Author: WorkCompAcademy

Katherine Rosenberg-Wohl had a homeowners insurance policy with defendant Respondent State Farm Fire and Casualty Company, providing coverage on her home in San Francisco.

The policy contains a provision entitled “Suit Against Us” that states: “No action shall be brought unless there has been compliance with the policy provisions. The action must be started within one year after the date of loss or damage.”

In late 2018 or early 2019, Katherine Rosenberg-Wohl noticed that on two occasions an elderly neighbor stumbled and fell as she descended her outside staircase, and learned that the pitch of the stairs had changed and that to make the stairs safe the staircase needed to be replaced.

In late April 2019, she authorized the work and contacted State Farm, and on August 9, she submitted a claim for the money she had spent. On August 26, State Farm denied the claim. Among other things Lee said that it if the claimed loss were “to be covered,” something “sudden” had to have happened. And what plaintiff claimed coverage for, Lee said, was just “preventative.”

Sometime later, her husband, attorney David Rosenberg-Wohl, reached out to State Farm “to see if anything could be done,” and in August 2020 a State Farm adjuster, Rita Lee,said it had reopened the claim. And a few days later denied it.

In October 2020, represented by her husband, plaintiff filed two lawsuits against State Farm in San Francisco Superior Court., some 18 months after she had replaced the staircase, 14 months after State Farm had denied her claim the first time, and nearly six months after the one-year limitation period of the policy had expired.

One alleged two causes of action, for breach of the policy and for bad faith. That lawsuit was removed to federal court, and was resolved against plaintiff on a motion to dismiss based on the one-year limitation provision. It is currently on appeal in the Ninth Circuit.

The other action, the one now before the California Court of Appeal, purports to allege a claim for violation of California’s unfair competition law and was designated as a “class action.” This case was also resolved against plaintiff, also based on the limitation provision. When the trial court sustained a demurrer to the second amended complaint without leave to amend. Plaintiff appealed, asserting two arguments: (1) the one-year limitation provision does not apply to her unfair competition claim, and (2) even if it does, State Farm waived the limitation provision

The California Court of Appeal affirmed the trial court in the published case of Rosenberg-Wohl v. State Farm Fire and Casualty Co., -A163848.PDF (July, 2023).

The one-year limitation provision in the State Farm policy is there because ” insurance policies providing fire insurance on California property must include the standard form provisions contained in Insurance Code section 2071 or provisions that are at least their substantial equivalent.”

Insurance Code 2071 specifically states that “2071. (a) “The following is adopted as the standard form of fire insurance policy for this state:” …. “No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within 12 months next after inception of the loss. If the loss is related to a state of emergency, as defined in subdivision (b) of Section 8558 of the Government Code, the time limit to bring suit is extended to 24 months after inception of the loss.”

State Farm asserts “the Legislature has expressly endorsed” the provision under Insurance Code section 2071, and argues that because the allegations here all concern how it handled plaintiff’s claim, the suit is subject to the policy limitation period under applicable law.

In her brief plaintiff conceded that “there is . . . no doubt that an insured cannot plead around the one-year limitations provision by labeling her cause of action something different than breach of contract,” But then went on to argue “where damages are not sought but rather the relief sought is change of an unfair policy that affects not just the insured but the public at large, the insurer’s policy promise to the insured is not at issue,”

Plaintiff’s brief makes another concession, that “Simply alleging a claim under the UCL, of course, is no different from one alleging breach of the covenant of good faith and fair dealing or any other claim in which the point is to recover money for breach of contract. [Citations.]”

And plaintiff’s argument concludes with this: “here the UCL claim about practice and procedure is not a contract claim – the conduct is unfair even though it is not required under the policy, and it is unfair regardless of whether it leads to payment under the policy or no. And plaintiff asserts, she seeks “only injunctive relief . . . and that is why the four-year UCL statutory period applies,” going on to cite five cases in claimed support.

