ERISA: Big HIPAA does not prohibit rating employers in purchasing consortium, preempts identical Montana statute, method of rating consortiums does not violate Montana’s little HIPAA… UTPA anti-discrimination statute cannot be used to challenge discriminatory rating… breach of contract claim cannot be maintained when it requires adjudication of matters for which there is no private right… Plaintiffs fail to state claim in complaint under SEHIAA, which in any event does not provide private right of action to directly challenge rating practices… Montana insurance code places primary enforcement duty with Commissioner… class/common fund claims moot… Plaintiffs suffered no actual damages, no basis for restitution of premiums… analysis of non-preempted state claim on remand from affirmance of other rulings… 2nd request for remand to State Court or certification to MSC denied… Lovell.
This Court granted summary judgment for BCBS that a group health premium calculation which considers health status factors when rating employer plans separately is permissible under an ERISA provision identical to a Montana provision prohibiting requiring an individual to pay more than similarly situated individuals based on health status. (38 MFR 80). Plaintiffs appealed. Fossen (9th Cir. 2011) affirmed this Court’s finding that MCA 33-22-526(2)(a) was preempted by the identical 29 USC 1182(b)(1) and that AMI/MCCT met the federal definition of a multiple employer welfare association for purposes of the federal statute. Because this Court did not analyze Plaintiffs’ non-preempted state claim, the Panel remanded for further proceedings.
The Court must first consider Plaintiffs’ 2nd motion for remand and alternative motion for certification to the Montana Supreme Court. It is the Court’s belief that the state claims are not unclear and do not raise complex issues of state law. Because this Court has delved deeply into the federal claim upon which summary judgment was granted and invested considerable resources in this litigation, and because the state law claims are fundamentally dependent on and/or restricted by that federal claim, it would be a waste of judicial resources to remand for litigation beginning anew. The Court remains dubious of Plaintiffs’ assertion that state insurance law is unclear, and therefore will hold the question of certification pending analysis of the state claims.
While the UTPA is generally & specifically enforceable by the Montana Insurance Commissioner, the 1987 Legislature carved out 6 UTPA claims-handling complaints that may be brought as independent causes for actual damages in state court — §§ 33-18-242(1), 33-18-201(1), (4), (5), (6), (13) — none of which is pertinent here or has been pled by Plaintiffs. Their UTPA claim (Count 3) rests on §33-18-206(2):
No person shall make or permit any unfair discrimination between individuals of the same class and of essentially the same hazard in the amount of the premium, policy fees, or rates charged for any policy or contract of disability insurance or in the benefits payable thereunder or in any of the terms or conditions of such contract or in any other manner whatever.
Originally, the basis of Count 3 was the Count 2 allegations that Caring for Montanans (fna BCBS of Montana) discriminated against them in violation of an insurance code provision outside of the UTPA, §33-22-526(2):
A group health plan and a health insurance issuer offering health insurance coverage in connection with a group health plan may not require an individual, as a condition of enrollment or continued enrollment under the group health plan, to pay a premium or contribution that is greater than the premium or contribution for a similarly situated individual enrolled in the group health plan on the basis of any health statute-related factor of the individual or of an individual enrolled under the plan as a dependent of the individual.
Thus their original theory was that because CFM raised the premium on their group health policy on the basis of the health status of one individual in their group, they had been discriminated against in violation of 526(2). They originally asserted that their group was an association of 600 employers, and their employer health plan was an “individual.” They concluded that all employer groups in the association should pay the same premium and that no employer group should be singled out to pay a higher premium based on the health status of one individual in the group. This Court found that 526(2) was preempted by the identical 29 USC 1182(b)(1). The 9th Circuit affirmed this and upheld determination that under federal law pertaining to 1182 (b)(1), the association of 600 employers was not a bona fide association, but merely a purchasing consortium, compelling the conclusion that the “group” was the Fossen Bros. Farms’ employer group, and thus because no single individual within Plaintiffs’ employer group was singled out to pay higher premiums based on health, 1182(b)(1) could not be violated by CFM.
