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Plavin v. Group Health Incorporated

United States District Court, M.D. Pennsylvania

June 22, 2018

STEVEN PLAVIN, on behalf of himself and all others similarly situated,, Plaintiff,
v.
GROUP HEALTH INCORPORATED,, Defendant.

          MEMORANDUM OPINION

          Robert D. Mariani United States District Judge

         I. Introduction and Procedural History

         This case is a putative class action against Defendant Group Health Incorporated ("Group Health") brought by Plaintiff Steven Plavin, alleging unjust enrichment and violations of New York's General Business Law and Insurance Law based on Group Health's marketing statements about coverage benefits for its health insurance plan, which was bargained for and sponsored by Plavin's employer, the City of New York. Group Health moved for dismissal of the Complaint, arguing that all claims are time barred, and in the alternative, that the General Business Law claims fail to allege consumer-oriented conduct or material misrepresentations, that the Insurance Law claim fails to allege material misrepresentations, and that the unjust enrichment claim should be precluded because it is quasi-contractual, duplicative of other claims, and fails to adequately allege the requisite elements. Doc. 31. For the reasons that follow, Defendant's motion will be granted.

         II. Factual Allegations

         Group Health is a not-for-profit corporation that offers health insurance plans to consumers through their employers. Doc. 1 ¶ 14. Plavin is a retired New York City police officer and a current resident of Pennsylvania. Id. ¶ 13. Prior to retirement, he was offered a choice of eleven health plans by his employer. Id. ¶¶ 19-20. Plavin enrolled in Group Health's preferred provider organization ("PPO") plan in 1984 and has chosen to re-enroll in the same plan since then. Id. ¶ 13. The Group Health plan did not require payment of out-of-pocket premiums from members, and it provided coverage for out-of-network services as well as in-network services. Id. ¶ 20. Plavin alleges that "[c]osts being equal, PPO plans are generally preferred by consumers because they provide coverage for services rendered by almost any provider, whether in-network or out-of-network." Id. Plavin alleges that "[b]y promoting itself as a PPO plan providing comprehensive in-network and out-of-network coverage that also did not require out-of-pocket premiums," the Group Health plan appeared to be an attractive plan to New York City employees, and as a result, the plan "had the highest enrollment of any health plan offered to NYC employees and retirees." Id. ¶25.

         The open enrollment period for current New York City ("NYC") workers occurs every year, and the period for NYC retirees is every two years. Id. ¶ 21. Prior to open enrollment, New York City employees and retirees receive the NYC Summary Program Description, which includes a summary of each of the eleven plans offered, as drafted by the respective insurers. Id. ¶ 22. Plavin alleges that the "Summary Program Description (the "Description") is the only document distributed to NYC employees and retirees" prior to enrollment. Id. ¶ 24. In addition to the Description, Group Health also offered a Summary of Benefits & Coverage on its website. Id. ¶ 24. Besides these two documents, "[prospective members were not provided with any certificate of insurance or schedule of reimbursement rates, and such documents were not available on [Group Health's] (or its parent EmblemHealth's) website." Id.

         Plavin alleges that both the Description and the Summary of Benefits & Coverage misled members by suggesting that it offered substantial reimbursement rates for out-of- network services, and that there is only a "mere possibility that reimbursements might be less than the actual fee charged by out-of-network providers." Id. ¶¶ 4-5. The materials disclosed that reimbursements for out-of-network services would be made according to the "NYC Non-Participating Provider Schedule of Allowable Charges" (the "Schedule"), which states, in relevant part:

The rate at which you will be reimbursed for particular service is contained within the Schedule. These reimbursement rates were originally based on 1983 procedure allowances and some have been increased periodically. The reimbursement levels as provided by the Schedule may be less than the fee charged by the non-participating provider. Please note that certain non-participating provider reimbursement levels may be increased if you have the optional rider. The subscriber is responsible for any difference between the fee charged and the reimbursement as provided by the Schedule. A copy of the Schedule is available for inspection at [Group Health].

