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Washington Therapists Win 9th Circuit Appeal Against Kaiser

Posted by on September 07, 2018

With a published opinion filed on September 4, 2018, the US Court of Appeals for the Ninth Circuit ruled that psychotherapists can prosecute claims in Washington state courts under the Washington Consumer Protection Act against health insurance companies that engage in unfair business practices or methods of competition. See Hansen v. Grp. Health Coop., 902 F.3d 1051 (9th Cir. 2018).

In August 2015, the Sound Justice Law Group, PLLC filed a class action complaint against the Kaiser Foundation Health Plan of Washington, then known as Group Health Cooperative, in a Washington state superior court. Sound Justice filed this complaint on behalf of two psychotherapists who seek to represent a class of similarly situated healthcare providers in Washington. The complaint challenges (a) Kaiser's use of mental healthcare guidelines that are biased against the full panoply of mental healthcare options which Washington psychotherapists are licensed to provide their patients; (b) Kaiser's use of guidelines to avoid paying for mental healthcare coverage required by Washington’s Mental Health Parity Act, Wash. Rev. Code § 48.44.341; and (c) Kaiser unfairly competing with healthcare providers by employing psychotherapists who strictly adhere to the guidelines and by discouraging patients form seeking treatment from psychotherapists who do not work for Kaiser. The complaint claims that this conduct by Kaiser has injured healthcare providers in Washington in violation of the Washington Consumer Protection Act, Wash. Rev. Code § 19.86.020, which prohibits “[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.”

In response to the complaint, Kaiser removed the case to federal court and sought its dismissal by arguing that the claims were completely preempted, and thus barred, by the federal Employee Retirement Income Security Act of 1974 ("ERISA"). In subsequent motion practice, the district court substantively agreed with Kaiser and issued a ruling which dismissed and otherwise rejected the meat of the case against Kaiser. Sound Justice appealed.

After hearing oral arguments on the matter in May 2018, the Ninth Circuit reversed the district court and held that the complaint alleged viable claims under state law against Kaiser which were not subject to the jurisdiction of federal courts and that the complaint should be remanded back to Washington state superior court.

Our federalism requires that federal courts refrain from adjudicating state-law claims between non-diverse parties unless a purported state-law claim is really a poorly disguised federal claim. But here, the Providers’ claims for unfair and deceptive business practices are not federal claims improperly cloaked in the language of state law. Those claims are basically that, as mental health professionals, the Providers are unfairly being cut out of the market of suppliers of mental health services by GHC’s unfair and deceptive use of treatment guidelines. To state their claims under Washington law, the Providers have alleged “(1) an unfair or deceptive act or practice, (2) occurring in trade or commerce, (3) affecting the public interest, (4) injury to a person’s business or property, and (5) causation.” Panag v. Farmers Ins. Co. of Wash., 166 Wash.2d 27, 204 P.3d 885, 889 (2009). Business and property injuries of this sort are “not of central concern” to ERISA, but instead pose important public policy issues under state law that are best decided by a state court. Franchise Tax Bd., 463 U.S. at 25–26, 103 S.Ct. 2841. We express no opinion whether these state-law claims are valid as pleaded, but rather conclude only that these claims do not mirror a suit for benefits due under an ERISA plan.

We hold that the Providers’ claims do not fall within the scope of, and so are not completely preempted by, ERISA section 502(a)(1)(B). We reverse the district court’s exercise of subject matter jurisdiction in dismissing these claims, and we remand with instructions for the district court to return the entirety of this action to the Washington superior court.

Hansen, 902 F.3d at 1060-61. Thus, the Ninth Circuit created precedent which allows Washington healthcare providers to hold health insurance companies directly accountable for their unfair or deceptive efforts to deny Washington consumers access to the healthcare they need.