Plaintiffs assert that there is a long line of cases that provide an independent basis for their claims under state law. However, in Larson (Mont. 1967) and Goddard(Mont. 1979), which they cite, the insured’s independent cause was breach of a contract, and the pertinent issue was whether the insurer was correctly allowed to recover punitives for an act that constituted breach of the contract and an unlawful act under Montana statutes, such as the statute requiring disability insurers to immediately pay claims. In neither case was there a separate, independent cause permitted under state law, but merely punitives made available for the breach of contract claim when it alleged an unlawful act as the breach. Notably, both are claims handling cases. Here we have the breach of contract claim but no evidence of an unlawful act under Montana insurance statutes, and certainly not under the only private right of action afforded by the UTPA, §33-18-242. Plaintiffs also point to Klaudt (Mont. 1983), which allowed a 3rd-party claimant to file an independent action under the UTPA for violation of the duty to settle claims. The 1987 Legislature then enacted §33-18-242 to place limitations on such common law claims. This statute does provide an independent cause in claims handling cases, butonly “for breach of the insurance contract, for fraud, or pursuant to this section, but not under any other theory or cause of action.” §242(3). It also added a proviso that “exemplary damages may also be assessed in accordance with 27-1-221.” §242(4). Thus the Legislature preserved the common law punitives permitted by Larson and Goddard for violation of the duty to settle. O’Fallon (Mont. 1993) expanded the common law arising from 242 by allowing plaintiffs to bring claims-handling suits against adjusters in addition to insurers. What is apparent from Plaintiffs’ cases is that common law state causes in Montana insurance cases are confined to claims handling and settlement disputes and would not under any circumstances extend to a rate discrimination dispute.
The real problem with Plaintiffs’ continuing reliance on the UTPA’s anti-discrimination statute, §206, as pled in Count 3, is that there is no such statutory private right of action under the UTPA (but for the claims-handling exceptions itemized in 33-18-242). Thus, not only has this Court found that there has been no discrimination under 33-22-526(2) that can be pled as a violation of UTPA anti-discrimination statute 33-18-206, it now finds that there is no private right of action provided by 33-18-206 itself. To the extent that Plaintiffs belatedly attempt to support this 206(2) discrimination claim by means of an alleged violation of SEHIAA (33-22-1809), the Court finds that SEHIAA likewise provides no private right of action. Indeed, both as to the UTPA (with the statutory and common law exceptions as noted) and to the SEHIAA, it is the Insurance Commissioner who has been tasked with enforcement of these provisions, not Plaintiffs’ counsel and not the state courts except on appeal from the Commissioner’s decision. The Court has received an affidavit on behalf of Commissioner Lindeen. Plaintiff’s counsel John Morrison previously was Commissioner. Both urge an expansive interpretation of Montana insurance law. However, the Legislature did not envision expansion or interpretation of the insurance code except by legislative enactments, administrative rules, or administrative enforcement actions reviewable by the court. Neither commissioner chose to utilize their powers on Plaintiffs’ behalf when they had the opportunity, and there is no authority under Montana law to create a new cause to do what they would not.
Plaintiffs assert that their Count 4 breach of contract claim — which, as pled, is grounded in a violation of 33-22-526(2) — should now be viewed as stating a claim for breach of contract by violation of §§ 33-18-206(2) and 33-22-1809. §1809 is not mentioned in Count 4, the linchpin of which is alleged violation of Montana’s “little HIPAA,” §33-22-526(2). However, the UTPA’s general anti-discrimination statute, 33-18-206(2), cannot forbid conduct that is expressly permitted by the more particular 33-22-526(2) (b): “this subsection (2) does not: (1) restrict the amount that an employer may be charged for coverage under a group health plan….” Plaintiffs now assert that a violation of SEHIAA forms the basis for Count 4 by reference to 33-18-206(2):
44. BCBSM breached its contracts with the Plaintiffs by violating the terms of §§ 33-18-206(2) and 33-22-526(2), which are incorporated in the contracts. BCBSM unfairly discriminated between the Plaintiffs and other individuals of the same class and of essentially the same hazard in the amount of premiums and rates charged for their policies of disability insurance. BCBSM required Plaintiffs to pay premiums greater than the premiums for similarly situated individuals enrolled in the group health plan, on the basis of health status-related factors of the individual Plaintiffs or of their individual dependents enrolled under the plan.
45. BCBSM breached its contracts with the Plaintiffs by violating the implied covenant of good faith and fair dealing in its actions described above.
