Opinion
A155736
10-21-2020
CALIFORNIA PHYSICIANS' SERVICE, Plaintiff and Appellant, v. SANTA BARBARA SAN LUIS OBISPO REGIONAL HEALTH AUTHORITY, Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (City & County of San Francisco Super. Ct. No. CGC16552950)
California Physicians' Service dba Blue Shield of California (Blue Shield) appeals from a summary judgment in favor of the Santa Barbara San Luis Obispo Regional Health Authority (CenCal), a managed care organization that provides Medi-Cal benefits to residents of Santa Barbara and San Luis Obispo counties under contract with the California Department of Health Care Services (the Department). Blue Shield asserts the trial court erred when it found its claim against CenCal does not satisfy the requirements for a waiver of government immunity from tort liability under Government Code section 815.6. While Blue Shield raises cogent health care policy arguments, in the end they are unpersuasive on the discrete legal issues we must decide. The trial court correctly applied the law of government tort immunity to this complex subject matter, understandably likened during the proceedings to the "mythic Serbonian Bog, in which entire armies were known to disappear, never to emerge again." We affirm the judgment.
See "Serbonian Bog" <https://en.wikipedia.org/wiki/Serbonian_Bog> [as of October 19, 2020]
BACKGROUND
I. Medicaid MCOs
Medicaid provides health coverage to low-income Americans. It is funded jointly by the federal and state governments and administered by individual states in accordance with federal requirements. (See 67 Fed.Reg. 40989 (June 14, 2002).) The Centers for Medicare & Medicaid Services (CMS) supervises Medicaid at the federal level. (42 C.F.R. § 430.10.) In California, the Department oversees the state's Medi-Cal program.
We take judicial notice of relevant general information provided at www.medicaid.gov/medicaid/index.html [as of October 19, 2020] and other government websites referenced in this opinion. Blue Shield's May 10 and August 7, 2019 requests for judicial notice are granted.
See 42 C.F.R. 431.10; <www.dhcs.ca.gov/formsandpubs/laws/Documents/Section%201%20(1.1).pdf> [as of October 19, 2020].
Since 1982, states have increasingly moved away from a fee-for-service health care model toward providing Medicaid coverage through contracts with managed care organizations (MCOs). (67 Fed.Reg. 40992 (June 14, 2002).) CenCal is an MCO. Like health maintenance organizations (HMOs) in the non-Medicaid context, Medicaid MCOs such as CenCal, contract with the state to provide services to Medicaid beneficiaries through a network of contracted providers. (67 Fed. Reg. §§ 40989, 40992, 40995 (June 14, 2002).)
II. CenCal's Premium Assistance Program
From at least 1991 until September 2016, CenCal operated a "Premium Assistance Program" (the Program) for a small percentage of its members. Through the program, CenCal paid private health insurance premiums for qualifying members so they could have access to private coverage and health care providers outside of its network. The Program saved CenCal a substantial amount of money by shifting most of the cost of the participating members' medical care to private insurers.
CenCal remained responsible for co-pays and deductibles associated with its participating members' private coverage, Medi-Cal mandated services not covered by the private insurer, and monthly capitation payments to each member's primary care doctor.
This case involves approximately 40 CenCal Medi-Cal members who required expensive dialysis or kidney transplants to treat end-stage renal failure. In late 2014, representatives of three dialysis centers contacted CenCal to inquire whether these patients would be eligible for premium assistance if they were to obtain private health insurance. This presented a novel question. Up until then, the only CenCal members in the Program had existing private health insurance coverage when they first sought CenCal's help paying their premiums. In contrast, these high-cost renal failure patients did not have private insurance when they applied for the program.
CenCal determined it could validly enroll its members in the program if they had applied and been approved for coverage through Blue Shield, even though that coverage was not yet effective. This would be the first time CenCal used the Program to pay its members' initial premiums for new private health care policies. Over about a three-month period, CenCal approved Program applications for the 40 high-cost renal failure patients and, once they were enrolled, paid their initial and subsequent premiums for newly obtained Blue Shield policies.
