McCarthy Fin., Inc. v. Premera

Opinion

FI~E~ lbAs opinion was fited for record IN CLERICI OPPICI ' at 6:aoetr"\ on A:pi,\ 2,7.-D\S IUPRBECOURti'DaiOI'IINir - 'DATE APR 0 2 20 5 I .

~JJl, Ronafd R. Carpenter Supr~nte Coun; Ci'i1<

IN THE SUPREME COURT OF THE STATE OF WASHINGTON

McCARTHY FINANCE, INC., a ) Washington corporation; McCARTHY ) RETAIL FINANCIAL SERVICES, LLC, a ) Washington limited liability company; ) HEMPHILL BROTHERS, INC., a ) Washington corporation; and its affiliates ) No. 90533-9 and subsidiaries, J.A. JACK & SONS, INC., ) a Washington corporation, LANE MT, ) SILICA CO., a Washington corporation; ) PUCKETT & REDFORD, PLLC, a ) Washington professional limited liability ) company; and ANNETTE STEINER, a ) single person; ) ) EnBanc Respondents, ) ) v. ) ) PREMERA, a Washington corporation; ) PREMERA BLUE CROSS, a Washington ) Corporation; LIFEWISE HEALTH PLAN ) OF WASHINGTON, aWashington ) Corporation; and WASHINGTON ) ALLIANCE FOR HEALTHCARE ) Filed APR 0 2 2015 INSURANCE TRUST, and its Trustee, F. ) BENTLEY LOVEJOY, ) ) Petitioners. ) ) ) McCarthy Fin. Inc. v Premera, No. 90533-9

GONZALEZ, J .-In Washington, health insurance premiums are approved by the

Washington State Office of the Insurance Commissioner (OIC). Under the nationally

recognized court created "filed rate doctrine," once an agency approves a rate, such as

a health insurance premium, courts will not reevaluate that rate because doing so

would inappropriately usurp the agency's role. However, courts may consider claims

that are related to rates approved by an agency but do not require the courts to

reevaluate such rates. In most cases, Washington courts must consider Consumer

Protection Act (CPA), chapter 19.86 RCW, claims alleging general damages merely

related to agency-approved rates. In the case before us, however, the plaintiffs allege

that several entities doing business in the health insurance field violated the CPA but

request specific damages the award of which would require a court to reevaluate the

reasonableness of health insurance premiums approved by the OIC. Because

awarding the specific damages requested by the plaintiffs would require a court to

inappropriately substitute its judgment for that of the OIC, we affirm the trial court's

dismissal of the plaintiffs claims.

FACTS

The plaintiffs' complaint alleges that two groups of defendants, (1) Premera,

Premera Blue Cross, and Life Wise Health Plan of Washington (collectively Premera)

and (2) the Washington Alliance for Healthcare Insurance Trust and its trustee, F.

Bentley Lovejoy (collectively WAHIT), colluded and made false and misleading

2 McCarthy Fin. Inc. v Premera, No. 90533-9

representations to the plaintiffs that induced the plaintiffs to purchase health insurance

policies under false pretenses.

Premera is a group of nonprofit health care service contractors that receive

premiums from groups and individuals in return for providing health care services

through a network of providers. Ch. 24.03 RCW; R.CW 48.44.010(9), .020(1). The

Washington Alliance for Healthcare Insurance Trust is a nonprofit trust designed to

hold insurance policies through which participating employers can obtain health

benefit plans for their employees; the. trust is not a Premera affiliate.

The plaintiffs are several companies and one individual that purchased Premera

policies (Policyholders). The Policyholders wish to form classes of groups and

individuals that purchased Premera policies: class A, the large group class, consists of

employer groups of more than 50 persons; class B, the small group class, consists of

employee groups of at least 1 but not more than 50 employees; and class C consists of

individuals.

