Reinsurance & Arbitration Focus

A patient sued her health plan and the plan's debt collector under various California and federal laws in connection with alleged attempts by the plan to unlawfully collect the balances of the plaintiff's medical statements that were in excess of the insurance allowed amounts. The defendants moved to compel arbitration based on arbitration agreements that the plaintiff executed when she enrolled in the health plan from year to year beginning in 2012. The plaintiff, however, opposed arbitration, arguing that (1) the arbitration agreements did not comply with section 1363.1 of the California Health and Safety Code, which requires that an arbitration provision be "prominently displayed" and meet certain other conditions, and (2) the agreements were unconscionable.

The court rejected the plaintiff's arguments. With respect to section 1363.1, the court found that it was preempted by the Affordable Care Act for the time period in which that law was applicable and that the plan's arbitration disclosures complied with the law. And as to unconscionability, the court found that the agreements' attorney fees and cost-splitting provisions were unconscionable, but these provisions could be severed from the arbitration agreements and would not preclude arbitration.

The plaintiff also argued that, if the court were to compel arbitration, it should be on a class basis because the arbitration agreements included references to "parties" asserting a claim (in plural form). The court, however, was not convinced. Relying on the U.S. Supreme Court's Stolt-Nielsen decision and Ninth Circuit authority, the court held that even an ambiguous arbitration agreement did "not provide a sufficient basis to conclude that parties to an arbitration agreement agreed to" resolve their dispute in a class proceeding. The court therefore compelled individual arbitration.

Hunter v. Kaiser Foundation Health Plan, No. 3:19-cv-01053 (N.D. Cal. Jan. 17, 2020).