In a new Medicare Advantage Plans (MAPs) update, the United States District Court for Maryland in MAO-MSP Recovery II, LLC v. Government Employers Ins. Co., 2024 WL 2924063 (D. Maryland, June 10, 2024) has ruled, in part, that MAPs, and certain “first tier” and “downstream entities,” can sue insurers for “double damages” under the Medicare Secondary Payer (MSP) statute’s private cause of action (PCA) provision.[1] In addition, the court ruled that the plaintiffs could pursue its MSP subrogation claim against the defendant insurers. From another angle, and interestingly, the court has also certified three questions to the Maryland Supreme Court for that court to address whether the plaintiffs’ assignments of rights violate Maryland public policy.
The author outlines this interesting new decision as follows:
Summary
The plaintiffs, as assignees of several MAPs and other contractors, sued the defendant insurers for “double damages” under the MSP’s private cause of action (PCA) statute for allegedly failing to reimburse the MAPs for payments they made in relation to various no-fault cases and liability settlements. The defendant insurers filed a motion to dismiss the plaintiffs’ actions and moved for summary judgment arguing that the MSP’s PCA statute does not apply to MAPs, the plaintiff’s assignments of rights violate Maryland public policy, and various other grounds.
In rejecting the defendant insurers’ motions, the court ruled, in part, that the MSP’s PCA provision does apply to MAPs, thereby allowing them to sue insurers for “double damages.” Noting no precedent on this issue from the United States Fourth Circuit of Appeals (which has, in part, jurisdiction over federal cases originating from Maryland),[2] the court found persuasive, and agreed with, the rulings and analysis of the Second, Third, and Eleventh Circuit Courts of Appeals which have previously found that MAPs can sue insurers for “double damages” under the PCA. See, Aetna Life Insurance Company v. Big Y Foods, Inc., 52 F.4th (2nd Cir. 2022), In re Avandia, 685 F.3d 353 (3rd Cir. 2012), and Humana v. Western Heritage Insurance Co., 832 F.3d 1229 (11th Cir. 2016).[3] As such, the United States District Court for Maryland joins several other district courts that have similarly found that the PCA statute applies to MAPs.[4]
In addition, the court ruled that claims relating to payments made by certain non-MAP assignors, known as “first tier” or “downstream entities,” may also be brought under the PCA statute. Very generally, these entities enter into agreements with MAPs to provide administrative or health services. [5] The court also rejected the defendant insurers’ argument that plaintiffs’ breach of contract/subrogation claim was invalid.
From another angle, and interestingly, the court has certified three questions to the Maryland Supreme Court regarding whether the plaintiffs’ assignments of rights from are void as being against Maryland public policy. In this regard, the court has stayed further activity in this case pending the Maryland Supreme Court’s rulings on the assignability issue.
Going forward, Verisk will continue to monitor subsequent proceedings in this case and provide updates as warranted. In the interim, insurers with Maryland cases should note this new decision in evaluating their MAP protocols to avoid potential MAP private cause of action claims.
In the interim, for those interested in a more detailed analysis, the following is presented:
Background
The plaintiffs, as assignees of 89 MAPs and other contractors, sued several defendant insurers seeking “double damages” under the MSP’s private cause of action statute alleging, in main part, that the insurers failed to properly reimburse the MAPs for payments.[6] The plaintiffs filed two separate actions, one involving no-fault claims and the other involving settlements of third-party automobile accident claims.[7] The defendant insurers moved to dismiss the plaintiffs’ actions, in main part, for lack of standing, and also sought summary judgment on grounds that the plaintiffs (1) do not have the right pursue their claims under the MSP; (2) the plaintiffs’ assignments violate Maryland public policy; and (3) many of the claims are time barred.[8]
In general, the court denied the defendant insurers’ motions ruling as follows:
MAPs can sue for “double damages” under the PCA statute
The defendant insurers argued that the MSP’s private cause of action, codified at 42 U.S.C. § 1395y(b)(3)(A), does not apply to MAPs or their subcontractors.[9] However, the court rejected this argument.
In addressing this question, the court acknowledged that the United States Fourth Circuit Court of Appeals (which has, in part, jurisdiction over federal cases originating from Maryland) [10] has not yet addressed the issue of whether the MSP’s PCA statute applies to MAPs.[11] Noting no precedent from the Fourth Circuit, the court found persuasive, and agreed with, the rulings and analysis of the Second, Third, and Eleventh Circuit Courts of Appeals which have previously found that MAPs can sue insurers for “double damages” under the PCA. See, Aetna Life Insurance Company v. Big Y Foods, Inc., 52 F.4th (2nd Cir. 2022), In re Avandia, 685 F.3d 353 (3rd Cir. 2012), and Humana v. Western Heritage Insurance Co., 832 F.3d 1229 (11th Cir. 2016).[12]
While the court’s detailed analysis of these decisions is beyond this article’s scope, the court ultimately agreed with the reasoning and conclusions of the Second, Third, and Eleventh Circuits that the MSP’s PCA statute is available to MAPs stating, in main part, that “[t]he Court finds that [MAPs] may invoke the private right of action under § 1395y(b)(3)(A) because there is ‘no basis to exclude [MAPs] from [this] broadly worded provision that enables a plaintiff to vindicate harm caused by a primary plan’s failure to meet its MSP primary payment or reimbursement obligations.’” MAO-MSP Recovery II, LLC, 2024 WL 2924063 at *9, citing Humana v. Western Heritage Insurance Co., 832 F.3d 1229, 1238 (11th Cir. 2016).