46. As a result of BCBSM’s breaches of contract, Plaintiffs have suffered damages.
Their newest theory is that a violation of SEHIAA is a type of discrimination encompassed by the UTPA’s anti-discrimination statute. It bears repeating that the Count 4 breach of contract claim is based on alleged violation of Montana’s little HIPAA, which is preempted by the ERISA big HIPAA, which this Court found was not violated, which was affirmed on appeal. Even if the Court were to overlook Plaintiffs’ failure to plead properly an alleged violation of SEHIAA, the problems they encountered as to Count 3 would still continue to beset them in Count 4. There is no private right of action to bring a claim of violation of UTPA’s anti-discrimination statute. There is also no private right of action to bring a claim of violation of SEHIAA. Plaintiffs’ breach of contract claim is merely another backdoor method of presenting an alleged violation of a statute that they have no right to enforce. The Legislature explicitly reserved enforcement of SEHIAA to the Commissioner pursuant to MAPA. Any final decision of the Commissioner is to be appealed to state district court. The statute of limitations for an enforcement action is 2 years from discovery of the violation, 2 years after the violation ought to have been discovered, and up to 5 years from the date of the violation. §33-1-707. Dale Fossen’s complaint to the Dept. of Insurance was dated 4/6/06. The Department took no action. Plaintiffs now claim that Montana common law permits them to bring a breach of contract claim on the basis of any alleged violation of the insurance code, including statutes for which no private right has been granted by the Legislature. This is not supported by the cases cited, which are all claims handling and settlement cases. Further, after the MSC extended the private right to 3rd-party claimants, the 1987 Legislature codified that extension, but expressed its intent that the extension go no further. To permit Plaintiffs to utilize the claims handling/settlement private right cases to charge any violation of any provision of the insurance code would intrude on the Commissioner’s duty of enforcing the code and violate the Legislature’s explicit intent to provide in the UTPA a private right only for claims handling/settlement actions, fraud, or breach of contract. The other possible basis for the breach of contract claim in Count 4 is the alleged violation of the implied covenant of good faith & fair dealing, which is preempted by ERISA. Dytrt (9th Cir. 1990); Jabour (CD Cal. 2001). Defendant is entitled to summary judgment on Count 4. Without any substantive surviving claims, Plaintiffs’ claims for class action and common fund also fail.
As previously noted, Fossens have no actual damages because when they filed a complaint with the Commissioner objecting to Defendant’s notice of impending increase in their premiums for 2006 by 21%, allegedly due at least in part to the health status of one of their employees or dependents. Defendant agreed not to raise the premium for that plan year as a gesture of good will, only because Fossens seemed to have a misunderstanding about the plan. It made clear in 2006 that if they chose to renew their policy for the next year the premium increase would then be imposed. Even though Fossens continued to believe that Defendant had no right to increase their premium, they continued to renew the policy every ensuing year. Thus they suffered no actual damages for 2006, when they arguably may have had a genuine misunderstanding as to Defendant’s method of rating and setting premiums, but in the following years when they could have had no such misunderstanding, they chose to renew and pay the higher premium. There is also a question as to whether Plaintiffs’ request for restitution by return of their premiums from 2006 is proper. ERISA permits relief only in the form of injunctions or “other appropriate equitable relief.” 29 USC 1132(a)(3)(B). Clearly, “appropriate equitable relief” excludes compensatory and punitive damages. Mertens (US 1993). It does include equitable restitution, but “not all relief falling under the rubric of restitution is available in equity.” Knudson (US 2002). A plaintiff can “seek restitution in equity, ordinarily in the form of a constructive trust or an equitable lien, where money or property identified as belonging in good conscience to the plaintiff could clearly be traced to particular funds or property in the defendant’s possession.” Id. Such an equitable lien applies “only to `particular funds or property in the defendant’s possession.”’ Bilyeu (9th Cir. 2012);CIGNA (US 2011). Thus the funds sought to be recovered in equity must be the specifically identified funds at issue and not payable from the general assets of the defendant. Sereboff (US 2006). Plaintiffs ask the Court to “order that Defendant return to its insureds the excess premiums it has charged in excess of those allowed by §33-22-5262).” It is settled that Defendant did not violate 33-22-526(2), but that is beside the point, which is that Defendant no longer has Plaintiffs’ premiums in its “possession and control,” and that Plaintiffs are seeking to “impose personal liability” on Defendant rather than “enforcement of an equitable lien on particular property.” Bilyeu; Sereboff. “This is quintessentially legal, rather than equitable, relief.” Id. There is really no doubt that the premiums here have not been segregated in a separate fund or dissipated, and that Plaintiffs seek “restitution” by payment from Defendant’s general funds.
The complaint is dismissed and all relief is denied to Plaintiffs.
Fossen et al v. Caring For Montanans, 41 MFR 279, 1/24/14.
Lawrence Anderson, Great Falls, and John Morrison (Morrison, Motl & Sherwood), Helena, for Fossens; Michael McMahon & Bernard Hubley (McMahon Law Firm), Helena, for BCBS.
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