Morris v. California Physicians’ Service, ___ F.3d ___, No. 17-55878, 2019 WL 1233466 (9th Cir. Mar. 18, 2019)
The Affordable Care Act requires insurers to calculate a Medical Loss Ratio (MLR), which is the ratio between its payments for medical services and its revenues. The insurer must pay a rebate to its enrollees if its payments for medical services are less than 80% of its revenues. Blue Shield had mistakenly included out-of-network physicians in its directory of in-network physicians, causing enrollees to see out-of-network physicians and pay higher rates. Blue Shield agreed to reimburse the enrollees for the higher cost of the out-of-network physicians, and it included those reimbursement payments in its annual MLR calculation. A class of enrollees sued Blue Shield for paying an insufficient rebate, arguing that Blue Shield improperly inflated its MLR by including the settlement payments. The enrollees argued the MLR should include payments to in-network providers only. The trial court dismissed this claim, reasoning the MLR could include payments to out-of-network providers.
The Ninth Circuit affirmed. Neither the text of the Affordable Care Act nor its implementing regulation distinguishes between in-network and out-of-network providers for purposes of the MLR calculation. Further, the purpose of the MLR was to incentivize insurers to make payments for medical services, an outcome that is achieved by including all payments in the MLR calculation, regardless of network coverage.
Prepared by H. Thomas Watson and Peder K. Batalden, Horvitz & Levy, LLP
California Society for Healthcare Attorneys
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