Brown v. Kaiser Foundation Health Plan of the Mid-Atlantic States, Inc.

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

ADAM A. BROWN, :

: 1:19-CV-1190

Plaintiff, :

: Hon. John E. Jones III

:

v. :

:

KAISER FOUNDATION HEALTH :

PLAN OF THE MID-ATLANTIC :

STATES, INC. :

:

Defendant. :

MEMORANDUM

December 27, 2019

Presently pending before the Court is Defendant Kaiser Foundation Health

Plan of the Mid-Atlantic States, Inc.’s Motion to Dismiss Plaintiff’s Complaint.

(Doc. 15). The matter has been fully briefed, (Docs. 16, 17, 18), and is ripe for

disposition. For the reasons that follow, Defendant’s motion shall be granted.

I. BACKGROUND

In accordance with the standard of review applicable to a motion to dismiss,

the following facts are derived from Plaintiff’s complaint and viewed in the light

most favorable to him.

Between 2006 and 2016, Plaintiff Adam Brown (“Brown”) lived in Adams

County, Pennsylvania but served as a firefighter with the Metropolitan Washington

Airports Authority (“MWAA”). (Doc. 1 at ¶ 7). Brown was stationed at Dulles

International Airport in northern Virginia. (Id. at ¶ 8). MWAA provided Brown

with healthcare coverage through Defendant Kaiser Foundation Health Plan of the

Mid-Atlantic States, Inc. (“Kaiser”). (Id. at ¶¶ 9–14). According to Brown,

“Kaiser offered this ‘healthcare coverage’ . . . understanding that MWAA

employees might live outside of Virginia, the District of Columbia, and Maryland

(the Service Area),” (id. at ¶ 14), and “Kaiser explicitly contemplated (both in the

Healthcare Contract) and in the Group Evidence of Coverage that Kaiser would

pay for its Members’ medical services that were provided outside of the Service

Area.” (Id. at ¶ 15). Indeed, Brown posits, “Kaiser implicitly contemplated that it

would pay for medical services provided in Pennsylvania for its Members.” (Id. at

¶ 16).

In 2016, Brown was diagnosed with cancer and underwent several months of

treatment at Gettysburg Hospital in Adams County. (Id. at ¶¶ 23–27). During this

time, Kaiser sent Brown several explanations of benefits letters rejecting payment

for Brown’s treatment because Gettysburg Hospital and Brown’s doctors were not

covered under Brown’s plan. (Id. at ¶ 28). Shortly thereafter, Kaiser referred

Brown to a treatment program in Maryland that was covered by his plan. (Id. at ¶

29). According to Brown, “[t]reatment in Maryland forced [him] to travel

distances for treatment and to travel distances home after the treatment,” which, in

turn, caused him financial hardship. (Id. at ¶ 30). Moreover, Brown asserts that,

because Kaiser declined to cover his treatment at Gettysburg Hospital, he “was

forced to make payments for his medical care out of his own pocket,” and “has

been unable to pay his Pennsylvania medical providers for medical services that

they rendered and for which Kaiser inappropriately refused to make payment.”

(Id. at ¶¶ 33–34).

On July 11, 2019, Brown filed a Complaint against Kaiser in this Court

seeking treble damages, costs, and attorneys’ fees. (Id.). In Count I, Brown

contends that Kaiser violated several subsections of Pennsylvania’s Unfair Trade

Practices and Consumer Protection Law (“UTPCPL”), 73 P.S. §201-2(4).

Specifically, Brown cites, Kaiser represented to him that its healthcare coverage

had “characteristics . . . uses . . . benefits or quantities that [it did] not have.” 73

P.S. §201-2(4)(v). Brown asserts that this is evidenced by Kaiser improperly

denying payment of benefits, coverage requests, authorizations, and referrals for

care. Brown also avers that Kaiser engaged in “other fraudulent or deceptive

conduct which creates a likelihood of confusion or of misunderstanding,” 73 P.S.