The Court of Appeal then discussed at length numerous cases, including many of those cited by the parties here, after all of which it made its analysis and conclusion.

In rejecting plaintiff’s effort to circumvent the one year statute of limitations the Court of Appeals concluded that “In sum, the crux of plaintiff’s claim (Jang, supra, 80 Cal.App.4th at p. 1303) is ‘grounded upon a failure to pay policy benefits.’ (Sullivan, supra, 964 F.Supp. at p. 1414.) That claim necessarily arises ‘out of the contractual relationship.’ (Lawrence, supra, 204 Cal.App.3d at p. 575.)”

Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) added mandatory reporting requirements with respect to Medicare beneficiaries who have coverage under group health plan (GHP) arrangements as well as for Medicare beneficiaries who receive settlements, judgments, awards or other payment from liability insurance (including self-insurance), no-fault insurance, or workers’ compensation.

The provisions for Non-Group Health Plans (NGHP), such as Workers’ Compensation claims, is found at 42 U.S.C. 1395y(b)(8). Reporting requirements are documented in the NGHP User Guide which is available as a series of downloads on the NGHP User Guide page. The NGHP User Guide is the primary source for Section 111 reporting requirements.

An organization that must report under Section 111 is referred to as a responsible reporting entity (RRE). In general terms, NGHP RREs include liability insurers, no-fault insurers, and workers’ compensation plans and insurers.

Failure to perform the required Section 111 reporting at all within one year of the date a settlement or other payment obligation provides for a monetary penalty of up to $1,000 for each day of noncompliance for each individual whose information should have been reported. This penalty amount will be adjusted annually for inflation under 45 CFR part 102. Current maximum penalty amount as adjusted for inflation in 2023 is $1,247.

CMS has just release of the latest iteration of the Non-Group Health Plan User Guide – Version 7.3. According to the firm of Allan Koba, Version 7.3 contains three main revisions:

First, and arguably the most significant, Chapter III has been updated to attempt to add some detail to the section on Ongoing Responsibility for Medical (ORM) reporting – Section 6.3.

These changes aim to clarify what triggers Ongoing Responsibility for Medical (ORM) reporting. In a prior update, this section was expanded, adding a conjunctive, 2-part test for the trigger of ORM. That is, in Version 7.2, the trigger for ORM was the assumption of ORM by the RRE AND the beneficiary receiving medical treatment for the related injury. This update caused questions from our industry, including how and when an RRE should know about medical treatment.

In response to these questions, the agency has released the updates of Version 7.3 which has removed use of the word “and”, applying a new definition which now states that the trigger for Ongoing Responsibility for Medical (ORM) reporting is the determination to assume ORM which is when the RRE learns, through normal due diligence, that the beneficiary has received claim-related treatment.

These changes to the text effectively remove the decision-making power from the RRE to decide when Ongoing Responsibility for Medical (ORM) has been accepted, and has defined acceptance as knowledge of claim-related treatment.

Secondly, Chapter IV has been updated to inform users who have opted into the unsolicited response file process that they may receive an empty file if no updates were made to their records in a given reporting period. That is, if an RRE has opted to receive the unsolicited response file, it will still receive a blank response file if no updates have been made by outside parties that would/should be contained therein. While the issuance of empty unsolicited response files was previously announced via an Alert last month, the fact that an empty file may be received is now outlined in Ch. IV, Sect. 7.5 for future reference.

Chapters I, II, and IV have been revised to remove all references to Internet Explorer as it is no longer a supported browser. While this update likely does not make too many waves, it may be of interest to some carriers utilizing a reporting software that was designed for IE.

Each chapter of the updated 7.3 User Guide is available for download. For questions about these updates, as well as general inquiries about Section 111 reporting and all things Medicare Secondary Payer, readers may contact Allan Koba at info@allankoba.com.