         Doc. 13-1 (Complaint Exhibit A) at 1 (emphasis added). Plavin alleges that "[n]othing in the two documents indicated that reimbursement rates for virtually every out-of-network service would be a fraction of the actual cost of that service." Doc. 1 ¶ 5. The Complaint concedes that the Description disclosed that reimbursement levels "may be less than the fee charged by the [out-of-network] provider," but alleges that it was presented as "a mere possibility-not a certainty-that members would be required to pay out-of-pocket for out-of-service services." Id. ¶ 31. The Complaint further alleges that Group Health "did not explain that the reimbursement rates were extraordinarily low when measured against other reimbursement methodologies typically used by PPOs." Id. ¶ 32. In addition, Plavin alleges that the Description's statements about the 1983 Schedule were misleading, because "out of thousands of procedures and services listed [in the Schedule], only a tiny number had been adjusted." Id. Finally, Plavin alleges that contrary to Group Health's representations, the Schedule was never made available to its members. Id. ¶ 7.

         In addition to alleging misrepresentations regarding the reimbursement rates, Plavin also alleges that Group Health misleadingly touted the plan's "Catastrophic Coverage" feature. The Complaint alleges that the feature is advertised as covering "100% of the Catastrophic Allowed Charge as determined by [Group Health]" for out-of-network expenses in excess of $1500. Id. ¶ 6. Compare Doc. 13-1 at 1 (Description describing Catastrophic Coverage as follows: "If you choose non-participating providers for predominantly in-hospital care and incur $1, 500 or more in covered expenses[, ] you are eligible for additional Catastrophic Coverage"). However, Plavin alleges that the term "Catastrophic Allowed Charge" simply meant "the same thing as 'Allowed Charge' does," that is, it "provides for reimbursement of the exact same Allowed Amount set forth in the Schedule that [Group Health] was already required to pay regardless of whether the member was above or below the $1, 500 'Catastrophic Coverage' threshold." Id. ¶ 10. Plavin claims that labeling the "Catastrophic Coverage" as a key benefit was misleading, because it "provides for reimbursement of the exact same Allowed Amount set forth in the Schedule that [Group Health] was already required to pay regardless of whether the member was above or below the $1, 500 'Catastrophic Coverage' threshold"; in other words, it "added literally nothing to the basic coverage." Id.

         The Complaint also alleges that there were misleading examples set forth in the Summary of Benefits & Coverage, which was made available on Group Health's website, including examples of out-of-network procedures that required "0% co-insurance" and a hypothetical illustrating how coverage might be calculated. Id. ¶¶ 31-32. Plavin alleges that the coverage calculation hypothetical was misleading because it showed a 66% reimbursement rate, while the actual "[reimbursement rates across all services averaged roughly 23% of actual cost... [and] for some types of services, reimbursement rates were as low as 9% of actual cost" Id. ¶ 19. Finally, the Complaint takes issue with the optional rider, which was offered for an additional fee under the plan, under which reimbursement rates would be based on an "enhanced schedule for certain services [that] increases the reimbursement of the basic program's non-participating provider fee schedule, on average, by 75%." Id. ¶ 7. Plavin has purchased the optional rider since he became a member of the Group Health plan in 1984. Id. ¶¶ 13, 41. He alleges that Group Health failed to disclose that the rider only applied to in-patient services, not out-patient services, when the latter category accounted for "65% of total out-of-network charges." Id. ¶ 11.

         Most of the Complaint's misrepresentation allegations are based on a settlement agreement arising out of the New York Attorney General's investigation, i.e. an Assurance of Discontinuance. According to the Complaint, the Attorney General's Office found that Group Health failed to "accurately describe limitations of out-of-network reimbursement" rates, misrepresented "the frequency with which the Schedule was updated," failed to "sufficiently describe the circumstances by which members unknowingly encounter out-of-network providers," and failed "to make the Schedule available to members." Id. ¶ 39. The Complaint also alleges that the Attorney General found that Group Health's materials "do not accurately set forth the potentially wide gap between the out-of-network reimbursement and out-of-network charges, and potentially substantial out-of-pocket amounts for which [Group Health] Plan members will be responsible," and that "it was deceptive for [Group Health] to merely suggest that it is only a possibility that members will be required to pay for out of network services." Id. ¶ 9.