§201-2(4)(xxi), by, among other things, “improperly and wantonly” denying

requests for coverage and appeals of those denials and imposing upon its members

an unnecessarily complex and technical appeal/resubmission process. (Id. at ¶¶

37–64). Moreover, Brown posits, Kaiser knew that Brown was relying upon its

agents for fiduciary advice and, despite having knowledge of additional methods

by which Kaiser could process Brown’s claims which could bring them within its

coverage, Kaiser was intentionally deceptive and misleading and failed to disclose

those methods to him. (Id. at ¶ 65–69). Finally, Brown contends, Kaiser’s conduct

was so pervasive that its conduct amounts to “a business practice,” (id. at ¶ 63),

and “corporate culture.” (Id. at ¶ 70). In Count II, Brown avers a bifurcated claim

of insurance bad faith against Kaiser under 42 Pa.C.S. § 8371. First, Brown

reasons, Kaiser breached its duty to him in bad faith by failing to cover the costs of

his treatment. Second, Brown continues, Kaiser committed “a separate and

independent act[] of bad faith” by inadequately investigating its denials after he

presented new evidence “that Kaiser should have paid coverage for certain

benefits.” (Id. at ¶¶ 76–88). In Count III, Brown asserts a claim of intentional

misrepresentation against Kaiser based upon the facts that: (1) “Kaiser never made

it known to Brown that [it] would be limiting his treatment to certain doctors and

facilities,” (id. at ¶ 90); (2) “Kaiser paid certain doctors and facilities for services

rendered in Adams County, Pennsylvania,” (id. at 91), yet also “denied certain

doctors and facilities for services rendered in Adams County, Pennsylvania,” (id. at

92); and (3) “motivated by Kaiser’s self-interest and ill will toward Brown,” Kaiser

deliberately failed to disclose certain material facts and deliberately misrepresented

certain other facts “with the intentions that Brown would forego further efforts to

have his benefits justly paid.” (Id. at ¶¶ 93–96).

On October 7, 2019, Kaiser filed the instant motion to dismiss Brown’s

Complaint, (Doc. 15), and a brief in support thereof on October 21, 2019. (Doc.

16). Brown filed a brief in opposition on November 4, 2019, (Doc. 17), and Kaiser

filed a Reply on October 18, 2019. (Doc. 18). The matter has been fully briefed

and is ripe for disposition. For the reasons that follow, Kaiser’s motion shall be

granted.

II. STANDARD OF REVIEW

In considering a motion to dismiss pursuant to Rule 12(b)(6), courts “accept

all factual allegations as true, construe the complaint in the light most favorable to

the plaintiff, and determine whether, under any reasonable reading of the

complaint, the plaintiff may be entitled to relief.” Phillips v. Cty. of Allegheny, 515

F.3d 224, 231 (3d Cir. 2008) (quoting Pinker v. Roche Holdings, Ltd., 292 F.3d

361, 374 n.7 (3d Cir. 2002)). In resolving a motion to dismiss pursuant to Rule

12(b)(6), a court generally should consider only the allegations in the complaint, as

well as “documents that are attached to or submitted with the complaint . . . and

any matters incorporated by reference or integral to the claim, items subject to

judicial notice, matters of public record, orders, [and] items appearing in the record

of the case.” Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006).

However, “[t]he Court is not obligated to accept as true ‘bald assertions,’ Morse v.

Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997) (internal quotation

marks omitted), ‘unsupported conclusions and unwarranted inferences,’ Schuylkill

Energy Res., Inc. v. Pennsylvania Power & Light Co., 113 F.3d 405, 417 (3d Cir.

1997), or allegations that are ‘self-evidently false,’ Nami v. Fauver, 82 F.3d 63, 69

(3d Cir. 1996).” Pinnavaia on behalf of Pinnavaia v. Celotex Asbestos Settlement

Tr., 271 F. Supp. 3d 705, 708 (D. Del. 2017).

In essence, a Rule 12(b)(6) motion tests the sufficiency of the complaint

against the pleading requirement of Federal Rule of Civil Procedure 8(a). Rule

8(a)(2) requires that a complaint contain a short and plain statement of the claim

showing that the pleader is entitled to relief, “in order to give the defendant fair

notice of what the claim is and the grounds upon which it rests.” Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47

(1957)). While a complaint attacked by a Rule 12(b)(6) motion to dismiss need not

contain detailed factual allegations, it must contain “sufficient factual matter,

accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009). To survive a motion to dismiss, a civil plaintiff

must allege facts that “raise a right to relief above the speculative level . . . .”

