Harvey v. CENTENE MANAGEMENT Co. Llc

Citation: 357 F. Supp. 3d 1073Docket: No. 2:18-CV-00012-SMJ

Court: District Court, E.D. Washington; November 20, 2018; Federal District Court

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Defendants Centene Management Company LLC and Coordinated Care Corporation filed a Motion to Dismiss the Second Amended Complaint brought by Plaintiff Cynthia Harvey, who alleges breach of contract and violation of the Washington Consumer Protection Act. Harvey, an Ambetter health insurance policyholder, claims that the Defendants misrepresented the coverage provided by the policy and failed to deliver services approved by the Washington State Office of the Insurance Commissioner. Her complaint asserts that the Defendants target low-income customers while offering inadequate coverage and a largely fictitious provider network, making it difficult for policyholders to find willing medical providers. Specifically, she alleges that the Defendants misrepresented the number and availability of medical providers, including listing non-participants and incorrectly categorizing providers. Additionally, Harvey contends that the Ambetter documentation fails to disclose significant limitations in coverage and that the Defendants do not adequately monitor their provider network, resulting in frequent denials of coverage for legitimate services. As a consequence, many providers refuse to accept Ambetter insurance, further limiting available care options for policyholders. Harvey purchased her policy in December 2016, relying on misleading promotional materials that did not reflect the true state of the provider network. The Court grants the motion to dismiss in part and denies it in part, indicating that some of Harvey's claims may proceed.

Emergency room services are covered under the Ambetter policy, but out-of-network charges may apply when out-of-network providers work in covered emergency rooms. In 2017, there were no in-network emergency room physicians in the Spokane area, which was not disclosed by the defendants. As a result, the plaintiff incurred a $1,544 charge for services from an emergency room doctor. Additionally, individual services related to the plaintiff's healthcare visits were denied coverage due to being out-of-network, despite some services being performed by in-network doctors. For instance, a colonoscopy recommended as preventive care was partially denied for technicians involved in the procedure, despite being covered under ACA guidelines. 

The plaintiff utilized the grievance and appeal process for each denial, often successfully, indicating that the initial denials were unjustified, but this led to financial stress as providers pursued payment. Other putative class members reported similar issues, including misrepresentation of providers in the network and difficulties accessing care. On December 12, 2017, the Insurance Commissioner ordered Coordinated Care to cease selling the 2018 Ambetter policy due to inadequate provider monitoring and failure to report network deficiencies. The Commissioner received over 100 consumer complaints and found that Coordinated Care was legally required to ensure access to necessary care without imposing out-of-network charges or surprise billing.

Harvey claims that Defendants violated their insurance contracts by providing inaccurate information about their provider networks, failing to maintain a sufficient network of providers, denying legitimate claims, and collecting premiums without delivering an adequate network that includes essential services like emergency room physicians and labs. As a result, Harvey and the class allege damages including all premiums paid, amounts paid due to improper billings, and expenses incurred for necessary medical services. Additionally, Harvey asserts that Defendants engaged in unfair or deceptive practices by misrepresenting the availability of providers, denying valid claims, failing to address complaints, and violating relevant laws while omitting critical facts about Ambetter policies.

As a consequence of these unfair practices, Harvey states that the Plaintiff and class members suffered injuries such as paying premiums without receiving corresponding benefits, incurring out-of-pocket costs for covered services, and spending time and money to find providers who accept Ambetter coverage. For each claim, Harvey seeks compensatory damages, including a full refund of premiums for misrepresented insurance, a partial refund reflecting the difference in value of the policy as represented versus delivered, and reimbursement for out-of-pocket expenses for services that should have been covered.

Harvey clarifies that she is not challenging the reasonableness of the health insurance premiums approved by the Insurance Commissioner, asserting that if Defendants had provided the promised services, she would not have filed a claim. Furthermore, the complaint identifies Centene Management and Coordinated Care as wholly-owned subsidiaries of Centene Corporation, with Centene Management controlling the operations of Coordinated Care through a management services agreement. Harvey argues that Coordinated Care functions as a "shell and alter ego" of Centene Management, making their actions interdependent. Defendants filed a motion to dismiss on September 12, 2018, to which Harvey responded, and a hearing was held on November 20, 2018.

A complaint must provide a concise statement showing entitlement to relief as per Federal Rule of Civil Procedure 8(a)(2). Under Rule 12(b)(6), a complaint can be dismissed if it fails to state a claim upon which relief can be granted. The court evaluates the complaint favorably towards the plaintiff, accepting all factual allegations as true while disregarding legal conclusions presented as facts. To survive dismissal, a complaint must articulate a viable legal theory and give fair notice of the claim and its grounds. It must include sufficient factual matter to establish a plausible claim for relief, which requires more than mere possibility but does not demand probability. Detailed factual allegations are not necessary, but mere recitals of the elements of a cause of action supported by conclusory statements are insufficient.

For a breach-of-contract claim, a plaintiff must demonstrate that the contract imposed a duty, that the duty was breached, and that the breach caused damage. In insurance contracts, there is a duty of good faith requiring insurers to treat insured parties fairly. Damages for breach of an insurance contract generally follow a benefit-of-the-bargain theory, aiming to place the insured in the position they would have been in had the contract not been breached, limited to the contract amount plus interest.

The Consumer Protection Act (CPA) mandates that the insurance sector operate in good faith, prohibiting deceptive practices in trade or commerce. Insureds may bring private actions against insurers for breaches of good faith under the CPA, which offers remedies for individuals harmed by violations of its provisions.

