days, notify the individual of the individual’s actual premium
charges for that plan contract, unless the plan has provided notice of the
premium charge prior to the application being filed. In no
case shall the premium charged for any health care service plan contract
identified in subdivision (d) of Section 1366.35 exceed the following
amounts:
“(A) For health care service plan
contracts that offer services through a preferred provider arrangement, the
average premium paid by a subscriber of the Major Risk Medical Insurance
Program who is of the same age and resides in the same geographic area as the
federally eligible defined individual.
However, for federally qualified individuals who are between the ages of
60 and 64, inclusive, the premium shall not exceed the average premium paid by
a subscriber of the Major Risk Medical Insurance Program who is 59 years of age
and resides in the same geographic area as the federally eligible defined
individual.
“(B) For health care service plan contracts
identified in subdivision (d) of Section 1366.35 that do not offer
services through a preferred provider arrangement, 170 percent of the standard
premium charged to an individual who is of the same age and resides in the same
geographic area as the federally eligible defined individual. However, for federally qualified individuals
who are between the ages of 60 and 64, inclusive, the premium shall not exceed
170 percent of the standard premium charged to an individual who is 59 years of
age and resides in the same geographic area as the federally eligible defined
individual. The individual shall have 30
days in which to exercise the right to buy coverage at the quoted premium
rates.
“(2) A plan may adjust the premium
based on family size, not to exceed the following amounts:
“(A) For health care service plans
that offer services through a preferred provider arrangement, the average of
the Major Risk Medical Insurance Program rate for families of the same size
that reside in the same geographic area as the federally eligible defined
individual.
“(B) For health care service plans identified in
subdivision (d) of Section 1366.35 that do not offer services through a
preferred provider arrangement, 170 percent of the standard premium charged to
a family that is of the same size and resides in the same geographic area as
the federally eligible defined individual.
“(b) When a federally eligible defined individual
submits a premium payment, based on the quoted premium charges, and that
payment is delivered or postmarked, whichever occurs earlier, within the first
15 days of the month, coverage shall begin no later than the first day of the
following month. When that payment is
neither delivered or postmarked until after the 15th day of a month, coverage
shall become effective no later than the first day of the second month
following delivery or postmark of the payment.
“(c) During the first 30 days after the effective
date of the plan contract, the individual shall have the option of changing
coverage to a different plan contract offered by the same health care service
plan. If the individual notified the
plan of the change within the first 15 days of a month, coverage under the new
plan contract shall become effective no later than the first day of the
following month. If an enrolled
individual notified the plan of the change after the 15th day of a month,
coverage under the new plan contract shall become effective no later than the
first day of the second month following notification.†(Italics added.)
Section 1399.811 provides:
“Premiums
for contracts offered, delivered, amended, or renewed by plans on or after
January 1, 2001, shall be subject to the following requirements:
“(a) The premium for new business
for a federally eligible defined individual shall not exceed the following
amounts:
“(1) For health care service plan
contracts identified in subdivision (d) of Section 1366.35 that offer services
through a preferred provider arrangement, the average premium paid by a
subscriber of the Major Risk Medical Insurance Program who is of the same age
and resides in the same geographic area as the federally eligible defined
individual. However, for federally
qualified individuals who are between the ages of 60 to 64 years, inclusive,
the premium shall not exceed the average premium paid by a subscriber of the
Major Risk Medical Insurance Program who is 59 years of age and resides in the
same geographic area as the federally eligible defined individual.
“(2) For health care service plan contracts
identified in subdivision (d) of Section 1366.35 that do not offer
services through a preferred provider arrangement, 170 percent of the
standard premium charged to an individual who is of the same age and resides in
the same geographic area as the federally eligible defined individual. However, for federally qualified individuals
who are between the ages of 60 to 64 years, inclusive, the premium shall not
exceed 170 percent of the standard premium charged to an individual who is 59
years of age and resides in the same geographic area as the federally eligible
defined individual.