Victaulic Co. v. Tieman, 499 F.3d 227, 235 (3d Cir. 2007) (quoting Twombly, 550

U.S. at 555). The complaint must indicate that defendant’s liability is more than “a

sheer possibility.” Iqbal, 556 U.S. at 678.

III. DISCUSSION

In its first issue, Kaiser argues that Count II must be dismissed because

Kaiser is a Health Maintenance Organization (“HMO”) which Pennsylvania courts

have explicitly found to be exempt from statutory bad faith claims. (Doc. 16 at 7

(citing DiGregorio v. Keystone Health Plan East, 840 A.2d 361, 370 (Pa. Super.

Ct. 2003) (“Pennsylvania specifically exempts HMOs . . . from statutory bad faith

claims under 42 Pa.C.S. § 8371.”); Nordi v. Keystone Health Plan West Inc., 989

A.2d 376, 382 (Pa. Super. Ct. 2010) (“HMO Act § 1560 insulates [an HMO] from

laws like the bad faith statute which ‘relate to insurance corporations engaged in

the business of insurance.’”)). Alternatively, Kaiser argues, even if the Court

erroneously finds that Kaiser is an insurer—as opposed to an HMO—Brown’s

failure to attach the insurance contract or his communications with Kaiser

regarding his claims is dispositive. That is, according to Kaiser, to assert a claim

under 42 Pa.C.S. § 8371, a claimant must demonstrate that the insurer “(1) lacked a

reasonable basis for denying benefits and (2) knew or recklessly disregarded its

lack of a reasonable basis.” (Doc. 18 at 4 (quoting Atiyeh v. National Fire Ins. Co.,

742 F. Supp.2d 591, 598 (E.D. Pa. 2010) (citing Toy v. Metro. Life Ins. Co., 928

A.2d 186, 193 (Pa. 2007))). Here, Kaiser, concludes, because Brown failed to

attach or quote the alleged insurance contract or any denial letters related to his

claims, he has failed to state a plausible claim for relief and Count II must be

dismissed.

In response, Brown asserts only that “[w]hether Kaiser is an insurer, an

HMO, or some other form of legal entity should be a factual analysis to be

completed during discovery,” and that, because he has pleaded in the alternative

that Kaiser is an insurer or an HMO, he has pleaded sufficient facts upon which his

insurance bad faith claim can survive a motion to dismiss. We disagree.

Although the district court is obliged on a motion to dismiss to accept as true

all of plaintiff’s well-plead facts in his complaint, “[t]he Court is not obligated to

accept as true ‘bald assertions,’ Morse v. Lower Merion Sch. Dist., 132 F.3d 902,

906 (3d Cir. 1997) (internal quotation marks omitted), ‘unsupported conclusions

and unwarranted inferences,’ Schuylkill Energy Res., Inc. v. Pennsylvania Power &

Light Co., 113 F.3d 405, 417 (3d Cir. 1997), or allegations that are ‘self-evidently

false,’ Nami v. Fauver, 82 F.3d 63, 69 (3d Cir. 1996).” Pinnavaia on behalf of

Pinnavaia v. Celotex Asbestos Settlement Tr., 271 F. Supp. 3d 705, 708 (D. Del.

2017). In his Complaint, Brown avers that Kaiser is either an insurer or an HMO.

However, Kaiser plainly cannot be both. Thus, in this instance, Kaiser’s legal

status constitutes a legal conclusion rather than a factual predicate and Brown’s

conclusory assertion that Kaiser is an insurer, and not an HMO, amounts to an

unsupported legal conclusion that need not be credited at this juncture. Indeed,

Kaiser has easily pointed to evidence subject to judicial notice demonstrating that

it is an HMO, see Buck, 452 F.3d at 260 (finding that a court may consider “items

subject to judicial notice” and “matters of public record” when ruling up a

Fed.R.Civ.P. 12(b)(6) motion), whereas, not only has Brown failed to attach the

documents relative to his claim which would likely reveal Kaiser’s legal status, but

Brown has failed to present any non-conclusory fact in support thereof.