The Policyholders claim that Premera and WAHIT violated the CPA. As the

Court of Appeals summarized, the Policyholders claim CPA violations:

[B]ased on (a) assertions on the WAHIT web site that it is an "employer governed trust," (b) advertising in WAHIT mailings that it "negotiate[s]" to obtain high quality benefits at the "lowest possible cost" or "most affordable cost," (c) assertions that WAHIT is a "member governed group," (d) allegations that the insurers "falsely stated publicly that the reasons for the annual premium increases are because of increases in the cost of medical, hospital and health care" and "concealed from the plaintiffs and class members the fact that the percentage increases in those costs were not required to justify

3 McCarthy Fin. Inc. v Premera, No. 90533-9

the increase in premiums," and (e) allegations that the insurers "created [WAHIT]" in order to enable it to accumulate its surplus.

McCarthy Fin. Inc. v. Premera, 182 Wn. App. 1, 18, 328 P.3d 940 (2014) (alterations

in original). The Policyholders allege that due to Premera and WAHIT's violations of

the CPA they experienced "excessive, unnecessary, unfair and deceptive overcharges

for health insurance," resulting in Premera obtaining "profits of millions of dollars"

that helped enable Premera to amass a surplus of approximately $1 billion. Clerk's

Papers (CP) at 10-11. The Policyholders also claim "that for a non-profit corporation

to amass over $1 billion in surplus is contrary to the non-profit statute under which

PREMERA ... is chartered and is a violation of public policy." !d. at 19.

The plaintiffs request only two specific forms of damages: (1) for the "unfair

business practices and excessive overcharges for premiums," the plaintiffs request

"the sum of the excess premiums paid to the defendants," in other words, a "refund[]

of the gross and excessive overcharges in premium payments" and (2) "[i]fthe surplus

is excessive and unreasonable," the plaintiffs assert that "the amount of the excess

surplus should be refunded to the subscribers who have paid the high premiums

causing the excess." !d. at 28.

On Premera and WAHIT' s motion, the trial court dismissed the Policyholders'

suit in its entirety based on the filed rate, primary jurisdiction, and exhaustion of

remedies doctrines. Specifically, the trial court dismissed all claims of class B (small

group) and class C (individuals) pursuant to CR 12(b)(6) and dismissed all claims of

4 McCarthy Fin. Inc. v Premera, No. 90533-9

class A (large group) on summary judgment under CR 56. The Court of Appeals

reversed the trial court in relation to certain ofthe Policyholders' CPA claims, which

are identified above. McCarthy, 182 Wn. App. at 18. We granted Premera and

WAHIT's petition for review. McCarthy Fin., Inc. v. Premera, 181 Wn.2d 1013,337

P.3d 325 (2014).

ANALYSIS

A . .Standard of Review

The trial court dismissed all of the Policyholders' claims on a CR 12(b)(6)

motion or on summary judgment. CP at 157-58, 274-75. We review both dismissals

de novo. FutureSelect Portfolio Mgmt., Inc. v. Tremont Grp. Holdings Inc., 180

Wn.2d 954) 962,331 P.3d 29 (2014) (citing Kinney v. Cook, 159 Wn.2d 837,842, 154

P.3d 206 (2007)); Jones v. Allstate Ins. Co., 146 Wn.2d 291, 300, 45 P.3d 1068 (2002)

(citing Lybbert v. Grant County, 141 Wn.2d 29, 34, 1 P.3d 1124 (2000)).

B. The Filed Rate Doctrine

Health insurance premiums in Washington must be approved by the OIC.

RC\V 48.44.017(2), .020-.024, .040, .070, .110, .120, .180; WAC 284-43-901,-910

through -930, -945, -950. Among its powers, the OIC may disapprove (1) ambiguous

or misleading contracts and deceptive solicitations and (2) contracts the benefits of

which are "unreasonable in relation to the amount charged for the contract." RCW

48.44.020(3), (2), .11 0. The OIC considers numerous factors when determining

whether a health insurance premium is reasonable, including "[h]ow much profit the

5 McCarthy Fin. Inc. v Premera, No. 90533-9

company expects to make[,] ... generally called 'contribution to surplus' or

'projected profit[,]' ... [which] depends on the company's current level of surplus as

well as the type of business." CP at 323. The Policyholders do not challenge that the

OIC approved the health insurance premiums that the Policyholders paid.

Consumers' .power to challenge agency-approved rates is limited by the

common law filed rate doctrine. See Wegoland Ltd. v. NYNEX Corp., 806 F. Supp.