“(b) The premium for in force
business for a federally eligible defined individual shall not exceed the
following amounts:
“(1) For health care service plan
contracts identified in subdivision (d) of Section 1366.35 that offer services
through a preferred provider arrangement, the average premium paid by a
subscriber of the Major Risk Medical Insurance Program who is of the same age
and resides in the same geographic area as the federally eligible defined
individual. However, for federally
qualified individuals who are between the ages of 60 and 64 years, inclusive, the
premium shall not exceed the average premium paid by a subscriber of the Major
Risk Medical Insurance Program who is 59 years of age and resides in the same
geographic area as the federally eligible defined individual.
“(2) For health care service plan contracts
identified in subdivision (d) of Section 1366.35 that do not offer
services through a preferred provider arrangement, 170 percent of the standard
premium charged to an individual who is of the same age and resides in the same
geographic area as the federally eligible defined individual. However, for federally qualified individuals
who are between the ages of 60 and 64 years, inclusive, the premium shall not
exceed 170 percent of the standard premium charged to an individual who is 59
years of age and resides in the same geographic area as the federally eligible
defined individual. The premium
effective on January 1, 2001, shall apply to in force business at the earlier
of either the time of renewal or July 1, 2001.
“(c) The
premium applied to a federally eligible defined individual may not increase by
more than the following amounts:
“(1) For health care service plan
contracts identified in subdivision (d) of Section 1366.35 that offer
services through a preferred provider arrangement, the average increase in the
premiums charged to a subscriber of the Major Risk Medical Insurance Program
who is of the same age and resides in the same geographic area as the federally
eligible defined individual.
“(2) For health care service plan contracts
identified in subdivision (d) of Section 1366.35 that do not offer
services through a preferred provider arrangement, the increase in premiums
charged to a nonfederally qualified individual who is of the same age and
resides in the same geographic area as the federally defined eligible
individual. The premium for an eligible
individual may not be modified more frequently than every 12 months.
“(3) For a contract that a plan has discontinued
offering, the premium applied to the first rating period of the new contract
that the federally eligible defined individual elects to purchase shall be no
greater than the premium applied in the prior rating period to the discontinued
contract.†(Italics added.)
Nowhere
in this detailed statutory scheme is the phrase “average premium paid†defined,
nor is there any language setting forth a methodology for how the average MRMIP
premium should be calculated. The
statute does not require or suggest that the Board should determine how the
average MRMIP premiums be calculated.
technical or special definition, we look to the plain and ordinary meaning of
the words used. “To determine the plain
meaning of statutory language, courts often look to dictionaries.†(Joyce,
supra, 198 Cal.App.4th at p. 1491;
see also People ex rel. Lungren v.
Superior Court (1996) 14 Cal.4th 294, 302-303.)
Webster’s Third
New International Dictionary identifies multiple related meanings for the word
“average,†including “equaling an arithmetic mean . . . approximating
or resembling an arithmetic mean specif[ically] in being about midway between
extremes: not out of the ordinary for
members of the group under consideration. . . .†(Webster’s Third New Internat. Dict. (2002)
p. 150, col. 3.) Black’s Law Dictionary
defines “average†as “[a] single value that represents the midpoint of a broad
sample of subjects; esp., in mathematics, the mean of a series.†(Black’s Law Dict. (9th ed. 2009) p. 155,
col. 2.)
Similarly the word
“mean,†a synonym for average, has been described as ambiguous and susceptible
to multiple reasonable definitions.