The “Insurance TPA Market by Service Type, by Service, and by End User – Global Opportunity Analysis and Industry Forecast, 2023-2030” reports that the insurance TPA Market size was valued at USD 307.79 billion in 2022, and is projected to reach USD 511.49 billion by 2030, at a CAGR of 5.5% during the forecast period, 2023-2030.

Innovative startup companies are emerging and revolutionizing the operational landscape within the insurance third-party administrator (TPA) industry. This factor is expected to drive the growth of the insurance TPA market. These emerging startups are transforming the conventional TPA business model by focusing on process optimization through automation and expedited claims handling. Moreover, they prioritize delivering transparent and dependable customer service to ensure customer satisfaction, comprehensive care, and operational efficiency.

Moreover, the increasing healthcare costs drive a higher demand for TPAs. As healthcare expenses continue to rise, there is a growing need for efficient management and cost-containment solutions. This has led to an increased reliance on TPAs, who specialize in streamlining administrative processes, negotiating with healthcare providers, and implementing strategies to control expenses. As a result, the demand for TPAs has significantly accelerated due to the rising healthcare expenses.

The TPAs reduce costs without compromising the quality of healthcare, and have established themselves as vital assets to self-insuring programs. These factors accelerate the growth of the insurance TPA market. However, the rising concerns of security and privacy of consumers from third parties restrain the market growth.

On the contrary, the technological advancements such as wearable technologies, blockchain, and artificial intelligence (AI) enable TPAs to manage claims and other processes. They guarantee efficient insurance services, offer exceptional service, and lower operational costs. This, in turn, creates ample growth opportunities for the key market players of the insurance TPA market in the coming years.

The global insurance TPA market is segmented on the basis of type, services, end user, and geography.

– – Based on type, the market is classified into health insurance, property and casualty insurance, workers’ compensation insurance, disability insurance, travel insurance, and others.
– – Based on services, the market is categorized into claims management and risk control management.
– – Based on end user, the market is divided into healthcare, construction, real estate and hospitality, transportation, staffing, and others.
– – Based on geography, the market is segmented into North America, Europe, Asia-Pacific, and Rest of the World (RoW).

North America holds the largest share of the insurance TPA market. This dominance is driven by the increase in chronic diseases such as cancer, heart disease, and diabetes caused by unhealthy habits such as smoking, alcohol consumption, and poor diet. As a result, there is a surge in the number of insurance policies, leading to the outsourcing of services to insurance TPAs for efficient claims management.

Additionally, the region’s vulnerability to natural disasters such as floods, earthquakes, and storms encourages individuals to opt for property insurance plans to mitigate potential losses. The growing number of insurance policies is expected to further drive the growth of the insurance TPA market in this region.

The key players in the global insurance TPA market include:

– – Sedgwick Claims Management Services, Inc.
– – United HealthCare Services (UMR), Inc.
– – Crawford & Co.
– – Gallagher Bassett Services, Inc.
– – CorVel Corp.
– – Meritain Health
– – ESIS, Inc.
– – Helmsman Management Services LLC
– – Trustmark Health Benefits, Inc.
– – Cannon Cochran Management Services Inc., dba CCMSI

United Behavioral Health (“UBH”) is one of the nation’s largest managed healthcare organizations. It administers insurance benefits for mental health conditions and substance use disorders for various commercial health benefit plans. In this role, UBH processes coverage requests made by plan members to determine whether the treatment sought is covered under the respective plans. UBH retains discretion to make these coverage determinations “for specific treatment for specific members based on the coverage terms of the member’s plan.”

ERISA is a federal statute designed to regulate “employee benefit plan[s].” 29 U.S.C. § 1003(a). Congress enacted ERISA “to promote the interests of employees and their beneficiaries in employee benefit plans,” 29 U.S.C. § 1132(a) sets forth a comprehensive civil enforcement scheme.

