CA Court Allows Unpaid Medical Debt Suit Against AmeriHealth Insurance to Proceed

Last Wednesday, in the Central District of California, the court issued an order granting in part and denying in part AmeriHealth Insurance Company of New Jersey’s —and AmeriHealth’s agent, Magellan Healthcare— motion to dismiss Malibu Behavioral Health Services’ first amended complaint (FAC).  Malibu is seeking $394,985 for unpaid medical services provided to a patient.

Malibu provides detoxification services along with medication for treatment to patients.  From June 2016 to December 2016, Malibu provided a patient with “covered treatment…for mental health and substance use disorder.”  That patient was insured by AmeriHealth under a New Jersey policy, which provides coverage for out-of-network services such as those provided by Malibu in this dispute.  AmeriHealth’s agent, Magellan, had exclusive control over benefit decisions, utilization management and claims handling related to the patient’s treatment by Malibu.  

Malibu claims prior to administering treatment to the patient, Malibu and AmeriHealth conducted a verified benefits call to discuss the terms, which guaranteed Malibu would be paid at a 90% rate until the patient’s out-of-pocket maximum had been met, at which point AmeriHealth would pay 100%. When AmeriHealth and Magellan ceased payments to Malibu, Malibu argued defendants had unilaterally rescinded the policy.  Malibu asserted eight claims relating to breach of contract under common law and California state law, along with promissory estoppel and fraudulent inducement.

The court held for the first count, violation of California’s Unfair Competition Law (UCL), Malibu failed to plausibly allege it lacks an adequate remedy at law for “compensation and damages” outside of the damage it already seeks through other claims.  Specifically, the court stated “to state a UCL claim, a plaintiff must plead that legal remedies are inadequate” and dismissed with leave to amend. For the second claim, breach of written contract, the court dismissed with prejudice, because the written confirmations Magellan sent to Malibu did not constitute contracts.  Additionally, Malibu appeared to expressly concede that the confirmations did not constitute contracts themselves.  The third claim, breach of oral contract, was also dismissed with leave to amend, because Malibu failed to adequately plead the existence of numerous oral agreements, even if said agreements were allegedly confirmed by the confirmations.  

All the remaining claims were dismissed with the exception of count four, breach of implied contract.  A breach of implied contract falls upon the obligations implied from a parties’ conduct, rather than expressed in words.  The court held Malibu sufficiently pleaded facts that established an implied contract claim.  Specifically, Malibu alleged it “confirmed with agents of AmeriHealth that LK was eligible for applicable behavioral health benefits.”  Furthermore, the plaintiff claimed that on a January 2016 call, “AmeriHealth’s agent promised and informed Malibu that it would be paid for behavioral health services at 90% of UCR (90% of billed charges) until LK’s out-of-pocket maximum had been met, at which point AmeriHealth would pay 100% of UCR (100% of billed charges).”  Malibu alleged it rendered services based upon those representations.  Thus, the court did not dismiss this claim.

Overall, the plaintiff has the opportunity to amend several of the claims within 14 days of the order.  Malibu is represented by Napoli Shkolnik.  Defendants are represented by Maynard Cooper, Stradley Ronon Stevens and Young, and Doll Amir and Eley.