“ ‘There are many means defined in Mathematics. Among the most commonly used means are the
arithmetic mean (also known as the arithmetic average), the weighted mean (also
known as the weighted average), the geometric mean, and the harmonic mean. The appropriateness of a particular mean as a
statistical tool depends upon its purpose.’ †(Garfield
Medical Center v. Belshe (1998) 68 Cal.App.4th 798, 807 (
In sum, the word
“average†in its ordinary and customary usage is inherently ambiguous. An “average†may be calculated in a number of
ways. The propriety of using any
particular method for arriving at an “average†is dependent on the
context. Nothing about the context in
which the statutory phrase “average premium paid†is used in sections 1399.805
and 1399.811 indicates what method for arriving at an “average†was intended. For instance, there is no indication whether
a straight or weighted average was intended, nor any basis for finding that the
Legislature believed either type of averaging was more reasonable than the
other in this context, or more likely to effectuate the policies behind the
statutory scheme. There is also no indication
how the age and geography qualifiers set forth in the statute are to be
factored into the calculation. Moreover,
looking at the full text of both statutory provisions and construing the phrase
in that greater context provides no guidance on what was intended. Therefore, the statutory phrase is ambiguous
on its face. “ ‘Ambiguity exists if
reasonable persons can find different meanings in a statute . . . .’ †(Garfield
Medical Center, supra, 68
Cal.App.4th at p. 806.)
Given the patent
ambiguity of the statutory language, we may look to the legislative
history. However, the legislative
history here is not useful in illuminating the Legislature’s intent. As originally introduced, Senate Bill No. 265
provided a rate cap that was based on a set percentage (“not . . .
more than 110 percent or less than 90 percentâ€) of the health care service
plan’s “applicable standard individual risk rate.†The rate cap was subsequently amended to
require that all HIPAA plan premiums not “exceed the overall average premium
paid by Major Risk Medical Insurance Program subscribers.†(Italics omitted.) The language was amended again and changed to
require premiums not to exceed the “actual†premium paid by a MRMIP subscriber
of a “similar†age and who resides in a “similar†geographic region as the
HIPAA applicant. (Italics omitted.) The next version of the bill maintained the
“actual†premium language but changed the age and residence qualifying factors
to the “same†age group and geographic region.
(Italics omitted.)
The final version
of the bill returned to the “average†premium paid language for setting the
rate limitation for HIPAA PPO products, and used an entirely separate standard
based on a set percentage for HIPAA HMO products. However, none of the legislative history
materials indicate the Legislature considered any specific methodology for
arriving at the “average premium paid.â€
For instance, there are no early versions of the bill using the word
“straight†or “weighted†to modify average, with such terms then subsequently
being deleted, or any similar modifications of the bill language evincing an
intent to reject any methodology for calculating an average in favor of any
other. It appears plain the Legislature
sought to tie rate limitations for HIPAA products to MRMIP premiums, but beyond
that, no intent to calculate the average in any particular manner appears in
the legislative materials. We will not
read an intent to use a particular means for arriving at the average that is
not clearly supported by the legislative materials. (See Campbell
v. Regents of University of California (2005) 35 Cal.4th 311, 331
[legislative history equivocal at best regarding intent to abrogate exhaustion
of administrative remedies requirement and court could therefore not read
intent into statute that history did not clearly support].)
There is nothing
in the statutory language or the legislative history that dictates the use of
only one identifiable methodology for calculating the “average premium paid,â€
or more specifically, nothing that dictates the use of the Board’s
methodology. It is not a question of the
Board’s pre-2010 weighted average methodology being reasonable or unreasonable,
but the fact that the statutory language cannot be read as requiring only that methodology. Therefore, reference to the statutory
language alone fails to raise a triable issue that Blue Cross engaged in any
methodology than the Board for arriving at an average and setting its HIPAA PPO
rates accordingly.
The Board’s
Pre-2010 Methodology for Calculating the “Average Premium Paidâ€
Plaintiff
nonetheless contends Blue Cross’s premium rates, which purportedly exceeded the
Board’s pre-2010 annual rate schedules, violated applicable law because the
Department impliedly adopted the Board’s annual rate schedules as an informal
interpretative rule or regulation, and that informal rule is entitled to great
deference. Plaintiff further contends
the Department was not required to comply with the Administrative Procedure Act
(APA) at Government Code section 11340 et seq. in adopting such a rule because
it falls within one, or both, of two express exceptions to the APA: (1) the informal rule or regulation “embodies
the only legally tenable interpretation of a provision of law†(
informal rule or regulation “establishes or fixes rates, prices, or tariffs†(
The purpose of the
APA is to “establish basic minimum procedural requirements for the adoption,
amendment, or repeal of administrative regulations.†(Gov. Code, § 11346, subd. (a).) The procedural requirements embodied in the
APA “promote the APA’s goals of bureaucratic responsiveness and public
engagement in agency rulemaking.†(
Equalization (2006) 38 Cal.4th 324, 333 (Morning Star).) The APA’s
provisions are “applicable to the exercise of any quasi-legislative power conferred
by any statute.†(Gov. Code, § 11346,
subd. (a).)