Blue Shield complained to the Department that CenCal was improperly shifting its obligation to cover MediCal beneficiaries by extending premium assistance to individuals who lacked pre-existing coverage. The Department agreed. In December 2015, it informed CenCal that "the operation of a premium assistance program that does not require pre-existing coverage has never been authorized. Accordingly, [the Department] directs CenCal to immediately cease and desist enrolling any CenCal Medi-Cal beneficiaries in commercial products with the use of premium assistance." The Department also stated that it was "continuing to analyze whether the operation of a premium assistance program in the managed care environment is permissible following the enactment of the Affordable Care Act," and that, once its analysis was completed, it would "provide further guidance on whether the continued operation of a premium assistance program in the managed care environment is permissible, and, if so, the minimum requirements for the proper operation of such a program."
The Affordable Care Act or ACA refers to the Patient Protection and Affordable Care Act passed by Congress and signed into law in 2010. (42 U.S.C. § 18001.)
CenCal agreed to stop enrolling new members in the Program and, effective August 2016, terminated the Program altogether. But it refused Blue Shield's demand for reimbursement of $12 million the insurer claimed it wrongly expended as a result of what it described as "CenCal's scheme [] to dump high-cost medical risk into private plans."
III. Blue Shield Sues CenCal
Blue Shield sued CenCal for failure to perform its mandatory duties under Government Code section 815.6. As amended, the complaint alleged CenCal's premium assistance program was legally unauthorized, implemented in an unlawful manner, and violated CenCal's mandatory duty to provide coverage to its high-cost renal failure members "and not to shift such members into qualified health plans."
Unless otherwise noted, further statutory citations are to the Government Code.
The parties filed cross-motions for summary judgment. After extensive briefing and two hearings, the court ruled that CenCal was not required to reimburse Blue Shield for the additional costs it incurred for the renal failure patients' care. The court questioned the equities of this result. But it concluded it was "required to adhere to the stingy case law construing Government Code 815.6, the provision of the Government Claims Act providing for public entity liability for failure to discharge a mandatory duty. Because none of Blue Shield's proffered enactments contain a clear and explicit statement that CenCal was prohibited from providing health services for its members by purchasing insurance, the undisputed material facts establish that CenCal did not violate any mandatory duty it owed to Blue Shield. Moreover, even if one or more of Blue Shield's proffered enactments were construed per section 815.6 case law as prohibiting CenCal from purchasing insurance to provide health services for its members, the undisputed material facts establish that any such prohibition was, in the language of section 815.6, not 'designed to protect against the risk of a particular kind of injury' suffered by Blue Shield."
Blue Shield filed this timely appeal from the judgment entered for CenCal.
DISCUSSION
Blue Shield asserts that "[w]hen CenCal paid for its sickest members to enroll in [Blue Shield] plans, it violated four mandatory duties designed to protect against the type of harm inflicted." Guzman v. County of Monterey (2009) 46 Cal.4th 887, 898 (Guzman) states the applicable general principles.
"Under the Government Claims Act (Gov.Code, § 810 et seq.), there is no common law tort liability for public entities in California; instead, such liability must be based on statute. [Citations.] One such statute is Government Code section 815.6, which provides: 'Where a public entity is under a mandatory duty imposed by an enactment that is designed to protect against the risk of a particular kind of injury, the public entity is liable for an injury of that kind proximately caused by its failure to discharge the duty unless the public entity establishes that it exercised reasonable diligence to discharge the duty.' " (Guzman, supra, 46 Cal.4th at p. 897.) "[T]he intent of the act is not to expand the rights of plaintiffs in suits against governmental entities, but to confine potential governmental liability to rigidly delineated circumstances: immunity is waived only if the various requirements of the act are satisfied." (Williams v. Horvath (1976) 16 Cal.3d 834, 838 (Williams).)
"The elements of liability under Government Code section 815.6 are as follows: 'First and foremost, application of section 815.6 requires that the enactment at issue be obligatory, rather than merely discretionary or permissive, in its directions to the public entity; it must require, rather than merely authorize or permit, that a particular action be taken or not taken. [Citation.] It is not enough, moreover, that the public entity or officer have been under an obligation to perform a function if the function itself involves the exercise of discretion. [Citation.]' Courts have construed this first prong rather strictly, finding a mandatory duty only if the enactment 'affirmatively imposes the duty and provides implementing guidelines.' . . . 'If rules and guidelines for the implementation of an alleged mandatory duty are not set forth in an otherwise prohibitory statute, it cannot create a mandatory duty' . . . ."