“First tier” or “downstream” entities may also sue for “double damages”
The defendant insurers argued that even if the court found that MAPs had the right to sue under the PCA statute (which the court did), the court should find that non-MAP assignors, known as “first tier” or “downstream entities” are not within in the PCA’s scope.[13] The court also rejected this argument.
Regarding “first tier” or “downstream entities,” the court noted that “[a]s defined by CMS regulations, a ‘first tier entity’ is ‘any party that enters into a written arrangement, acceptable to CMS, with an [MAP] to provide administrative services or health care services for a Medicare eligible individual under the [MAP] program,’ and a ‘downstream entity’ is ‘any party that enters into a written arrangement, acceptable to CMS, with persons or entities involved with the [MAP] benefit, below the level of the arrangement between an [MAO] and a first tier entity.’”[14] The court further noted that “[s]uch entities can incur financial costs associated with making conditional payments or reimbursing MAOs for their conditional payments.”[15]
The defendant insurers argued that any conditional payments made by these entities are made pursuant to contracts with MAPs, not with CMS, and, accordingly, these entities have no statutory remedy to seek recovery for those payments.[16] However, the court rejected this argument.
On this question, the court found “instructive” the United States Eleventh Circuit Court of Appeals’ ruling in MSP Recovery Claims, Series LLC v. ACE American Insurance Co., 974 F.3d 1305 (11th Cir. 2020).[17] In ACE, the court noted that Eleventh Circuit rejected the argument that first tier and downstream entities lack the ability to sue under the PCA because they make conditional payments per contractual obligations. On this point, the court referenced the Eleventh Circuit’s conclusion that “’when a downstream actor bears the cost of an MAO’s conditional payments, that downstream actor suffers an injury squarely within the ambit of the Medicare Secondary Payer Act.’” MAO-MSP Recovery II, LLC, 2024 WL 2924063 at *9, citing ACE, 974 F.3d at 1316.
Based on the ACE decision, the court ruled that “the private right of action … is available to first tier and downstream entities.”[18] In reaching this conclusion, the court found that “the plain language of the [PCA] provision does not restrict the private right of action to any particular category of individuals or plaintiffs” and that “[w]here first tier and downstream entities are linked to the Medicare program through the [MAPs], and they may incur financial injury as a result of a ‘primary plan’ failing to ‘provide for primary payment (or appropriate reimbursement).’”[19]
Plaintiffs’ subrogation claim can proceed
On another MSP issue, the court also rejected the defendant insurers’ argument that the plaintiffs’ direct right of recovery for breach of contract and subrogation claim under 42 C.F.R. § 411.24 (e) and 42 C.F.R. § 411.26 failed as a matter of law.[20] Section 411.24 (e) states as follows: “Recovery from primary payers. CMS has a direct right of action to recover from any primary payer.”[21] Meanwhile, Section 411.26 is entitled “Subrogation” which, the court notes, states that “’[w]ith respect to services for which Medicare paid, CMS is subrogated to any individual, provider, supplier, physician, private insurer, State agency, attorney, or any other entity entitled to payment by a primary payer.’”[22]
The court described Plaintiffs’ claim as follows: “The theory appears to be that they have the right to sue the No-Fault Action Defendants for breach of contract, because based on the relevant insurance policies, the policyholders have a breach of contract claim against the No-Fault Action Defendants for failing to pay for their medical expenses pursuant to the no-fault provisions, and the Assignors have subrogation rights to assert the contractual rights of those policyholders that they have assigned to the No-Fault Plaintiffs.”[23]
While a review of the court’s detailed analysis into these regulations (and other MSP and MAP statutory provisions discussed) is beyond the scope of this article, the court, in general, found that while the above regulations on their face do not demonstrate that they apply to MAPs, based on the language contained in 42 C.F.R. § 422.108(f), “the rights that an [MAP] may exercise to recover from a primary plan include CMS’s subrogation right contained in 42 C.F.R. § 411.26.”[24]
Thus, in rejecting the defendant insurers’ argument, the court stated: “[W]here [MAPs] already have a statutory private right of action under 42 U.S.C. § 1395y(b)(3)(A), the extension to [MAPs] of the same range of rights relating to the recovery of payments from primary providers, including rights relating to subrogation that arguably may facilitate recovery, can be fairly construed as within the purview of § 1395w-26(b)(3), which was aimed at preventing states from imposing their own rules on [MAPs] that would limit their ability recover. The Court therefore finds within § 1395y(b)(3)(A) and § 1395w-26(b)(3) sufficient statutory authority for 42 C.F.R. § 422.108(f). Because that regulation, in conjunction with 42 C.F.R. § 411.26, grants subrogation rights to secondary-payer [MAPs], the Court will deny [the defendant insurers’ motion to dismiss] the No-Fault Action.”[25]
Court asks the Maryland Supreme Court to address whether the plaintiffs’ assignments of rights violate Maryland public policy
The defendant insurers also argued that the plaintiffs’ assignments of rights in this action were void as contrary to Maryland public policy.[26] Very generally, one of the focus points regarding this issue is whether the plaintiffs’ assignments of rights violated common law prohibitions against champerty and barratry under Maryland law.[27] While a review of the court’s lengthy discussion of Maryland law on this issue is beyond the scope of this article, the court ultimately found that “there is no controlling appellate decision, constitutional provision, or statute that clearly resolves this issue.”[28]
Accordingly, the court, has certified the following questions to the Maryland Supreme Court regarding the plaintiffs’ assignments: “(1) whether it is the current fundamental public policy of Maryland to prohibit schemes to stir up and promote litigation for the benefit of the promoter rather than for the benefit of the real party in interest; (2) if there is such a public policy, what are the specific terms of such a public policy; and (3) if there is such a public policy, whether it is sufficiently strong that any agreement that violates it cannot be enforced by courts in Maryland, regardless of any choice-of-law provision contained in the agreement.”[29] Thus, the court denied defendant insurers’ motion pending the Maryland Supreme Court’s decision on the above questions.