Failure to comply
with the APA renders the agency regulation void. (Gov. Code, § 11340.5, subd. (a);
Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, 576 (
adopted in conformity with Government Code section 11346.1, or regulations that
fit within one of the enumerated statutory exceptions to the APA set forth at
Government Code section 11340.9.
Under the APA, the
definition of “regulation†is broad:
“ ‘ “[R]egulation†means every
rule, regulation, order, or standard of
general application or the amendment, supplement, or revision of any rule,
regulation, order, or standard adopted by
any state agency to implement, interpret, or make specific the law enforced or
administered by it, or to govern its procedure.’ (Gov. Code, § 11342.600 [italics
added].) ‘A regulation subject to the
APA . . . has two principal identifying characteristics. [Citation.]
First, the agency must intend its rule to apply generally, rather than
in a specific case. . . .
Second, the rule must “implement, interpret, or make specific the law
enforced or administered by [the agency], or . . . govern [the agency’s]
procedure.†[Citation.]’ [Citation.]â€
(Morning Star,
A rule or
guideline of general applicability in which an agency interprets a governing
statute is deemed a “regulation†subject to the APA. “[A]bsent an express exception,
administrative interpretations of a statute.†(Morning
Star, supra, 38 Cal.4th at p.
335, italics added.) And while a valid
agency regulation is ordinarily accorded deference by a reviewing court (
agency’s interpretation of a governing statute “commands a commensurably lesser
degree of judicial deference.†(
Equalization (1998) 19 Cal.4th 1, 11.)
b.
Plaintiff’s
proffered evidence
It is undisputed
the Department did not formally adopt
an interpretative regulation pertaining to the phrase “average premium paid†in
accordance with the APA. Rather,
plaintiff contends he raised a triable issue that the Department
rate calculations as its own general interpretation of the phrase “average
premium paid,†thus defining the maximum rate ceiling for HIPAA PPO
products.
Plaintiff’s
evidence in support of this contention is not strong, but construing the
evidence and the reasonable inferences therefrom in the light most favorable to
plaintiff, as we must, there is arguably sufficient evidence to raise a triable
issue that the Department informally adopted the Board’s interpretation of the
statutory language as its own. For
instance, the record contains competent deposition testimony from Board
employees that the Board forwarded its annual rate calculations regarding the
premiums paid by MRMIP subscribers to the Department for most of the years
between 2001 and 2009. Plaintiff also
cites deposition testimony of Department employees, within the division of
licensing, acknowledging receipt of those annual rate calculations. Plaintiff further cites to the deposition
testimony of Amal Abu-Rhama, the Department’s senior enforcement counsel, that
she was not aware of any other source of information about MRMIP subscriber
rates other than the annual rate schedules supplied by the Board, and that the
Board’s premium data was confidential and not obtainable from any other
source. Plaintiff also points to
additional testimony of Ms. Abu-Rhama, as well as from Laura Rosenthal, chief
counsel for the Board, regarding an informal agreement for the Board to forward
such information to the Department.
Further, plaintiff
cites to various pieces of email correspondence from 2009 between Board
employees, one Department employee and another health plan that is not a party
to this appeal. Assuming for the sake of
argument that these hearsay documents are admissible over Blue Cross’s
objection, they show that the Board and one Department employee, in 2009,
provided some annual rate calculations to a separate entity (not Blue Cross)
pursuant to that party’s specific request for the relevant rate
calculations.