" 'Second, but equally important, section 815.6 requires that the mandatory duty be "designed" to protect against the particular kind of injury the plaintiff suffered. The plaintiff must show the injury is " 'one of the consequences which the [enacting body] sought to prevent through imposing the alleged mandatory duty.' " [Citation.] Our inquiry in this regard goes to the legislative purpose of imposing the duty. That the enactment "confers some benefit" on the class to which plaintiff belongs is not enough; if the benefit is "incidental" to the enactment's protective purpose, the enactment cannot serve as a predicate for liability under section 815.6. [Citation.]' [Citations.] If these two prongs are met, the next question is whether the breach of the duty was a proximate cause of the plaintiff's injury. [Citations.]" (Guzman, supra, 46 Cal.4th at p. 898, italics omitted; see Haggis v. City of Los Angeles (2000) 22 Cal.4th 490, 499 (Haggis).)
Blue Shield identifies three legal bases for the mandatory duties it asserts CenCal breached by offering initial premium assistance to the 40 high-cost renal failure patients: (1) 42 C.F.R. §435.1015; (2) Attachment 4.22-C to California's state Medicaid Plan; and (3) the state's "Bridge to Reform Demonstration Project." We address them in turn.
I. 42 C.F.R. § 435.1015
Blue Shield's first proffered legal basis for public entity tort liability is a federal regulation published at 42 C.F.R. § 435.1015 (section 435.1015). CenCal does not dispute that this regulation is an enactment for purposes of governmental liability.
Section 435.1015 addresses the circumstances under which state Medicaid agencies like CenCal may use the federal government's monetary contribution to state Medicaid expenditures, known as federal financial participation or FFP, to purchase private health coverage for Medicaid beneficiaries. Under section 435.1015 (a)(4), "[t]he total cost of purchasing such coverage, including administrative expenditures, the costs of paying all cost sharing charges in excess of the amounts imposed by the agency under subpart A of part 447, and the costs of providing benefits as required by (a)(2) of this section, must be comparable to the cost of providing direct coverage under the State plan." (Italics added.)
In full, section 435.1015 (a) provides: "FFP is available for payment of the costs of insurance premiums on behalf of an eligible individual for a health plan offered in the individual market that provides the individual with benefits for which the individual is covered under the State plan, subject to the following conditions: (1) The insurer is obligated to pay primary to Medicaid for all health care items and services for which the insurer is legally and contractually responsible under the individual health plan, as required under part 433 subpart D of this chapter; (2) The agency furnishes all benefits for which the individual is covered under the State plan that are not available through the individual health plan; (3) The individual does not incur any cost sharing charges in excess of any amounts imposed by the agency under subpart A of part 447; and (4) The total cost of purchasing such coverage, including administrative expenditures, the costs of paying all cost sharing charges in excess of the amounts imposed by the agency under subpart A of part 447, and the costs of providing benefits as required by (a)(2) of this section, must be comparable to the cost of providing direct coverage under the State plan."
Blue Shield contends the requirement that the cost of purchasing private insurance for Medicaid beneficiaries is to be "comparable" to that of directly providing the covered medical services subjects CenCal to a mandatory duty not to purchase private coverage for its members unless the cost of coverage is similar to, but not less than, the cost of directly providing them medical services. Relying on dictionary definitions of "comparable" for the plain meaning of the term, Blue Shield asserts that in the context of the regulation it means " 'of relatively equal quality, value, or importance' " (italics in brief), " 'capable of or suitable for comparison,' " or " 'similar, like.' " CenCal, in contrast, relies primarily on regulatory materials for its position that CMS interprets "comparable" as "cost-effective," which in context means " 'likely to be less than' " or (as the trial court put it) "roughly equal or less than."