Moreover, even were we inclined to credit Brown’s bald allegation that

Kaiser is an insurer, we agree with Kaiser that Brown has failed to state a plausible

claim for bad faith under 42 Pa.C.S. § 8371. As Kaiser notes, Brown’s complaint

is devoid of any factual pleadings demonstrating that Kaiser lacked a reasonable

basis for denying benefits. See Atiyeh v. National Fire Ins. Co., 742 F. Supp.2d

591, 598 (E.D. Pa. 2010). Instead, Brown avers in a conclusory manner that

“Kaiser breached its insurance contract with Brown,” that Kaiser “denied Brown’s

appeal of a denial of payment of certain benefits, thereby first communicating the

results of its inadequate investigation . . . follow[ing] presentation of new evidence

and persuasion that Kaiser should have paid coverage for certain benefits,” that

Kaiser’s “inadequate investigation included a July 14, 2017 determination that an

appeal was untimely, when Kaiser Knew that the appeal had been timely

submitted,” that “Brown is an ‘insured’ of Kaiser,” that “all of the aforementioned

acts, omissions, and malfeasance were motivated by Kaiser’s self-interest and ill

will toward Brown and those similarly situated, and constitute bad faith,” and that

“all of the aforementioned acts, omissions, and malfeasance are outrageous.”

(Doc. 1 at ¶¶ 77–87). Each of these assertions constitute unsupported conclusions

that need not be credited on a motion to dismiss. Associated Gen. Contractors of

Cal. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983) (holding

that a court need not “assume that a . . . plaintiff can prove facts that the . . .

plaintiff has not alleged”); Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906

(3d Cir. 1997) (holding that a Court “need not credit a complaint's bald assertions

or legal conclusions when deciding a motion to dismiss”). Accordingly, we shall

grant Kaiser’s motion to dismiss as to Count II.

In its next issue, Kaiser argues that Brown’s UTPCPL necessarily fails.

According to Kaiser, “Brown appears to argue that by establishing a network of

providers for its members and requiring pre-authorization before covering out of

network care—a hallmark of any HMO—Kaiser violated” several provisions of the

UTPCPL. (Doc. 16 at 10). Moreover, Kaiser reasons, had Brown attached the

relevant documents associated with his healthcare coverage, it would be self-

evident that all his asserted UTPCPL violations are spelled out as terms of his

healthcare coverage. For example, “Brown claims that he did not know that

Kaiser, an HMO, would limit his treatment to certain doctors and facilities.

Brown’s averment is stunning because it goes against the entire premise of an

HMO. The plain language of the extent and nature of Kaiser’s coverage is

contained in the Contract delivered to Brown, which Brown has chosen to withhold

from the Court.” (Id. at 11). Indeed, Kaiser reasons, “[t]he Complaint is relatively

barren of specific factual allegations about coverage, but instead is loaded with

empty conclusions to the effect that Brown believes that all of his medical

expenses should have been covered.” (Id. at 14). Thus, Kaiser reasons, Brown’s

UTPCPL claims necessarily fail and Count I should be dismissed. We agree.

While a complaint attacked by a Rule 12(b)(6) motion to dismiss need not

contain detailed factual allegations, it must contain “sufficient factual matter,

accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009). To survive a motion to dismiss, a civil plaintiff

must allege facts that “raise a right to relief above the speculative level . . . .”

Victaulic Co. v. Tieman, 499 F.3d 227, 235 (3d Cir. 2007) (quoting Twombly, 550

U.S. at 555). In essence, the complaint must indicate that defendant’s liability is

more than “a sheer possibility.” Iqbal, 556 U.S. at 678. “To determine the

sufficiency of a complaint under the pleading regime established by [Iqbal and

Twombly], a court must take three steps: First, the court must ‘tak[e] note of the

elements a plaintiff must plead to state a claim.’ Second, the court should identify

allegations that, ‘because they are no more than conclusions, are not entitled to the

assumption of truth.’ Finally, ‘where there are well-pleaded factual allegations, a

court should assume their veracity and then determine whether they plausibly give

rise to an entitlement for relief.’” Santiago v. Warminster Twp., 629 F.3d 121, 130

(3d Cir. 2010) (internal citations omitted).

