In response to the question whether the Medicare Secondary Payer statute preempted the state’s automobile no fault law, the State of Florida Third District Court of Appeal responded with an emphatic No! Ocean Harbor Cas In. v. MSPA Claims (2018 Fla. App. LEXIS 13775) involved the intersection of the law of Florida class actions, Federal Medicare and Florida no-fault insurance. In Ocean Harbor, MSPA Claims 1 LLC (“MSPA) asserted it was an assignee of a defunct Medicare advantage organization (“MAO”) and filed a class action seeking to represent other MAOs to prosecute a private cause of action for double damages under the Medicare Secondary Payer Act against Ocean Harbor Casualty Insurance Company, a Florida no-fault automobile insurer. MSPA sought reimbursement for the medical bills of Ocean Harbor’s no-fault insureds which were paid by MSPA’s alleged assignor under Medicare but which allegedly should have been paid by Ocean Harbor. The trial court certified the class and Ocean Harbor appealed. The Court acknowledged the nature of proof required under this private cause of action was at the heart of the class certification.
The complaint alleged Ocean Harbor failed to pay covered medical bills on behalf of certain insureds in violation of federal and state law. This failure caused MSPA’s alleged assignor to make conditional payments under Medicare for those bills, thereby triggering a right to bring a private cause of action for double damages under 42 U.S.C. § 1395y(b)(3)(A). MSPA contended class action was appropriate because some or all of the 37 MAOs in Florida might be in a similar situation. Common issues will predominate, it asserted, because its right to payment from Ocean Harbor was “automatic.” Proof of liability involved little more than establishing (1) its assignor made a payment under Medicare to an enrollee or his or her provider, (2) the enrollee was also insured by Ocean Harbor and (3) Ocean Harbor failed to pay or reimburse the payment. Any other issues as to liability were “waived” or could be ascertained based upon a “propietary algorithm” developed by MSPA’s lead attorney and that class-wide damages could be derived from statistical models.
Ocean Harbor countered MSPA’s characterization of its right to reimbursement as automatic and its reliance upon Humana Med. Plan. Inc. v. W. Heritage Ins Co., 832 F.3d 1229, 1232 (11th Cir. 2016) was misplaced. In that case, the private insurer’s responsibility to pay medical bills was demonstrated by a pre-existing tort settlement in which coverage was admitted and the amount due held in trust. Here, in contrast, MSPA did not intend to demonstrate Ocean Harbor’s responsibility to pay the medical bills at issue by pre-existing settlements reached by Ocean Harbor. Instead, MSPA intended to demonstrate Ocean Harbor’s responsibility by other means, namely Ocean Harbor’s obligations under Florida’s no-fault statutes and its enrollees’ no-fault policies with Ocean Harbor.
After noting an MAO’s access to the private cause of action did not appear to be settled law in light of several forceful and reasoned dissents, the Court concluded it could not accept the argument that MSPA’s reimbursement rights were “automatic” and not governed by Florida law relating to the recovery of benefits under a no fault insurance policy. It stated,
“Contrary to MSPA’s arguments, the Secondary Payer Act does not eliminate the terms and conditions of underlying state no fault law. Under the Secondary Payer Act, “Medicare does not pay until the beneficiary has exhausted his or her remedies under no-fault insurance.”
As this language indicates, the Secondary Payer Act does not supersede an existing State insurance policy; it merely requires the exhaustion of the benefits under that policy. Except for making Medicare the secondary payer and private insurance the primary payer, the Secondary Payer At “has never created or extended coverage; it has only dictated the order of payment when Medicare beneficiaries already have alternate sources of payment for health care.””
Thus, for each reimbursement it claims, MSPA must demonstrate not only did it make a proper conditional payment under Medicare, but also that Ocean Harbor was required to make the payment in the first place under Florida no-fault law. Therefore, MSPA’s proof to establish liability would necessarily degenerate into a series of mini trials under Florida’s no-fault law. The Court stated that an MAO must prove with evidence Ocean Harbor’s valid insurance contracts actually rendered it responsibility for primary payment of each of the expenses it sought to recover.
Florida’s no fault insurance is a system that involves each insurance company paying for the damage incurred by its customer regardless of who is at fault, but coverage is not without limitations. The Court noted Florida had gone to great lengths to craft a statutory structure that protected both the insured and insurer in a process that promotes accurate and expedited payments of medical bills and lost income to covered persons. Insured persons must provide reasonable proof of loss; an insurer may decline or reduce payment if the claim was unrelated, not medically necessary, unreasonable or the amount of the charge exceed statutory limits or schedules; coverage may be denied if the injuries were intentionally self-inflicted, incurred during the commission of a felony or while operating a vehicle without the owner’s permission; the law requires a demand letter be sent to the insurer as a condition precedent to litigation; it allowed an insurer to decline to pay all or part of a claim subject to the insurer specifying in writing what and why it is declining to pay; is allows insurers to require written notice of a loss as soon as practicable; and also authorizes the insurer to obtain relevant medical records and even require a mental or physical examination by physicians; and it provides for civil actions for penalties against an insurer who fails to timely pay valid claims and against an insured who commits insurance fraud.
In short, payment under Florida no-fault law proceeds on a factually intensive bill-by-bill and case-by-case basis and an insurer’s liability is far from “automatic.” The Court concluded MSPA would have to prove Ocean Harbor was required to pay each particular bill it sought to recover and Ocean Harbor would be entitled to raise any appropriate defense under the statute and individual policies, effectively defeating the trial court’s class certification because each “mini trial” would not necessarily involve the same questions or similar results:
What matters to class certification…is not the raising of common ‘questions’ – even in droves – but, rather the capacity of a class-wide proceeding to generate common answers apt to drive the resolution of the litigation; and
A class representative establishes predominance if he or she demonstrates a reasonable methodology for generalized proof of class-wide impact. A class representative accomplishes this if he or she, by proving his or her own individual case, necessarily proves the cases of the other class members.
Finally, the Court rejected MSPA’s argument that Ocean Harbor had failed to exhaust available administrative remedies. It argued it had made an “organization determination” that Ocean Harbor had the responsibility to make payments and that Ocean Harbor could have challenged these determinations, as the Court was unable to find in the record examples of when and where MSPA made administratively appealable “organization determinations” that Ocean Harbor had the responsibility to make specified payment and it found nothing in the cited regulations that created a federal administrative remedy for a primary plan like Ocean Harbor to challenge such an “organization determination.” The regulations cited by MSPA dealt only with claims by an enrollee against an MSA and while Congress created a “right of appeal” for secondary payer determinations relating to no fault insurance when it enacted the SMART Act, the administrative remedy was available only as to decisions made by the Secretary for which the Secretary is seeking to recover conditional payments from an applicable primary plan; in so doing, Congress specifically excluded MAOs.
This is yet another example of a Medicare Advantage Plan’s continued attempt to avail itself of the private cause of action provisions of the Medicare Secondary Payer Act and in this particular case an attempt to tap into the primary plan’s resources before liability for medical expenses was even established using not real evidence but an algorithm and statistical models. Even if not successful in this case, it shows these MAOs are determined to achieve on par status with Medicare. We encourage all our clients to exercise due diligence in determining if their claimants were at any time during the pendency of their claims covered by Part C or Part D Plans and whether any payments were made under those plans. If so, it is prudent to address and resolve any potential reimbursement claims at the time of the settlement in order to avoid any potential litigation as well as the possibility of double damages as it is inevitable that at some time a MAO’s access to the private cause of action will become settled law.