A. The Trial Court's Ruling
The trial court rejected Blue Shield's contention that section 435.1015 implements a mandatory duty as required for public entity liability. (See Guzman, supra, 46 Cal.4th at p. 898.) First, it found that "when the history of that section is considered," the meaning of its language "is subject to 'debate' and 'interpretation.' " Second, it found the determination of whether costs are "comparable" is an inherently discretionary endeavor that requires the exercise of judgment and is subject to conflicting views. Moreover, "not only does section 435.1015 not include any 'implementing guidelines,' but it is clear that [CMS] intended that section 435.1015 would be implemented not by it, but by the various state plans." The court thus declined to find this regulation satisfied the "rigidly delineated circumstances" necessary for for a waiver of government immunity. (Williams, supra,16 Cal.3d at p. 838.)
B. Analysis
We review this question of statutory interpretation independently, examining the " 'language, function and apparent purpose' of each cited enactment 'to determine if any or each creates a mandatory duty designed to protect against' the injury allegedly suffered by plaintiff. [Citation.]" (Guzman, supra, 46 Cal.4th at p. 898; Haggis, supra, 22 Cal.4th at p. 499; San Mateo Union High School Dist. v. County of San Mateo (2013) 213 Cal.App.4th 418, 428-429 (San Mateo).)
The law guiding our task is long settled. "While the dividing line between a discretionary and mandatory duty is not always definitive, the California Supreme Court has articulated 'rigid requirements for imposition of governmental liability under Government Code section 815.6.' " (San Mateo, supra, 213 Cal.App.4th at p. 429.) "Even where an enactment imposes an obligation, it does not necessarily follow that the obligation gives rise to a mandatory duty. The key question is whether the obligation involves an exercise of discretion. As the Supreme Court explained, '[i]t is not enough . . . that the public entity or officer have been under an obligation to perform a function if the function itself involves the exercise of discretion.' " (Ibid.)
"Therefore, specific terms used in the enactment are not dispositive. For example, in some contexts, use of the word 'shall' will impose a mandatory duty [citation], while in others it will not [citation]. As the Court of Appeal explained in [de Villers v. County of San Diego (2007) 156 Cal.App.4th 238, 260 (de Villers)]: 'In determining whether a mandatory duty actionable under section 815.6 had been imposed, the Legislature's use of mandatory language (while necessary) is not the dispositive criteria. Instead, the courts have focused on the particular action required by the statute, and have found the enactment created a mandatory duty under section 815.6 only where the statutorily commanded act did not lend itself to a normative or qualitative debate over whether it was adequately fulfilled.' [Citations].)" (County of Los Angeles v. Superior Court (2012) 209 Cal.App.4th 543, 549-550, italics omitted (County of Los Angeles); State Dept. of State Hospitals v. Superior Court (2015) 61 Cal.4th 339, 350 (State Hospitals).) But if an enactment "leaves implementation to an exercise of discretion, 'lend[ing] itself to a normative or qualitative debate over whether [the duty] was adequately fulfilled,' an alleged failure in implementation will not give rise to liability." (State Hospitals, supra, 61 Cal.4th at p. 350.) A mandatory duty must thus be based on a precisely formulated duty that is phrased in "explicit" and "forceful" language and leaves no room for the public entity's discretion or judgment. (Id.at p. 351; see Guzman, supra, 46 Cal.4th at pp. 910-911.)
Is the requirement that the cost of premium assistance be "comparable" to the cost of directly providing health care services an explicit and forceful directive that leaves no room for discretion or judgment? Our independent review leads us to the same place the trial court landed: determining whether the cost of coverage on the individual market is "comparable" to that of directly providing medical services indeed requires the exercise of discretion and judgment. " 'It is not enough . . . that the public entity or officer have been under an obligation to perform a function if the function itself involves the exercise of discretion.' " (Guzman, supra, 46 Cal.4th at p. 898.)
