Antitrust Law Daily Wrap Up, ANTITRUST—W.D. Pa.: Class conspiracy claims severely limited against Pittsburgh health care provider, insurer, (Aug 22, 2014)

By Greg Hammond, J.D.

A class of health insurance coverage purchasers dwindled yesterday, when the federal district court in Pittsburgh partially denied individual purchasers’ motion to file a third amended complaint (TAC) against the University of Pittsburgh Medical Center (UPMC) and insurance company Highmark, Inc. In partially denying the plaintiffs’ motion to file a TAC—alleging an antitrust conspiracy between the health care provider and insurer, the court determined that individual purchasers could not state a valid measure of damages, but small group purchasers may be able to do so if given the opportunity (Royal Mile Company, Inc. v. UPMC, August 21, 2014, Conti, J.).

Background. Individual and group health insurance purchasers filed an antitrust suit against Highmark and UPMC, alleging that they suffered damages from a conspiracy entered into by the health care provider and insurer. Specifically, the purchasers alleged that UPMC and Highmark conspired “to control, divide and/or monopolize both the market for medical care and the market for health insurance in the Greater Pittsburgh area and to their exclusive benefit.” But for the conspiracy, the purchasers alleged that they would have had more choices for health care insurance providers; they would have paid lower premiums to purchase equivalent levels of insurance; there would have been more viable alternatives to UPMC that would have offered equivalent care at lower prices; and they would therefore have paid lower amounts to health care providers. After their second amended complaint was dismissed, the purchasers moved to file a TAC, which UPMC and Highmark contested.

Individual purchasers’ damages. In their proposed TAC, individual purchasers—led by Pamela Lang—sought damages “measured by the difference between the rates Lang paid Highmark and the rates Lang would have paid Highmark absent the UPMC-Highmark conspiracy.” However, the court determined that those damages were the exact measure of damages the court previously held barred by the filed rate doctrine.

In addition, the individual purchasers sought damages “measured by the difference between the payments Lang directly paid to UPMC and the payments Lang would have directly paid to UPMC absent the UPMC-Highmark conspiracy.” Nevertheless, the court determined that this measure of damages was also barred by its interpretation of the filed rate doctrine set forth in its September 27, 2013 opinion dismissing the plaintiffs’ second amended complaint. According to the court, the filed rate doctrine bars antitrust suits based on rates that have been filed and approved by federal or state agencies. Because insurance companies were required to file their individual insurance plans with the Pennsylvania Insurance Department, the filed rate doctrine applied, and the individual purchasers were left without any viable measure of damages. Consequently, the motion to file a TAC with regard to the individual purchasers was denied.

Small group purchasers’ damages. The small group purchasers—including Royal Mile Company, Inc. and Cole’s Wexford Hotel, Inc.—also alleged two measures of damages in their proposed TAC: (1) “damages measured by the difference between the rates the small group plaintiffs paid Highmark and the rates the small group plaintiffs would have paid Highmark absent the UPMC-Highmark conspiracy”; and (2) “Damages measured by the difference between the rates the small group plaintiffs paid Highmark during the alleged UPMC-Highmark conspiracy and the rates the small group plaintiffs would have paid Highmark’s insurance competitors not subject to the rate-filing requirements absent the conspiracy.”

The first measure of damages was barred under the filed rate doctrine, but the second measure of damages was found to be partially valid. Specifically, the court determined that the small group purchasers could file a TAC, alleging a measure of damages based on the difference between the rates Highmark charged the small group plaintiffs during the alleged conspiracy and the rates Highmark’s “excluded and marginalized competitors”—who were not subject to the PID’s rate-filing requirements prior to March 21, 2012—would have charged the small group purchasers but for the conspiracy.

In addition, Cole’s Wexford’s measure of damages based on “the difference between the rates Cole’s Wexford paid [Highmark Health Insurance Company (HHIC)] and the rates Cole’s Wexford would have paid HHIC but for the alleged UPMC-Highmark conspiracy” was deemed not barred by the filed rate doctrine. However, Cole’s Wexford would only be able to allege this measure of damages to the extent it could demonstrate that Highmark shifted Cole’s Wexford to HHIC prior to March 21, 2012, and the group purchaser paid rates to HHIC that were not subject to approval by the PID.

Statute of limitations. UPMC and Highmark argued that the purchasers’ theory of recovery based on the alleged conspiracy is barred by the statute of limitations. Specifically, they claimed that the “exclusion theory of liability”—that the two companies conspired to exclude Highmark’s competitors from the relevant market—is wholly different from the liability theories identified in the purchasers’ previous complaints, and that the claims consequently do not relate back to the filing date of the original complaint. The court disregarded this argument, finding that relation back is appropriate in this case, as: (1) the proposed TAC is based on the same set of operative facts as the original complaint; (2) it concerns the same transaction at issue in the original complaint; and (3) the defendants had notice of the proposed TAC’s factual allegations when the original complaint was filed. However, the court did note that the small group purchasers could not recover damages sustained prior to December 2, 2006.

Sufficiency of class action allegations. In reviewing Fed. R. Civ. P. 23(a)’s numerosity, commonality, typicality, and adequacy of representation factors, the court only found only one class definition that could be appropriate for class certification—Highmark customers that were switched to HHIC. This definition would be limited to a measure of damages based on “the rates the small group plaintiffs that Highmark switched to HHIC paid to HHIC during the alleged UPMC-Highmark conspiracy and the rates the small group plaintiffs that Highmark switched to HHIC would have paid to HHIC but for the alleged UPMC-Highmark conspiracy.” The court reasoned that this was the only group of Highmark customers that had common questions that predominated over individualized issues, and it could be administratively ascertainable if Highmark possessed the records of customers that were switched to HHIC. The issue of adequacy of counsel was not decided at the current stage of proceedings, as there were currently no valid class allegations pending before the court. Consequently, the small group purchasers were allowed to file a third amended complaint containing class allegations regarding a class defined as Highmark customers that were switched to HHIC prior to March 21, 2012.

The case number is 10-1609.

Attorneys: Andrew M. Stone (Stone Law Firm, LLC) and Kathleen S. Kiernan (Boies, Schiller & Flexner LLP) for Royal Mile Co., Inc. and Coles Wexford Hotel, Inc. Keith E. Whitson (Schnader, Harrison, Segal & Lewis) for UPMC. Alexander W. Saksen (Gordon & Rees LLP) for Highmark, Inc.

Companies: Royal Mile Co., Inc.; Coles Wexford Hotel, Inc.; UPMC; Highmark, Inc.

Cases: Antitrust PennsylvaniaNews