1112, 1113-16 (S.D.N.Y. 1992) (providing a history of the doctrine). As this court

observed:

The "filed rate" doctrine, also known as the "filed tariff' doctrine, is a court-created rule to bar suits against regulated utilities involving allegations concerning the reasonableness of the filed rates. This doctrine provides, in essence, that any "filed rate"-a rate filed with and approved by the governing regulatory agency-is per se reasonable and cannot be the subject of legal action against the private entity that filed it. The purposes of the "filed rate" doctrine are twofold: (1) to preserve the agency's primary jurisdiction to determine the reasonableness of rates, and (2) to insure that regulated entities charge only those rates approved by the agency. These principles serve to provide safeguards against price discrimination and are essential in stabilizing prices. But this doctrine, which operates under the assumption that the public is conclusively presumed to have knowledge of the filed rates, has often been invoked rigidly, even to bar claims arising from fraud or misrepresentation.

Tenore v. AT&T Wireless Servs., 136 Wn.2d 322,331-32,962 P.2d 104 (1998)

(footnotes omitted). In cases such as this that involve claims and damages related to

agency-approved rates, courts must determine whether the claims and damages are

merely incidental to agency-approved rates and therefore may be considered by courts

or would necessarily require courts to reevaluate agency-approved rates and therefore

may not be considered by courts. See id. at 344.

6 McCarthy Fin. Inc. v Premera, No. 90533-9

But while a court must be cautious not to substitute its judgment on proper rate

setting for that of the relevant agency, the legislature has directed that the CPA be

liberally construed. See, e.g., RCW 19.86.920; Panag v. Farmers Ins. Co. of Wash.,

166 Wn.2d 27, 37, 204 P.3d 885 (2009); Indoor Billboard/Wash., Inc. v. Integra

Telecom of Wash., Inc., 162 Wn.2d 59, 73, 170 P.3d 10 (2007); Short v. Demopolis,

103 Wn.2d 52, 60, 691 P.2d 163 (1984). The mere fact that a claim is related to an

agency-approved rate is no bar. The CPA itself addresses the limited times when

agency action exempts application of the CPA. See RCW 19.86.170; Vogt v. Seattle-

First Nat'! Bank, 117 Wn.2d 541, 550-52, 817 P.2d 1364 (1991); In re Real Estate

Brokerage Antitrust Litig., 95 Wn.2d 297,300-01, 622 P.2d 1185 (1980)). In most

cases, courts must consider CPA claims even when the requested damages are related

to agency-approved rates because, to the extent that claimants can prove damages

without attacking agency-approved rates, the benefits gained from courts' considering

CPA claims outweigh any benefit that would be derived from applying the filed rate

doctrine to bar the claims.

In this case, however, rather than requesting general damages or seeking any

damages that do not directly attack agency-approved rates, the Policyholders

specifically request ( 1) a "refund[] of the gross and excessive overcharges in premium

payments" and (2) a refund of"the amount of the excess surplus." CP at 28. The

Policyholders' requested damages cause their CPA claims to run squarely against the

filed rate doctrine. Even assuming that the Policyholders can successfully prove all

7 McCarthy Fin. Inc. v Premera, No. 90533-9

the elements of their CPA claims, a court's awarding either of the two specific

damages requested by the Policyholders would run contrary to the purposes of the

filed rate doctrine because the court would need to determine what health insurance

premiums would have been reasonable for the Policyholders to pay as a baseline for

calculating the amount of damages and the ore has already determined that the health

insurance premiums paid by the Policyholders were reasonable. Accordingly, the

Policyholders' claims are barred by the filed rate doctrine because to award either of

the specific damages requested by the Policyholders a court would need to reevaluate

rates approved by the ore and thereby inappropriately usurp the role of the ore.

Given that application of the filed rate doctrine is decisive in this case, we

decline to address either the primary jurisdiction or exhaustion of remedies doctrines.

CONCLUSION

We reverse the Court of Appeals and affirm the trial court's dismissal of the

Policyholders' claims.

8 McCarthy Fin. Inc. v Premera, No. 90533-9

WE CONCUR:

s~/52 ~?' -t:k~- -=1--aM ~._____:_~q-=+-----