We consider deVillers, supra, 156 Cal.App.4th at p. 261 instructive in this regard. The court there held that a regulation requiring a public entity to "guard against" theft with "effective controls and procedures" did not authorize a tort action when materials were stolen, because the effectiveness of the security measures "involves actions that admit to a qualitative debate" over whether the government entity's actions were sufficient to fulfill its mandate. (Ibid.) Similarly, in Creason v. Department of Health Services (1998) 18 Cal.4th 623 (Creason), a statute requiring that state standards for testing newborns for certain hereditary disorders be "appropriate," "accurate," produce "maximum" information and subject to "minimum" misinterpretation was discretionary in its implementation. Accordingly, the statute did not create a mandatory duty within the meaning of section 815.6 (Id. at pp. 631-633; see Haggis, supra, 22 Cal.4th at p. 506 [determination whether land instability is "of such magnitude as to cause an immediate hazard to the occupancy of the proposed development" inherently called for exercise of judgment and discretion].) Section 435.1015 (a)(4) no less contemplates that agencies implementing primary assistance programs will make discretionary judgments about whether premium costs are "comparable" to the costs of providing services directly. Indeed, as the Supreme Court has more than once observed, the " 'very essence of discretion is the power to make "comparisons, choices, judgments, and evaluations." ' " (Guzman, supra, 46 Cal.4th at p. 900, quoting Braman v. State of California (1994) 28 Cal.App.4th 344, 351.)
This conclusion is reinforced by CMS's explanation of its reason for employing the "comparable" standard in the regulation. (See Olszewski v. Scripps Health (2003) 30 Cal.4th 798, 821 [federal agency's interpretation of its own regulation is entitled to deference]; see also B.H. v. County of San Bernardino (2015) 62 Cal.4th 168,189-190; All Angels Preschool/Daycare v. County of Merced (2011) 197 Cal.App.4th 394, 402-403 [court gives the regulation a reasonable construction conforming to the law makers' apparent intention].) In response to public comments that MCO premium assistance programs could result in higher premiums in the individual market and requests to revise the rule to prevent this, CMS explained it did "not use a more restrictive word" than comparable "to allow flexibility because the amount, duration, and scope of QHP [Qualified Health Plan] coverage, or the nature of the QHP service delivery system, might be different from direct coverage under the state plan." (78 Fed.Reg. 42185 (July 15, 2013), italics added.)
"Comment: Several commenters expressed concern that permitting state Medicaid programs to establish premium assistance programs could affect premiums in the Exchange. Some commenters recommended that CMS revise the proposed §435.1015 (a)(4) to require that premium assistance not increase federal costs and not increase premiums in the individual market. [¶] Response: Medicaid beneficiaries enrolled in a QHP would be included in the individual market single risk pool of the health insurance issuer of the plan in which they are enrolled, just as any other individual obtaining coverage through such plans. §435.1015 (a)(4) requires the cost of premium assistance to be 'comparable' to the cost of providing direct coverage under the state plan. We do not use a more restrictive word to allow flexibility because the amount, duration, and scope of the QHP service delivery system, might be different from direct coverage under the state plan."
The critical indication is that CMS contemplated implementing agencies would enjoy some degree of flexibility, or "play in the joints," in the trial court's words, in determining whether premium costs were "comparable" to those of direct services. Compounding this "play in the joints," CMS provided no rules or guidelines to inform the numerous state agencies responsible for implementing the regulation as to how to make that determination. (See Clausing v. San Francisco Unified School Dist. (1990) 221 Cal.App.3d 1224, 1240 ["If rules and guidelines for the implementation of an alleged mandatory duty are not set forth in an otherwise prohibitory statute, it cannot create a mandatory duty."].)
All of this leads us to conclude that "comparable" as used in section 435.1015 is an inherently relative term whose application requires the exercise of judgment and discretion. To be clear, we are not addressing whether the actual dollar amount CenCal spent on premiums was in fact "comparable" under any reasonable definition to the cost of directly providing medical care to the 40 renal failure enrollees. Nor are we deciding whether, as Blue Shield asserts, CenCal violated the regulation by failing to exercise its discretion to decide if the premium costs were comparable to the costs of care. To pursue either of those questions would put the cart before the horse. Our inquiry must begin, instead, with the threshold determination whether the government has chosen to waive tort immunity for breach of the alleged duty. The answer depends on whether section 435.1015 satisfies the "'rigid requirements' " for such a waiver. (San Mateo, supra, 213 Cal.App.4th at p. 430.) We agree with the trial court that it does not.
