Cause of Action Asserted Against Blue Cross for Violation of Montana's Unfair Trade Practices Act is Not Preempted by ERISA

Posted by Scott Calvert on November 09, 2011

In a recent decision, the Ninth Circuit Court of Appeals ruled that ERISA does not preempt causes of action based on unfair insurance practice claims brought under Montana’s Unfair Trade Practices Act.  However, the Court did find that Montana’s so-called “little HIPAA” was preempted by federal HIPAA, which is part of ERISA. 

In Fossen v. Blue Cross and Blue Shield, __ F.3d __ (9th Cir. October 18, 2011), the Court considered an appeal from a District Court ruling that entered summary judgment in favor of Blue Cross on two causes of action.  Plaintiffs – which consisted of three brothers, their corporations and a partnership of the three corporations – sued Blue Cross after the health insurer increased their premiums by over 40%.  The lawsuit, filed in state court, alleged two causes of action:  violation of Montana Code Annotated § 33-22-526(a) (also known as Montana’s “little HIPAA” statute) and violation of Montana Code Annotated § 33-18-101 (also known as Montana’s Unfair Trade Practices Act).  Plaintiffs alleged that premium increase violated little HIPAA’s prohibition against imposing a “premium or contribution that is greater than the premium or contribution for a similarly situated individual” on account of "any health status-related factor of the individual” and the Unfair Trade Practices Act’s prohibition against “unfair discrimination between individuals of the same class and of essentially the same hazard in the amount of premium, policy fees, or rates charged.”  The action, filed in state court, was removed to the District Court, which eventually granted Blue Cross’ motion for summary judgment as to all causes of action.

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Will Healthcare Reform Affect the Rate of Claim Denials?

Posted by Robert McKennon on January 14, 2010

On Monday October 19, 2009, Lisa Girion of the Los Angeles Times reported on the healthcare reform bills being debated in Congress and their potential impact on claim denials by insurers. Girion states that, “Despite growing frustration with the way health insurers deny medical treatments, major healthcare bills pending in Congress would give patients little new power to challenge those sometimes life-and-death decisions.” She further explains that “a patient's ability to fight insurers' coverage decisions could be more important than ever because Congress, in promoting cost containment and price competition, may actually add to the pressure on insurers to deny requests for treatment.”

The article discusses the wrongful death lawsuit filed by Hilda and Grigor Sarkisyan, whose daughter Nataline died in 2007 after Cigna decided not to cover a liver transplant. The lawsuit against Cigna over the transplant denial was dismissed this year by a federal judge, who ruled that the Employee Retirement Income Security Act (“ERISA”) preempts suits with state law claims for damages over such health benefit decisions. The Sarkisyans traveled to Washington this year to try to persuade members of Congress to pass legislation which would remove ERISA’s bar of certain types of damages that are now available under state law.

Rep. Adam B. Schiff (D-Burbank), who met with the Sarkisyans in Washington, said that there are not enough votes in Congress to pass such legislation.  Insurers and employers strongly support ERISA’s limitations on damages. They say any increase in litigation would drive up costs and could force some employers to drop health benefits.

The healthcare reform bill pending in the House would extend the right to sue under state law for damages to anyone who buys coverage through one of the health insurance exchanges it envisions. That could include small businesses. However, the pending legislation does not remove ERISA’s barrier to such suits by employees who procure coverage in the employment-based insurance market.