Ninth Circuit Revives Antitrust Case Alleging Health Insurance Monopolization in California

On Tuesday, the Ninth Circuit reversed a dismissal by the Northern District of California of an appeal in a case alleging that Kaiser Permanente attempted to monopolize health insurance in a California county. One judge wrote a dissenting opinion.

Plaintiffs NorthBay Healthcare Group Inc. and NorthBay Healthcare Corporation originally filed a complaint that alleged that defendants Kaiser Foundation Health Plan, Kaiser Foundation Hospitals Inc. and the Permanente Medical Group conspired to monopolize and did monopolize the health insurance market in Solano County, where the companies are located, through anticompetitive acts. 

Specifically, the plaintiffs purported that Permanente physicians at two Kaiser facilities influenced hospital workers to “steer” uninsured patients toward NorthBay facilities while “steering” insured patients from NorthBay hospitals toward Kaiser hospitals, the court explained. The plaintiffs also purported that Permanente began reimbursing NorthBay at “less than half the previously reimbursed rate” after terminating a 2010 agreement.

The complaint was dismissed by the district court, which cited a failure to “allege four essential elements of ‘causal antitrust injury,’” including unlawful conduct, injury, injury flowing from anticompetitive conduct, and conduct antitrust laws were meant to prevent. However, the circuit court ruled that the plaintiffs’ complaint did indeed sufficiently allege these elements, plus another element, market participation/inextricable intertwinement. 

Judge Carlos Bea dissented to the majority’s decision, saying it “sidestepp(ed) governing law on two essential elements of ‘causal antitrust injury’: (1) that the defendant’s conduct be unlawful and (2) the proximate cause requirement that the plaintiff participate in the market the defendant is allegedly monopolizing.” 

Regarding the first element, Judge Bea said instead of alleging the facts of what the defendant did, the plaintiff makes “legal conclusions that claim Kaiser violated the law.” The judge maintained that “steering” is not an allegation of fact but rather a conclusion. On the second disputed element of proximate cause, the judge claimed the plaintiffs failed to allege that the defendants’ anticompetitive acts proximately caused the plaintiffs’ injury “by targeting a market in which they are direct participants for monopolization,” as they did not allege that NorthBay is an actual participant in the health insurance market.

Despite the dissent, the district court decision was reversed and remanded.

The plaintiffs were represented by Latham & Watkins LLP. The defendants were represented by Farella Braun & Martel LLP, Crowell & Moring LLP, and Manatt, Phelps & Phillips.