We have independently assessed whether section 435.1015 creates a mandatory duty, so we will not separately address Blue Shield's argument that the trial court applied an "incorrect heightened standard" requiring the absence of "any potential ambiguity or debate about what the enactment means."
II. Attachment 4.22-C
We next address Blue Shield's assertion that "Attachment 4.22-C," an amendment to California's Medicaid plan, provides a basis for government tort liability.
States that participate in the Medicaid program must formulate and obtain CMS approval of a "State plan," a "comprehensive written statement submitted by the [state] agency describing the nature and scope of its Medicaid program and giving assurance that it will be administered in conformity with [federal Medicaid law]. The State plan contains all information necessary for CMS to determine whether the plan can be approved to serve as a basis for Federal financial participation (FFP) in the State program." (42 C.F.R § 430.10 (2012); 42 U.S.C. § 1396a.)
In 2014 CMS approved as an amendment to California's state plan the two-page "Attachment 4.22-C," captioned "State Methodology for Determining Cost-Effectiveness of Individual and Group Health Plans." Blue Shield asserts that two of the amendment's passages establish mandatory duties that CenCal violated when it used premium assistance to purchase private coverage for its high-cost renal failure members.
Like the trial court, we will assume without that deciding Attachment 4.22-C is an enactment within the meaning of section 810.6.
The first is a statement that "[p]urchasing or paying for health insurance coverage is deemed not cost-effective when: . . . A [Medi-Cal] beneficiary is also enrolled in a Medi-Cal managed care plan." Blue Shield asserts this is a declaration "that premium assistance by Medicaid MCOs was per se not cost-effective, and therefore impermissible[.]" Accordingly, it maintains, "Amendment 4.22-C creates a mandatory duty categorically prohibiting CenCal, . . . from operating a premium assistance program." The second passage states that "[t]he methodology used by California for determining cost-effectiveness of paying individual or group health insurance premiums for existing coverage shall be as follows. . . ." From this, Blue Shield asserts CenCal had a mandatory duty "to use premium assistance programs (where otherwise authorized) only to maintain existing private coverage" (footnote omitted)—not to buy new coverage.
The trial court was unpersuaded that Attachment 4.22-C either created a mandatory duty prohibiting CenCal from purchasing insurance for its high-cost renal failure members, or that it was intended to protect Blue Shield from the cost of those members' health care. As to the second Guzman prong (see 46 Cal.4th at p.898) which considers the purpose of imposing the duty, the court found that "[n]othing in the language of Attachment 4.22-C or of the documents submitted by the parties referring to Attachment 4.22-C states or suggests that Attachment 4.22-C or any portion thereof was designed or otherwise intended to benefit an insurer. In the absence of any indication of any intention to benefit an insurer, Blue Shield's section 815.6 claim fails as to Attachment 4.22-C, even if that document could, consistent with section 815.6 case law, be construed to impose a mandatory duty on CenCal . . . ." In short, the court concluded that "Blue Shield comes nowhere close to establishing the second element of its section 815.6 24 claim as to the asserted mandatory duties in Attachment 4.22-C."
We reach the same conclusion. According to Blue Shield, it "suffered injury to its individual market risk pool when CenCal dumped very sick Medicaid beneficiaries who did not have private coverage into that pool and distorted the ratio of healthy to unhealthy members, which could lead to increases in consumer rates for all individual plans." To be sure, Blue Shield makes a logical policy argument that, with the ACA's prohibition against denying coverage on the basis of pre-existing health conditions, allowing MCOs to purchase new private policies for their very ill members could skew the individual market risk pool and result in increased rates. "[V]ery sick individuals enrolled in any of a health plan's individual and family plans can adversely impact the risk pool—and the premiums—for all other enrollees of all other individual and family products. If a plan's risk pool contains too high a proportion of individuals with high medical costs, it will raise premiums pursuant to actuarial requirements. [Citation.] Harm to the plan equates to harm to consumers. A plan experiencing adverse economic impacts from its risk pool may opt out of participating in the ACA exchange, leaving consumers with fewer coverage options."