However, the
record contains no material evidence the Department ever publicly represented
or told its licensees, like Blue Cross, that the Board’s annual rate
calculations established the maximum rates for HIPAA guaranteed issue PPO
products. Indeed, the only evidence on
this point shows that the Department, as of 2009, brought only two enforcement
actions regarding alleged noncompliance with the rate limitations. And, in the action against Blue Cross, the
Department took the position that the “average premium paid†could not be
fairly and reasonably determined, and at no time during that proceeding
asserted the Board’s rate calculations as its own.
The question then
becomes whether the potential triable issue as to the Department’s informal
adoption of the Board’s rate calculations warrants reversal of the summary
judgment. As we explain, it does not.
Accepting as true
plaintiff’s contention that the Department informally adopted the Board’s rate
calculations, such an informal interpretative rule would trigger the APA. An informal rule purportedly clarifying the
definition of “average premium paid†and setting a maximum rate ceiling for all
HIPAA PPO products offered by all health plans operating in California would
constitute a rule of general applicability meant to interpret or make specific
the law enforced by the Department. (
Therefore, the informal rule would necessarily be void for failure to
comply with the APA, absent a showing that one of the statutory exceptions to
the APA applied.
We are not
persuaded by plaintiff’s argument invoking two of the exceptions to the
APA. First, the sole “legally tenableâ€
interpretation of law exception is narrowly construed. Our Supreme Court has explained the exception
“applies only in situations where the law ‘can reasonably be read only one way’
[citation], such that the agency’s actions or decisions in applying the law are
essentially rote, ministerial, or otherwise patently compelled by, or
repetitive of, the statute’s plain language.â€
(Morning Star,
statutory language at issue here is not
plain, but ambiguous on its face. There
is nothing in the record supporting a determination that the Board’s pre-2010
methodology for calculating the “average premium paid†by MRMIP subscribers is
the only tenable interpretation of the statutory language.
The
rate-setting exception, upon which plaintiff also relies, is equally
unavailing. Like the sole legally
tenable exception, the rate-setting exception is also ordinarily given a narrow
construction. (See California Assn. of Nursing Homes etc., Inc. v. Williams (1970) 4
Cal.App.3d 800, 821.) It applies, as
relevant here, only to exempt from the APA an agency regulation that
“establishes or fixes rates.†(Gov.
Code, § 11340.9, subd. (g).)
The Department’s
informal rule, accepting plaintiff’s evidence as true, provides a specific
definition for the phrase “average premium paid†contained in sections 1399.805
and 1399.811, but plaintiff offered no evidence or argument demonstrating how
this translates into a rule
of the Department is precluded from
setting premium rates for health care service plans. (§ 1367, subd. (j) [“Nothing in this section
shall be construed to permit the director to establish the rates charged
subscribers and enrollees for contractual health care services.â€].) We are not persuaded by plaintiff’s citation
to 20th Century Ins. Co. v. Garamendi (1994)
8 Cal.4th 216 and Winzler & Kelly v.
Department of Industrial Relations (1981) 121 Cal.App.3d 120, neither of
which concerns the regulatory authority of the Department over health care
service plans but, instead, concern completely unrelated and dissimilar
statutes and regulatory agencies.
Accordingly,
plaintiff has not shown any exception to the APA applies, and therefore, even
if he could establish that the Department informally adopted the Board’s
pre-2010 interpretation of “average premium paid,†such a rule would constitute
a void underground regulation. Plaintiff
could not rely on it to attempt to establish the unlawfulness of Blue Cross’s
conduct.
d.
Blue Cross’s
pre-enforcement action conduct
Plaintiff argues
there may be a triable issue whether Blue Cross’s conduct was unlawful because
it had a duty to be in compliance with the statutory scheme. This is of course true, in principle. However, given the lack of clarity in the
governing statutes as to what was required to be “in compliance,†the lack of
Department regulations or guidelines in that regard, and the potential for
criminal penalties for violations of the statutes (§ 1390), we conclude it
cannot be shown, as a matter of law, that Blue Cross’s conduct violated the
statutory scheme. Plaintiff succinctly
states in his reply brief that resolving the question of Blue Cross’s unlawful
behavior is “just plain arithmetic.†We
agree. But plaintiff fails to recognize
that an essential element of the equation was not, and cannot, be
established. Plaintiff cannot show that
between 2006 and 2008, the statutory scheme required Blue Cross to set its
HIPAA PPO premiums below the Board’s annual rate calculations. His claims, based on that faulty premise,
therefore fail.
