9th Cir. MMA preempts misrepresentation claims against Part D plan

The Ninth Circuit held that the Medicare Act preempted a variety of state law claims against a Medicare Part D plan sponsor, where the defendant made misrepresentations, failed to enroll individuals, and then denied benefits.

The court reasoned that from the time plaintiffs submitted an enrollment form they became “enrollees” and could use the coverage determination and grievance processes under the Act, which preempted all their claims. Uhm v. Humana Inc., --- F.3d ---, 2008 WL 3891592 (9th Cir. Aug. 25, 2008) (No. 06-35672).

 

The Uhms filled out a form to enroll in Humana Health Plan Inc.’s Part D plan, relying on its representations that they would be enrolled and receive coverage starting January 1, 2006. As their enrollment date approached, they had not received order forms, ID cards or other information; Humana was unresponsive to their calls. Just before the date, a Humana representative said they were not recognized members. They were forced to pay out of pocket for drugs until they filed their class complaint in early February, though premiums were deducted from their social security checks. They asserted various common law and consumer law claims against Humana Health Plan Inc. and corporate parent Humana Inc., all of which the district court dismissed. 2006 WL 1587443 (W.D.Wash. Jun. 2, 2006).

 

            The Medicare Modernization Act of 2003 included a provision that expressly preempts “any State law or regulation (other than State licensing laws or State laws relating to plan solvency” with respect to Part D plans. 42 U.S.C. §§ 1395w-112(g), 1395w-26(b)(3). The court noted that the use of the phrase “law or regulation” “demonstrates Congress’ intent to expressly supplant only positive state enactments.” Nevertheless, the court held that common law claims would be subject to implied preemption “to the extent that there are federal standards.”

 

            The parties argued over whether the Uhms were “enrollees” when their claims arose, since their enrollment was not processed or recognized by Humana. Despite different usages of “enroll” in the regulations, the court concluded that the Uhms became “enrollees” at the time they completed enrollment forms, and at that point the Act’s coverage determination and grievance procedures were available to them, and preemption would apply. The court acknowledged that these procedures were “arduous and limited in scope and limited the availability of judicial review,” but nevertheless concluded that they preempted any claims for which the procedures were available.

 

            Accordingly, the court found each of their claims preempted. Claims related to failure to provide benefits were coverage determinations, and claims related to failure to provide documents were grievances. To the extent claims were based on failure to enroll, they were preempted by the Act’s standards governing enrollment. Claims based on misrepresentation were preempted by Part D marketing standards, which extend to broadly to all informational materials targeting beneficiaries, including enrollment forms. In short, each claim related to a matter regulated by the Act.

 

            The court also held that preemption extended to parent company Humana Inc., even though it is not a Part D plan sponsor, because the claims against it were identical and were premised on the sponsor’s actions.

 

            The court stated that the Act expressly or impliedly preempts state law “only insofar as federal standards exist,” meaning that state law still applies where a plan sponsor’s conduct is not subject to a specific standard under the Act. It left open “whether allegations related to a third party’s involvement with a [plan sponsor] that differ from those alleged here might be preempted.”

 

            The Uhm case was apparently brought under diversity jurisdiction. In a case that was removed from state court under federal question jurisdiction, the Eleventh Circuit recently held that the district court lacked jurisdiction, and left it to the state court to decide the preemption issue. Dial v. Healthspring of Alabama Inc., --- F.3d ---, 2008 WL 3896741 (11th Cir. Aug. 26, 2008) (summary here). The Dial court reasoned that 42 U.S.C. § 405(h) “strips federal courts of primary federal-question subject matter jurisdiction” over claims arising under the Medicare Act by vesting original jurisdiction in the Secretary of Health and Human Services. The Ninth Circuit did not address whether this jurisdictional bar applied to a diversity case.

    For more on Medicare preemption, see Rochelle Bobroff & Jane Perkins, Recent Developments in Court Access for Medicaid and Medicare Cases, Clearinghouse Review Sept/Oct 2008.