See generally American Academy of Actuaries, "Risk Pooling: How Health Insurance in the Individual Market Works," <https://www.actuary.org/content/risk-pooling-how-health-insurance-individual-market-works-0> [as of October 19, 2020] ["The key factor is the average healthcare costs of the enrollees included in the pool. Just as a pool with healthy individuals can result in lower-than-average premiums, a large pool with a large share of unhealthy individuals can have a higher-than-average premiums"]. We grant judicial notice of this publication pursuant to Evidence Code section 452, subdivision (h).
But the relevant inquiry is not whether allowing MCOs like CenCal to engage in premium assistance might have such effects on the risk pool or consumers of private health coverage. Nor is it whether it would benefit private health insurers like Blue Shield to prevent these impacts. Rather, to establish public entity tort liability Blue Shield must show its alleged injury "is ' "one of the consequences which the [enacting body] sought to prevent through imposing the alleged mandatory duty." ' [Citation.] . . . That the enactment 'confers some benefit' on the class to which plaintiff belongs is not enough; if the benefit is 'incidental' to the enactment's protective purpose, the enactment cannot serve as a predicate for liability under section 815.6." (Haggis, supra, 22 Cal.4th at p. 499, italics added; Guzman, supra, 46 Cal.4th at p. 898.)
Blue Shield's discussion at times seems to focus on harms to be visited on consumers of health plans in the form of higher premiums, rather than on its own potential injury. We will nonetheless assume it is in fact addressing financial harm incurred by insurers, not their insureds.
Here, Blue Shield is seeking to recover millions of dollars it incurred because CenCal paid for Blue Shield policies for its high-cost renal failure patients. But it identifies nothing in the record that indicates Attachment 4.22-C was designed to shield private insurers from incurring such costs due to high-need Medicaid patients accessing private coverage through premium assistance programs. As the trial court recognized, this failure to show the plan amendment satisfies the second and "equally important" (Haggis, supra, 22 Cal.4th at p. 499) Guzman requirement is an insurmountable obstacle to the insurer's position that Attachment 4.22-C subjects public entities like CenCal to tort liability.
We therefore have no occasion to address the trial court's additional rulings that the amendment does not establish a mandatory duty because (1) it is "debatable and subject to interpretation" whether it applies to county-level MCOs such as CenCal in addition to California's separate, state-operated Health Insurance Premium Program; (2) "by its terms, Attachment 4.22-C only applies to purchase of insurance for 'existing coverage' and does not state explicitly, and certainly not forcefully, that the Attachment was meant to prohibit purchase of new insurance policies"; and (3) the Department's written policy guidance contradicts Blue Shield's position that Attachment 4.22-C prohibits MCOs from operating premium assistance programs.
III. California's Bridge to Reform Waiver
The trial court also rejected Blue Shield's argument that California's "Bridge to Reform Demonstration Project," or the "BTR Waiver," read together with 42 C.F.R. §438.2 (section 438.2), creates a mandatory duty prohibiting CenCal from operating a premium assistance program. Again assuming without deciding that the BTR Waiver and section 438.2 together qualify as an enactment for this purpose, the court found they lack explicit language to support the asserted mandatory duty and, further, that nothing in the waiver, section 438.2, or Blue Shield's supporting materials demonstrates they were intended to benefit private insurers.
A. Background
States participating in the Medicaid program may apply for and obtain waivers of federal rules so they can use Medicaid funds in otherwise impermissible ways "[i]n the case of any experimental, pilot, or demonstration project which, in the judgment of the Secretary, is likely to assist in promoting the objectives" of the Medicaid program. (42 U.S.C. § 1315; 42 C.F.R. §§ 430.25, 431.400.) "The purpose of these demonstrations, which give states additional flexibility to design and improve their programs, is to demonstrate and evaluate state-specific policy approaches to better serving Medicaid populations." ("About Section 1115 Demonstrations" <www.medicaid.gov/medicaid/section-1115-demonstrations/about-section-1115-demonstrations/index.html> [as of October 19, 2020]; see Evid. Code, § 452.) If a waiver is granted, the state "must comply with the terms and conditions of the agreement between the Secretary and the State." (42 C.F.R. §431.420.)