To succeed in a private CPA claim, a plaintiff must establish five elements: 1) the defendant engaged in an unfair or deceptive act or practice, 2) the act occurred in trade or commerce, 3) the act impacts public interest, 4) the plaintiff suffered injury to their business or property, and 5) there is a causal link between the unfair act and the injury. Remedies under the CPA include injunctive relief, actual damages, attorney fees and costs, and, at the trial court's discretion, treble damages up to $25,000. Damages must be broadly interpreted to include even minimal injuries, including nonquantifiable injuries like loss of property use. 

The Court's analysis focuses solely on the complaint, excluding extraneous documents as unnecessary at the pleading stage. The filed rate doctrine does not bar Harvey's claims, which involve contract breaches and CPA violations. While the doctrine prevents courts from reassessing health insurance premiums approved by the Insurance Commissioner, it does not apply to claims that are merely related to these rates without directly contesting their reasonableness. Courts can entertain CPA claims linked to approved rates if they do not require a reevaluation of those rates. The Washington State Supreme Court previously dismissed a similar CPA claim, affirming that specific damages necessitating a reevaluation of approved premiums are not permissible.

Plaintiffs claimed two specific forms of damages related to unfair business practices and excessive insurance premium overcharges. They sought a refund of the excess premiums paid and a refund of any excessive surplus that resulted in high premiums. The court ruled that the filed rate doctrine barred these claims, as determining reasonable premiums would require a court to overstep the Insurance Commissioner's established rates. The court emphasized that while claims related to agency-approved rates are permissible, those that necessitate a reevaluation of those rates are not. The plaintiffs' claims were deemed incidental and not a direct challenge to the approved premiums. Additionally, the court noted that the Washington state law supports claims that do not directly attack agency-approved rates, leading to the conclusion that Harvey's claims were permissible despite the defendants’ arguments to the contrary. Harvey explicitly disclaimed any challenge to the reasonableness of the approved rates, asserting claims for full refunds, partial refunds based on value discrepancies, and out-of-pocket expenses related to inadequate service delivery.

Harvey's claims relate to health insurance premiums approved by the Insurance Commissioner but do not challenge their reasonableness. Instead, Harvey assumes the premiums are reasonable, using them as a baseline for damages, alleging that Defendants misrepresented and omitted material information about the coverage of the Ambetter policy, which did not provide the approved insurance services. The requested damages would not require the Court to assess the reasonableness of the premiums, thus avoiding an inappropriate substitution of judgment for that of the Insurance Commissioner. Unlike the McCarthy Finance case, where plaintiffs claimed the premiums were excessively high for the services received, Harvey asserts that she is willing to pay the approved rate as long as the insurance provider meets its contractual obligations. The Court concludes that Harvey's claims do not directly challenge the Insurance Commissioner's approved premiums. Even if concerns about measuring damages under the filed-rate doctrine arise, the Court prefers to address these issues at the summary judgment or trial stages rather than dismissing them at the pleading stage. Furthermore, while Harvey states a valid Consumer Protection Act (CPA) claim against Centene Management, she does not sufficiently plead a breach-of-contract claim, as Centene Management is not a party to the contract in question. However, Harvey does allege that Centene Management participated in wrongful conduct, establishing liability for the CPA violations. An individual acting as an agent cannot be held liable for breach of a contract they are not a party to.

An agent is liable for breaching an independent obligation to an injured party, regardless of following a principal's instructions. The Court dismissed Centene Management from breach-of-contract claims against it, not addressing its alter ego argument, while recognizing that Harvey has a plausible claim under the Consumer Protection Act (CPA) but not for breach of contract. The dismissal of the breach-of-contract claim is without prejudice, allowing Harvey to amend her complaint as discovery may reveal more about the interaction between the corporate entities.

Harvey adequately states a breach-of-contract claim against Coordinated Care, despite its arguments that the grievance process and out-of-network billing caveat negate a breach. The Court emphasizes that at the motion to dismiss stage, it only assesses whether the complaint presents sufficient facts for a claim, not the merits of contractual interpretation. Harvey's allegations provide enough detail to give Coordinated Care fair notice of her claims.

Coordinated Care contends that Harvey has not identified viable damages theories, arguing she cannot claim a full refund of premiums since she received some services. However, Harvey's misunderstanding of damages reflects a need for compensatory damages to place her in the position she would have been in had the contract been fulfilled, not merely restoring her to a prior state.

An injured party is not entitled to a better position than they would have been had the contract been fulfilled. In this case, the possibility exists that Coordinated Care's alleged breach caused class members to incur unjustified out-of-pocket expenses or to forgo healthcare altogether. A full refund of health insurance premiums could be a valid measure of damages, provided it does not exceed the contract's expected value, but Harvey has not presented sufficient facts to support this claim. The court determines that the appropriate measure of compensatory damages for Harvey’s breach-of-contract claim is the value of the contract as if it had been performed. Harvey must amend her complaint by November 30, 2018, to reflect this. Additionally, Coordinated Care's argument about lacking notice of the damages is rejected; Harvey's allegations are deemed sufficient to establish a plausible breach-of-contract claim under Washington law, focusing on compensatory damages related to the benefit of the bargain, the difference in value received, or out-of-pocket expenses. The court granted in part and denied in part the motion to dismiss: the claim against Centene Management Company is dismissed without prejudice, while the claim against Coordinated Care will proceed with the specified measure of damages. The 'filed rate' doctrine protects filed rates from legal challenges based on reasonableness, explaining that rates approved by regulatory agencies are considered reasonable. Although Harvey claims to have a valid contract for Ambetter insurance, it is clarified that she purchased this policy solely from Coordinated Care.