Blue Cross’s
Voluntary Premium Refund
One final point
bears mentioning. It is undisputed Blue
Cross made a refund of premium payments to plaintiff for “overcharges.†However, this evidence provides no basis for
raising a triable issue on plaintiff’s claims.
The record shows, including judicial admissions in plaintiff’s
complaint, that Blue Cross voluntarily issued the refund pursuant to its
determination that internal errors had been made in calculating its HIPAA PPO
plan rates during the years 2005 through 2008.
Such evidence raises no inference the “overcharges†were a violation of
any law. At most, it establishes Blue
Cross made internal errors in calculating its premium rates, for which it
voluntarily paid refunds with interest to subscribers, including
plaintiff. (Plaintiff concedes that Blue
Cross’s internal bases for setting its premiums rates is not the issue.) Plaintiff can raise no inference of
unlawfulness from such evidence.
The
Evidentiary Objections
Just as the trial
court found it unnecessary to consider the extraordinarily numerous objections
to evidence, we too can think of no useful purpose to be served by describing
the objectionable, and largely immaterial, evidence or individually ruling on
the objections. Previous appellate
opinions have discussed at length the judicial burden of ruling on hundreds of
objections, many of which are frivolous.
(See, e.g., Reid v. Google, Inc.
(2010) 50 Cal.4th 512, 532-533; Nazir v.
United Airlines, Inc. (2009) 178 Cal.App.4th 243, 254-257.) This case does not inspire us to add to the
literature on the inutility of evidentiary rulings in deciding many summary
judgment motions, in the trial court or on appeal. Hopefully, our opinion has made plain why
nothing more needs to be said concerning the evidence or the objections.
The evidence
recited in this opinion on which our analysis rests was mostly in the
undisputed facts and judicial admissions in plaintiff’s operative
pleading. The few facts recited in this
opinion to which objections were made include:
(1) the legislative history materials; (2) declaration of Terry German –
paragraphs 1 to 4, paragraph 8 (lines 21-24 only), paragraph 10 (lines 16-19
only), paragraph 14, exhibits A and D attached thereto; (3) declaration of Erin
Weber and the exhibits attached thereto; (4) declaration of Ali Khan –
paragraphs 1 to 4; (5) deposition testimony of Amal Abu-Rahma – pages16 to 18,
23 to 30, 39 to 40, 83 to 85, 96, 99, 108 to 110, 119 to 121, 132 to 133, 136;
and (6) deposition testimony of Bryan Curley – pages 54, 71 to 72, 83 to 86,
and 111 to 114. We have considered the
objections to this evidence and overrule the objections.
DISPOSITION
The judgment is affirmed. Defendant and respondent Blue Cross of
California shall recover its costs on appeal.
NOT TO BE
PUBLISHED IN THE OFFICIAL REPORTS
GRIMES,
J.
WE CONCUR:
RUBIN, Acting P. J.
FLIER, J.
name="_ftn1" title="">[1] COBRA
is an acronym for the Consolidated Omnibus Budget Reconciliation Act of
1985. (See 29 U.S.C. § 1161 et
seq.) COBRA gives eligible individuals,
who lose coverage under a group plan, the option of paying premiums to maintain
coverage for a limited period of time.
California subsequently enacted the California Continuation Benefits
Replacement Act or “Cal-COBRA†(Health & Saf. Code, § 1366.20 et seq.) to
provide temporary continuation coverage for individuals who are not eligible
for federal COBRA benefits.
name="_ftn2" title="">[2] All
further undesignated statutory references are to the Health and Safety Code
unless otherwise indicated.