The named Plaintiffs in this class action are all beneficiaries of ERISA-governed health benefit plans for which UBH was the claims administrator. Plaintiffs all submitted coverage requests, which UBH denied. Among the individually named Plaintiffs, there are ten different ERISA plans. Among the class members, there may be as many as 3,000 different plans. The Parties stipulated to a sample class of 106 members, from which they submitted a sample of health insurance plans.

Plaintiffs alleged that the Plans required, as a condition of coverage, that treatment be consistent with generally accepted standards of care (“GASC”) or were governed by state laws specifying certain criteria for making coverage or medical necessity determinations.

UBH employed two different processes to determine whether a requested service was covered. First, where the requested service was subject to a Plan exclusion, UBH issued an administrative denial. Administrative denials did not involve clinical reviews and are not at issue in this appeal. Second, for those claims not administratively denied, UBH conducted a clinical review, by which UBH Peer Reviewers made clinical coverage determinations.

To assist with these clinical coverage determinations, UBH developed internal guidelines used by UBH’s clinicians. The Guidelines applied across Plans and were not customized based on specific plan terms. For this reason, among others, Plaintiffs argue that the Guidelines implemented only the plan exclusion for coverage inconsistent with GASC, which appeared in all plans.

UBH issued new Level of Care Guidelines each year, which contained several parts, some of which Plaintiffs challenge tas more restrictive than GASC,.

The district court entered judgment in Plaintiffs’ favor, concluding that UBH breached its fiduciary duties and wrongfully denied benefits because the Guidelines impermissibly deviated from GASC and state-mandated criteria. The district court also found that financial incentives infected UBH’s Guideline development process, particularly where the Guidelines “were riddled with requirements that provided for narrower coverage than is consistent with” GASC.

Based on these findings, the district court concluded that UBH breached its fiduciary duty to comply with Plan terms and breached its duties of loyalty and care “by adopting Guidelines that are unreasonable and do not reflect” GASC. It also held that UBH improperly denied Plaintiffs benefits by relying on its restrictive Guidelines that were inconsistent with the Plan terms and state law.

The district court issued declaratory and injunctive relief, directed the implementation of court-determined claims processing guidelines, ordered “reprocessing” of all class members’ claims in accordance with the new guidelines, and appointed a special master to oversee compliance for ten years.

UBH appealed and argued that Plaintiffs lacked Article III standing to bring their claims because: (1) Plaintiffs did not suffer concrete injuries; and (2) Plaintiffs did not show proof of benefits denied, and so they cannot show any damages traceable to UBH’s Guidelines. The 9th Circuit disagreed with this argument in the published case of Wit v United Behavioral Health -20-17363 (Aug 2023). However it did find error in other aspects of the trial court orders, and reversed in part.

To establish standing under Article III, a plaintiff must show (i) that he suffered an injury in fact that is concrete, particularized, and actual or imminent; (ii) that the injury was likely caused by the defendant; and (iii) that the injury would likely be redressed by judicial relief. The 9th Circuit ruled that Plaintiffs met all three criteria.

UBH also appealed from the district court’s class certification order. The district court’s class certification decision was reviewed for an abuse of discretion. As to Plaintiffs’ denial of benefits claim, the 9th Circuit agreed, and concluded that the district court erred in granting class certification here based on its determination that the class members were entitled to have their claims reprocessed regardless of the individual circumstances at issue in their claims. It ordered remand for claim reprocessing where a plaintiff has shown that his or her claim was denied based on the wrong standard and that he or she might be entitled to benefits under the proper standard.

UBH further argues that the district court erred by concluding that the Guidelines improperly deviated from GASC, and by failing to apply an appropriate level of deference to UBH’s interpretation of the Plans. It was undisputed that the Plans in this case confer UBH with discretionary authority to interpret the Plan terms.  But where “an administrator has a dual role as plan administrator and plan insurer, there is a structural conflict of interest .”