B. Analysis
Blue Shield argues that California's BTR Waiver "makes CenCal subject to a federal regulation [§ 438.2] that requires entities like CenCal to assume the risk of their Medi-Cal beneficiaries' health care and to pay directly for that health care. CenCal violated this mandatory duty by foisting the risk and cost of Medi-Cal beneficiaries onto [Blue Shield], rather than pay for the costs directly." (Italics omitted.) This is so, according to Blue Shield, because the Waiver incorporates section 438.2 by reference. The regulation defines "Health insuring organizations," such as CenCal, as county-operated entities that "in exchange for capitation payments, cover[] services for beneficiaries . . . [t]hrough payments to, or arrangements with, providers [¶] . . . [¶] [u]nder a comprehensive risk contract with the State." Then, it defines "risk contract" as "a contract between the State [and] an MCO . . . under which the contractor [¶] . . . [a]ssumes risk for the cost of the services covered under the contract; and [¶] . . . [i]ncurs loss if the cost of furnishing the services exceeds the payments under the contract." (42 C.F.R. § 438.2.) From these two definitions, Blue Shield deduces that "the Waiver requires that CenCal itself pay the cost of care of these individuals and assume the risk that health care expenses would exceed the capitation payment." (Italics omitted.)
The trial court rejected this argument. It explained: "[t]he most compelling reason why the Waiver and section 438.2 cannot be the basis for a mandatory duty prohibiting CenCal from purchasing insurance for its members is that the Waiver and section 438.2 do not contain any explicit language to that effect. Nowhere in those documents is there any language regarding the purchase of insurance by a 'Health insuring organization [HIO].' While it is undisputed that CenCal is an HIO, as defined in section 438.2, and CenCal is required to enter into a 'risk contract' with [the Department], neither the definition of an HIO nor the definition of a 'risk contract' nor any of the language in the Waiver, including the language pertaining to Medi-Cal beneficiaries with existing illnesses, states that an HIO is precluded from satisfying its 'risk' obligations to its members by purchasing insurance for those members."
Our analysis of the cited regulatory language confirms the court's assessment. Nothing in the federal regulation's definitions of "health insuring organization" and "risk contract" sets forth a duty that is "clearly defined" and "phrased in explicit and forceful language." (State Hospitals, supra, 61 Cal.4th at p. 350; see Guzman, supra, 46 Cal.4th at pp. 910-911 [no mandatory duty created by statute that did not require the performance of any particular act].) The definitional language that an HIO "covers services . . . [¶] . . . [t]hrough payments to, or arrangements with, providers" (§ 438.2, italics added) cannot reasonably be read as clearly or explicitly imposing on HIOs a mandatory obligation to "cover" services only through direct payments to medical service providers and not through insurance. And, while Blue Shield again posits that "CMS's and [the Department's] actions in the wake of the passage of the ACA [were] to protect the risk pools and the individual market from adverse selection," it has no response to the trial court's observation, confirmed by our own reading, that "there is not a peep in the Waiver or section 438.2 or any of the materials submitted by the parties referring to those documents" to indicate that either provision was intended for the benefit of private insurers. (See Haggis, supra, 22 Cal.4th 490, 499.) To the contrary, it requires a considerable leap of policy-driven inference to get from the cited definitions to Blue-Shield's conclusion that they mandatorily prohibit MCOs like CenCal from complying with their "risk contracts" by helping their members purchase private insurance. The "rigidly delineated circumstances" (Williams, supra, 16 Cal.3d at p. 838) required for a waiver of government tort immunity cannot be found in them.
IV. Conclusion
The trial court correctly determined that none of Blue Shield's proposed legal bases for an exception to the general rule of government tort immunity establish a mandatory duty that prohibited CenCal from offering premium assistance to its high-cost renal failure patients, or, if there was such a duty, that it was intended to benefit private insurers like Blue Shield. Summary judgment for defendants was therefore properly granted.
DISPOSITION
The judgment is affirmed.
/s/_________
SIGGINS, PJ. We concur. /s/_________
FUJISAKI, J. /s/_________
JACKSON, J.