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Judge Dismisses Case Against United Health with Leave to Amend

A UnitedHealth sign in front of an office building.

Minneapolis, United States - May 29, 2016: UnitedHealthcare corporate headquarters exterior and sign. UnitedHealth Group Inc. is an American diversified managed health care company.

In the Northern District of California on Friday, Judge Yvonne Gonzalez Rogers dismissed health insurance case against United Behavioral Health was dismissed with leave to amend. The judge dismissed the plaintiffs’ claims with prejudice under the Sherman Act and Racketeer Influenced and Corrupt Organizations Act (RICO) and the plaintiffs’ state law claims within the scope of the Employee Retirement Income Security Act (ERISA). Furthermore, the judge dismissed the plaintiffs’ state law claims regarding plans that fall outside the scope of ERISA with leave to amend.

The plaintiffs, led by Pacific Recovery Solutions, are out-of-network health care providers who provided intensive outpatient program (IOP) services to patients who had health insurance policies administered by United. At dispute was whether United represented to the plaintiffs that it would pay a percentage of the Usual, Customary, and Reasonable Rates (UCR) for the IOP services. This court previously dismissed the plaintiffs’ first complaint with leave to amend. Subsequently, the plaintiffs filed a notice of an amended complaint (FAC). 

In the FAC, the plaintiffs continued to argue that United represented it would pay for IOP services at a percentage of the UCR. In support, the plaintiffs argued that this was their understanding based on what United meant when it represented that it would pay a percentage of the UCR from United’s published definition on its webpage describing out-of-network plan benefits, which suggested that the UCR definition has a connection to the terms of the health care plans. The plaintiffs also added a RICO claim and deleted some claims from their initial complaint.

First, addressing the Sherman Act claim, the court held that the plaintiffs failed to meet the first factor, which requires that the plaintiffs’ allegations raise a reasonable inference that the type of injury they suffered is of the type that antitrust laws were intended to prevent. The court reasoned, based on the allegations, that the plaintiffs’ alleged injury would arise directly from the patients’ failure to comply with their financial obligations to the plaintiffs, and not from the defendants’ conduct. Additionally, this type of injury arises from a breach of agreements, which is irrelevant to competition, the court found. The court asserted that the plaintiffs failed to meet the additional factors for the Sherman Act claim.

Second, the court found that for the same reason that the plaintiffs lacked antitrust standing, they also lacked RICO standing. The allegations made by the plaintiffs that the defendants committed wire fraud and mail fraud to under-reimburse the plaintiffs for the IOP services that the plaintiffs provided to patients with United insurance policies were too remote for RICO standing, the court found; the proximate cause of plaintiffs’ injury was the nonpayment by their patients of any amounts that United did not reimburse, which is derivative of their patients’ injuries. The patients of the plaintiffs have filed a separate lawsuit for their injuries against the defendant (LD et al. v. United Behavioral Health et al). Furthermore, the court said the plaintiffs failed to distinguish prior case law in which an analogous action was brought by health care providers against United for failure to properly reimburse patients for covered out-of-network services, and the district court dismissed the action because the claims were derivative of those of the patients.

Finally, the court concluded that state law claims were preempted by ERISA. The court reasoned that the plaintiffs’ argument was inconsistent with their reasons in FAC, which raised the inference that the parties’ understanding of what United was required to reimburse was based on the terms of the patients’ plans and not on the terms of an agreement that was independent of the plans between the plaintiffs and defendants.

The plaintiffs are represented by Napoli Shkolnik and the DL Law Group. United is represented by Gibson, Dunn & Crutcher; defendants Viant Inc. and MultiPlan Inc. are represented by Phelps Dunbar and Sheppard Mullin

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