However, the district court’s findings did not excuse it from applying the abuse of discretion standard. “Abuse of discretion review applies to a discretion-granting plan even if the administrator has a conflict of interest.” In short, while the Plans mandated that a treatment be consistent with GASC, they did not compel UBH to cover all treatment that was consistent with GASC.

Thus the 9th Circuit reversed the district court’s judgment that UBH wrongfully denied benefits to the named Plaintiffs to the extent the district court concluded the Plans require coverage for all care consistent with GASC.

The Department of Justice just announced deferred prosecution agreements resolving criminal antitrust charges against Teva Pharmaceuticals USA, Inc. and Glenmark Pharmaceuticals Inc., USA. As part of those agreements, both companies will divest a key business line involved in the misconduct, and as an additional remedial measure,

Teva will make a $50 million drug donation to humanitarian organizations. Teva will pay a $225 million criminal penalty – the largest to date for a domestic antitrust cartel – and Glenmark will pay a $30 million criminal penalty. Both companies will face prosecution if they violate the terms of the agreements, and if convicted, would likely face mandatory debarment from federal health care programs.

The agreements each require the companies to undertake remedial measures, including the timely divestiture of their respective drug lines for pravastatin, a widely used cholesterol medicine that was a core part of the companies’ price-fixing conspiracy. This extraordinary remedy forces the companies to divest a business line that was central to the misconduct.

Teva must also donate $50 million worth of clotrimazole and tobramycin, two additional drugs with prices affected by Teva’s criminal schemes, to humanitarian organizations that provide medication to Americans in need.

Both Teva and Glenmark have agreed, among other things, to cooperate with the department in the ongoing criminal investigations and resulting prosecutions, report to the department on their compliance programs, and modify those compliance programs where necessary and appropriate.

As part of the agreements, Teva admitted to participating in three antitrust conspiracies that affected essential medicines – including pravastatin, clotrimazole and tobramycin – and Glenmark admitted to participating in a conspiracy to fix the price of pravastatin. Pravastatin is a commonly prescribed cholesterol medication that lowers the risk of heart disease and stroke; clotrimazole is commonly prescribed to treat skin infections; and tobramycin is commonly prescribed to treat eye infections and cystic fibrosis.

Also as part of the agreements, the parties filed joint motions, which are subject to approval by the Court, to defer prosecution and trial on the filed charges for the three-year terms of the agreements or until after the criminal penalties are paid, whichever occurs later.

During the multi-year investigation, the Antitrust Division and its law enforcement partners uncovered price-fixing, bid-rigging and market-allocation schemes affecting many generic medicines, and charged seven generic pharmaceutical companies for their participation in the schemes. With these newest agreements, all seven companies have resolved their criminal charges and collectively agreed to pay more than $681 million in criminal penalties.

In June 2020, Glenmark was charged with one count of price fixing for its role in a conspiracy affecting the prices of pravastatin and other generic drugs. A grand jury returned a superseding indictment against Glenmark and Teva in August 2020 for the same and similar conduct. Count one alleged that Teva conspired with Glenmark, Apotex Corp. and others to increase prices for pravastatin and other generic drugs. Apotex admitted its role in this conspiracy and agreed to pay a $24.1 million penalty in May 2020.

Count two charged Teva for its role in a conspiracy with Taro Pharmaceuticals U.S.A. Inc., its former executive Ara Aprahamian and others to increase prices, rig bids and allocate customers of generic drugs, including clotrimazole, a medicine used to treat skin infections. Taro admitted to its role in this conspiracy and agreed to pay a $205.7 million penalty to resolve that charge in July 2020. Aprahamian was indicted in February 2020 and is awaiting trial.

Count three charged Teva for its role in a conspiracy with Sandoz Inc. and others to increase prices, rig bids and allocate customers of generic medicines, including cystic fibrosis medicine tobramycin. A former Sandoz executive pleaded guilty for his participation in the conspiracy in February 2020. Sandoz admitted to its role in the conspiracy and agreed to pay a $195 million penalty in March 2020.