         With respect to Plavin's personal injuries, the Complaint alleges that he submitted four out-of-network medical services received by his wife from February 2013 to July 2014. Id. ¶ 41. For a July 2014 procedure, Group Health "did not pay Mr. Plavin until February 2015," when it "ultimately paid just $32" for a medical treatment billed at $98. Id. Plavin does not allege when the other three procedures were ultimately reimbursed. Based on these four concrete injuries, Plavin brings claims against Group Health for unjust enrichment (Count I), violations of New York's General Business Law ("GBL") §§ 349 and 350 (Counts II and III), and New York Insurance Law § 4226 (Count IV). Plavin filed this action on behalf of himself and "[a]ll persons who were members of Group Health Incorporated's Comprehensive Benefit Plan from 2011 to 2015." Id. ¶ 42. On October 6, 2017, Group Health filed a motion to dismiss all claims, arguing that all the claims are time barred, and that in the alternative, Plavin failed to state a claim as to all causes of action. Doc. 31-1.

         III. Standard of Review

         A complaint must be dismissed under Federal Rule of Civil Procedure 12(b)(6) if it does not allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009).

         "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (internal citations, alterations, and quotations marks omitted). A court "take[s] as true all the factual allegations in the Complaint and the reasonable inferences that can be drawn from those facts, but... disregard[s] legal conclusions and threadbare recitals of the elements of a cause of action, supported by mere conclusory statements." Ethypharm S.A. France v. Abbott Labs., 707 F.3d 223, 231 n.14 (3d Cir. 2013) (internal citation, alteration, and quotation marks omitted). Thus, "the presumption of truth attaches only to those allegations for which there is sufficient 'factual matter' to render them 'plausible on [their] face.'" Schuchardt v. President of the U.S., 839 F.3d 336, 347 (3d Cir. 2016) (alteration in original) (quoting Iqbal, 556 U.S. at 679). "Conclusory assertions of fact and legal conclusions are not entitled to the same presumption." Id.

         "Although the plausibility standard 'does not impose a probability requirement,' it does require a pleading to show 'more than a sheer possibility that a defendant has acted unlawfully.'" Connelly v. Lane Constr. Corp., 809 F.3d 780, 786 (3d Cir. 2016) (internal citation omitted) (first quoting Twombly, 550 U.S. at 556; then quoting Iqbal, 556 U.S. at 678). "The plausibility determination is 'a context-specific task that requires the reviewing court to draw on its judicial experience and common sense."' Id. at 786-87 (quoting Iqbal, 556 U.S. 679).

         IV. Analysis

         A. Plavin's GBL Claims Are Not Conclusively Time-Barred

         Group Health argues that all of Plavin's claims are time-barred because they "accrued when he first subscribed to the [Group Health] plan in 1984." Doc. 31-1 at 10. . Doc. 31-1 at 9-14. Alternatively, Group Health argues that the claims could have accrued in 2004, when Plavin first started submitting claims for out-of-network services, "which put him on additional notice of the obvious fact that reimbursement rates under the [Group Health] Plan were a 'fraction' of the providers' bills for those services." Id. at 14. In support, Group Health attached an affidavit from a company representative to its motion, which avers that "[s]ince May of 2004, individuals under Mr. Plavin's plan [i.e. Plavin and his family members] have submitted hundreds of claims for out-of-network services for which they have received reimbursement." Doc. 31-3 ¶ 6. Group Health contends that the Court may consider the affidavit because it is "integral to or explicitly replied upon in the complaint," citing to a case involving a motion for judgment on the pleadings. See Doc. 31-1 at 14 (citing Yatsonsky v. State Farm Fire & Cas. Co., 2016 WL 1660863, at *4 (M.D. Pa. Apr. 27, 2016)).

         However, the instant motion is a motion to dismiss, not one for judgment on the pleadings. It is well established that "[a]s a general matter, a district court ruling on a motion to dismiss may not consider matters extraneous to the pleadings" unless they are "integral to or explicitly relied upon in the complaint." In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997). Plavin's alleged injuries arise from four medical claims submitted by him in 2013 and 2014. The Complaint makes no references to any claims Plavin submitted in 2004. Furthermore, the type of assertions contained in the affidavit-details regarding the Plaintiffs medical claims and whether or how much he was reimbursed-is exactly the type of subject matter that should properly be explored during discovery. The document is therefore neither integral to nor explicitly relied upon in the Complaint. Thus, the Court will not consider when Plavin first started submitting out-of-network claims to Group Health based on the extraneous affidavit. Instead, for statute of limitations purposes, the proper inquiry before the Court is whether Plavin's claims accrued in 1984, when he first enrolled in the Group Health policy, i.e. 1984, or in or after 2014, when he submitted specific claims to Group Health and received lower reimbursement rates than expected. On the face of the Complaint, Plavin alleged four specific instances of claim submissions, only one of which may be timely-he alleges that pursuant to a medical claim he submitted for a July 2014 procedure, he was not reimbursed by Group Health until February 2015, which would be within three years of August 2017, when the instant suit was filed. Doc. 1 ¶ 41.