Regardless of the elements that Brown must demonstrate to establish a

prima facie violation of the UTPCPL, because Brown’s Complaint contains only

“naked assertions devoid of further factual enhancement” and “threadbare recitals

of the elements of a cause of action, supported by mere conclusory statements,”

Iqbal, 129 S.Ct. at 1949, Brown fails to state a plausible claim for relief under the

UTPCPL. As Kaiser notes, rather than spelling out facts, Brown simply concludes

that “Kaiser improperly denied payment of benefits,” (Doc. 1 at ¶ 41), “Kaiser

improperly denied coverage,” (id. at ¶ 42), “Kaiser improperly denied requests for

coverage,” (id. at ¶ 43), “Kaiser improperly denied claims,” (id. at ¶ 48), “Kaiser

improperly failed to advise Brown’s medical providers that they needed to

resubmit claims with itemizations and medical records,” (id. at ¶ 49), and so on and

so forth. At no point does Brown submit why the aforementioned actions were

improper. Thus, disregarding these assertions—as we must—we find that Brown

has failed entirely to state a plausible claim for relief under the UTPCPL and shall

grant Kaiser’s motion to dismiss Count I.

In their next issue, Kaiser argues that Brown has failed to a state a claim for

misrepresentation. According to Kaiser, because a claim for misrepresentation is

considered fraud, Federal Rule of Civil Procedure 9(b) requires Brown to plead as

much “with particularity.” FED.R.CIV.P. 9(b). “At the very least a ‘[p]laintiff must

set forth the exact statements or actions plaintiff alleges constitute the fraudulent

misrepresentations.’” (Doc. 16 at 15 (quoting Youndt v. First Nat. Bank of Port

Allegany, 868 A.2d 539, 545 (Pa. Super. 2005)). In his Complaint, Kaiser argues,

Brown does not specify the statements that he labels as “misrepresentations.”

Indeed, Kaiser continues, although claiming that “a July 14, 2017 communication

was ‘intentionally deceptive and misleading,’” (id. at 16 (quoting Doc. 1 at ¶ 93)),

Brown does not identify what the representation was or attach or quote the

communication. Thus, Brown has failed to plead his misrepresentation claim with

particularity and Count III must be dismissed. We agree.

As in Counts I and II, Brown has failed entirely to allege any facts in support

of his claim. That is, Brown simply presents “naked assertions devoid of further

factual enhancement” and “threadbare recitals of the elements of a cause of action,

supported by mere conclusory statements.” See Iqbal, 129 S.Ct. at 1949. In

support of his misrepresentation claim, Brown avers that Kaiser never informed

him that his treatment would be limited to certain doctors. In fact, Brown posits,

Kaiser explicitly contemplated providing services outside of its service area.

However, Brown offers no factual basis to so find. That is, Brown does not attach

the contract he insists exists between himself and Kaiser and does not provide any

promotional material wherein Kaiser represents that his treatment would not be so

limited or wherein such information is necessarily omitted where it should appear.

The only factual assertion Brown posits in support thereof is his anecdotal

explanation that “Kaiser paid some doctors and facilities for services rendered in

Pennsylvania however did not pay other doctors and facilities for services rendered

in Pennsylvania.” (Doc. 1 at ¶¶ 17–19). However, it is unreasonable to infer from

this fact that Kaiser in any way misrepresented anything to Brown. Brown does

not specify that the doctors that Kaiser did cover were outside of the limits of his

policy, but only that they were in Pennsylvania.

All of Brown’s other averments suffer from the same defect—they are

wholly conclusory and insufficient to sustain a claim, let alone a claim premised

upon fraud which must be pleaded with particularity. Brown conclusively insists

that Kaiser conducted an inadequate investigation, that an appeal of that inadequate

investigation was deemed untimely even though it was not, and that Kaiser’s

communications with him concerning this denial, investigation, and appeal were

“intentionally deceptive and misleading.” (Doc. 17 at 10). Yet Brown provides no

basis for us to so conclude. Brown does not even identify the statement that he

insists was misleading. Other than bald assertions, Brown has presented no facts

demonstrating the same or from which the same could be inferred. Thus, we are

constrained to conclude that Count III fails to state a claim for relief and shall grant

Kaiser’s motion premised thereon.

IV. CONCLUSION

For the foregoing reasons, Defendant’s Motion to Dismiss Plaintiff’s

Complaint, (Doc. 15), shall be granted. An appropriate Order shall issue.