2 Cal. App. 5th 132
Cal. Ct. App.2016Background
- Roberts enrolled in UnitedHealthcare’s AARP Medicare Complete Secure Horizons Plan 1 (a Medicare Advantage/Part C plan) and received a Welcome Book listing $30 in-network and $50 out-of-network urgent care copayments.
- UnitedHealthcare’s marketing materials represented a large local provider network; the plan had no in-network urgent care centers in California, so Roberts paid a $50 out-of-network copay for urgent care.
- Roberts sued on behalf of a California class alleging misleading marketing (UCL, Insurance Code, Civil Code), unjust enrichment, and financial elder abuse, seeking restitution, treble damages, and other relief.
- United removed, the case was remanded to state court; the trial court sustained UnitedHealthcare’s demurrer without leave to amend, holding the claims preempted by the Medicare Advantage preemption clause and that any benefits challenge required administrative exhaustion.
- On appeal, the court analyzed (1) whether Roberts’ misrepresentation and network-adequacy claims are preempted by 42 U.S.C. § 1395w-26(b)(3) (and related federal regulatory scheme), and (2) whether claims challenging a benefits determination require exhaustion of the Part C administrative remedy scheme.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether state-law claims based on marketing misrepresentations and network adequacy are preempted by the Medicare Advantage express preemption clause | Roberts: his state-law consumer, unjust enrichment, and elder-abuse claims are not displaced; common-law and generally applicable consumer protections survive | United: Part C’s express preemption (and related regulatory scheme) supersedes any state law regulating marketing or plan adequacy; allowing state claims would undermine the CMS preapproval process | Held: Express and implied (obstacle) preemption apply. The Part C clause supersedes any state law/regulation (except licensing/solvency), and CMS’s preapproval of marketing and network adequacy displaces Roberts’ claims. |
| Whether claims that effectively challenge the amount owed for a service require exhaustion of the Part C administrative remedies | Roberts: his dispute involves only a $20 difference and is a consumer tort/UDAP claim not subject to the Medicare exhaustion scheme | United: any claim challenging the amount payable for a service is a benefits claim governed by the four-tier administrative appeal process and must be exhausted before court | Held: Roberts’ implicit claim that the copay was improper is a claim for benefits and required exhaustion; he did not exhaust the Part C administrative remedies, so that claim must be dismissed. |
Key Cases Cited
- Do Sung Uhm v. Humana, Inc., 620 F.3d 1134 (9th Cir. 2010) (Part C/D preapproval of marketing materials preempts state consumer claims)
- Cotton v. StarCare Medical Group, Inc., 183 Cal.App.4th 437 (Cal. Ct. App. 2010) (narrower view of Part C preemption; limited to positive enactments and statutes targeting MA plans)
- Yarick v. PacifiCare of California, 179 Cal.App.4th 1158 (Cal. Ct. App. 2009) (held Part C preemption limited to positive state enactments and not to common-law duties)
- McCall v. PacifiCare of Cal., Inc., 25 Cal.4th 412 (Cal. 2001) (Medicare Parts A/B context; exhaustion and preemption analysis distinguished from Part C)
- Riegel v. Medtronic, Inc., 552 U.S. 312 (U.S. 2008) (preemption of state common-law duties by federal device statute; common-law claims fall within preemption scope)
- Sprietsma v. Mercury Marine, 537 U.S. 51 (U.S. 2002) (construed a different preemption clause narrowly; distinguished by the court here)