         The statute of limitations for GBL claims is three years. Gaidon v. Guardian Life Ins. Co. of Am., 96 N.Y.2d 201, 210 (2001); see also Gristede's Foods, Inc. v. Unkechauge Nation, 532 F.Supp.2d 439, 452 (E.D.N.Y.2007) ("Since Gaidon [], New York courts have uniformly applied a three-year statute of limitations to section 349 and section 350 [of the GBL] cases."). While the accrual of GBL claims "is not dependent upon any date when discovery of the alleged deceptive practice is said to occur," it is dependent on "when a plaintiff is injured by the actions alleged to have violated the Statute." Marshall v. Hyundai Motor Am., 51 F.Supp.3d 451, 461 (S.D.N.Y. 2014) (internal citations omitted). Pursuant to Gaidon, the seminal New York Court of Appeals case on this issue, accrual of GBL claims' statute of limitations "first occurs when plaintiff has been injured by a deceptive act or practice violating section 349 [of the GBL]." Id. at 210. Plavin argues that even though he enrolled in the same Group Health policy year after year since 1984, his claim did not accrue until his "expectations were actually not met" because the suit involves allegations "that a defendant deceptively marketed a benefit so as to give a consumer false expectations." Doc. 41 at 9 (quoting Enzinna v. D'Youville College, 922 N.Y.S.2d 729, 730 (N.Y.App.Div. 2011)). Plavin argues that in one of the four claim submissions specifically pled in the Complaint, his expectations were not met until he was informed of the reimbursement rate of his claim until February 2015, and "that is when he suffered injury under the GBL" Id. at 11.

         In Gaidon, the Court of Appeals stated that where "the gravamen of the complaints of General Business Law § 349 violations was not false guarantees of policy terms, but deceptive practices inducing unrealistic expectations ... plaintiffs suffered no measurable damage until the point in time when those expectations were actually not met." Gaidon, 96 N.Y.2d at 211-12. Gaidon dealt with a particular type of insurance contracts: so-called "vanishing premiums," which were advertised as policies that, after a certain period of time, would no longer require premium payments because the policy's "continuing interest/ dividend rate performance [would] fully offset premiums at the projected date." Id. at 211. The Gaidon court held that because the plaintiffs' claims were not premised on any false statements apparent in the policies themselves, but on "deceptive practices inducing unrealistic expectations" about the plan's benefits, they did not suffer injury until "they were first called upon to pay additional premiums beyond the date by which they were led to believe that policy dividends would be sufficient to cover all premium costs." Id.

         Based on the distinction delineated by Gaidon, Plavin's claims cannot be defeated on statute of limitations grounds because he does not allege a "false guarantee of policy terms," but rather, that Group Health created "unrealistic expectations" regarding the benefits of its reimbursement coverage of out-of-network expenses. Viewing the facts in a light most favorable to the Plavin, the Complaint does not allege any false statements in the policy itself. In fact, the Complaint alleges that Plavin never received a copy of the policy. Doc. 1 ¶¶ 7, 24. Rather, the "gravamen" of Plavin's claims is that he was provided with misleading marketing statements by Group Health, which, while not false on their face, nevertheless induced him into believing that reimbursement levels for out-of-network claims would be higher than the ones he ultimately received. See, e.g., Id. ¶¶ 31, 32 (alleging that while the Description stated that "[t]he reimbursement levels, as provided by the Schedule, may be less than the fee charged by the non-participating provider," it "did not explain that the reimbursement rates were extraordinarily low when measured against other reimbursement methodologies typically used by PPOs"); id. ΒΆΒΆ 5, 7, 32 (alleging that ...


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