A state appeals panel has ruled a lower court shouldn’t have let Kaiser Permanente escape a lawsuit led by the San Diego city attorney, accusing the health insurer of allegedly misleading customers about care access.
The legal history dates to 2021 when San Diego City Attorney Mara Elliott sued Kaiser, alleging violations of unfair competition and false advertising laws based on allegations its health plan provider directories were not adequately maintained and updated under the California Health and Safety Code.
San Diego County Superior Court Judge Gregory Pollack exercised discretion to abstain and granted summary judgment to Kaiser, prompting an appeal to the California Fourth District Appellate Court. Justice Martin Buchanan wrote the opinion. Justices Julia Kelety and Jose Castillo concurred.
The underlying allegations assert Kaiser violated both state law and the federal Affordable Care Act, which guarantees patients access to a current, correct list of medical providers participating in an insurance plan. Elliott alleged Kaiser conducted annual reviews of its data but neither corrected inaccuracies nor prominently displayed its own contact information so users and providers could report errors.
In seeking summary judgment, Kaiser argued the complaint lacked allegations that qualified as factual disputes subject to trial. Elliott countered by noting the unfair competition law allows for elected attorneys and administrative agencies to enforce its provisions through litigation.
Buchanan framed Pollack’s ruling as an attempt not to subvert the authority of the California Department of Managed Health Care and a rejection of the argument the complaint sought remedies that agency couldn’t provide, such as restitution or civil penalties, which could only come through the unfair competition or false advertising laws.
The panel rejected Pollack’s determination that state lawmakers didn’t impose an accuracy requirement on insurers. Buchanan said the law specifically states a clear directive, specifically that “a provider directory shall not list or include information on a provider that is not currently under contract with the plan.” He further noted the law calls for weekly updates to online versions of the plan whenever the insurer hears and confirms a provider isn’t accepting new patients, isn’t under contract for a specific product, has changed locations or contact information or if an enrolled member has a verified complaint of noncompliance.
“A trial court has the authority and ability, in the exercise of its ordinary judicial function, to adjudicate a UCL claim based on alleged violations of” the clause supporting the lawsuit, Buchanan wrote. “Abstention is not appropriate in these circumstances.”
The panel said Pollack looked at other parts of the law to find process requirements, but said those rules don’t negate requirements for substantive accuracy and added that “no one has suggested that the DMHC has authorized Kaiser to depart from these accuracy requirements, so enforcing them against Kaiser could not interfere with any judgment made by the DMHC.” Furthermore, even if Pollack had correctly interpreted that law, the panel said that addressed only the merits of the claim and not any of the factors providing for judicial abstention.
The panel agreed an unfair competition lawsuit to complement DMHC’s regulatory authority was proper and noted the department’s brief on the appeal — filed through the California Attorney General’s Office and not in support of either party — acknowledged the requested relief would not interfere, in part because the DMHC doesn’t independently review directories.
Buchanan also wrote Pollack could’ve ruled without making a determination of complex economic policy better left to lawmakers or a state agency and agreed the requested relief wouldn’t have been “unnecessarily burdensome for the trial court to monitor and that there is no other means of redress that would be more effective.”
Finally, the panel said Kaiser failed to show how the DMHC would be more effective at remedying inaccurate directories than a lawsuit from a city attorney, further noting the unique remedies of unfair competition litigation are unavailable to a state agency, weighing against judicial abstention.
“Because the trial court’s order omitted any substantive analysis of each of the three factors that courts generally must consider in exercising their discretion to abstain from adjudicating an action, and because it relied on an incorrect interpretation of the statute, we conclude that the court did not apply the correct principles of law, and therefore abused its discretion, by deciding to abstain from adjudicating,” Buchanan wrote.
The panel remanded the complaint and clarified Pollack could not again choose to abstain. It said the same reasoning applies to the parts of the complaint that relied on other state laws.
Elliott led the lawsuit, along with deputies Mark Ankcorn and Kevin Bing, with assistance from Bradley Bernstein Sands. The California Attorney General’s Office filed a support brief on behalf of the government.
“This lawsuit is a wakeup call to the life insurance industry,” Elliott said in an emailed statement. “Californians expect you to follow the law, not to exploit a beneficiary when a loved one has died, or an owner who is incapacitated. The industry’s antics are unlawful, and we will do all we can to hold them accountable and get relief for those they've harmed.”
Kaiser is represented by Sheppard, Mullin, Richter & Hampton. The California Association of Health Plans filed a support brief through Manatt, Phelps & Phillips.
Kaiser issued the following statement: “The decision by the Court of Appeal returns the case to the trial court and is not a ruling on the merits of the allegations. We disagree with the plaintiff’s allegations and characterizations of our provider directories, including the claim that those directories include so-called ‘ghost networks.’ Kaiser Permanente’s provider directories are updated regularly and are subject to extensive regulation and oversight. Providing high-quality, culturally responsive care so our members can achieve the best possible health outcomes is central to our mission. Kaiser Permanente will vigorously defend against the allegations in this complaint.”