Statute of Limitations
The court declined to address the defendant insurers’ claim that many of the plaintiff’s claims were time barred stating that “[b] ecause resolution of this issue would not be dispositive of all claims and may not be necessary, the Court declines to address it at this time. The Motion will be denied without prejudice as to this issue.”[30]
What’s Next?
It will be interesting to see how the Maryland Supreme Court rules regarding the assignability issue as outlined above, the scope of that ruling, and how that could impact the plaintiffs’ actions going forward. On this point, the court’s ruling indicates that “these cases case will be stayed pending the resolution of the certification process” by the Maryland Supreme Court.[31] Depending on that ruling, if the case continues, it will then be interesting to see if the district court ultimately finds the defendant insurers liable for “double damages” under the MSP’s PCA statute and whether the defendant insurers appeal to the Fourth Circuit Court of Appeals.
How Verisk can help
Going forward, insurers with Maryland cases should note this new decision in evaluating their MAP protocols to avoid potential MAP private cause of action claims. On this point, Verisk can help you address MAP recovery claims and help you build MAP best practices. We can help you address MAP recovery claims on an ad hoc (case by case) basis through our Medicare Advantage Resolution Services or through our programmatic CP Link solution.
[1] The MSP’s private cause of action statute is codified at 42 U.S.C. 1395y(b)(3)(A) which states, in full, as follows: “There is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).” Id.
[2] The Fourth Circuit has jurisdiction over federal cases originating from Maryland, Virginia, West Virginia, North Carolina, and South Carolina. See, https://www.ca4.uscourts.gov/about-the-court
[3] The Second Circuit has jurisdiction over federal cases arising from Connecticut, New York, and Vermont. Third Circuit has jurisdiction over federal cases originating in Delaware, New Jersey, Pennsylvania, and the U.S. Virgin Islands; while the Eleventh Judicial Circuit has jurisdiction over federal cases originating in Alabama, Florida, and Georgia. See, https://www.ca2.uscourts.gov/,https://www.ca3.uscourts.gov/ and https://www.ca11.uscourts.gov/
[4] On this point, the following United States District courts have also ruled that MAPs can sue claims payers for double damages: MAO-MSO Recovery II, LLC v. Mercury Insurance, 2018 WL 3357493 (C.D. Calif. May 23, 2018); MAO-MSO Recovery II, LLC v. Farmers Insurance Exchange, 2018 WL 2106467 (C.D. Calif. May 7, 2018); Aetna v. Guerrera, 300 F.Supp.3d 367 (D. Conn. March 13,2018); MAO-MSO Recovery II, LLC v. State Farm, 2018 WL 340021 (C.D. Ill. January 9, 2018); MSP Recovery Claims, Series 44 v. Zurich, 2023 WL 5227396 (N.D. Illinois, August 15, 2023); Collins v. Wellcare Healthcare Plans, Inc., 73 F.Supp.3d 653 (E.D. La. 2014); MSP Recovery Claims Series LLC v. Plymouth Rock Assurance Corporation, 404 F.Supp.3d 470 (D. Massachusetts, July 18, 2019); MSP Recovery Claims, Series LLC v. Phoenix Insurance Company, 426 F.Supp. 3d 458 (N.D. Ohio, December 12, 2019); MSP Recovery Claims, Series LLC v. Grange Insurance Company, 2019 WL 6770729 (N.D. Ohio, December 12, 2019); MSP Recovery Claims, Series LLC v. Progressive Corporation, 2019 WL 5448356 (N.D. Ohio, September 17, 2019); Humana Ins. Co. v. Bi-Lo, LLC, 2019 WL 4643582 (D. South Carolina, September 24, 2019); Cariten Health Plan, Inc. v. Mid-Century Ins. Co., No.: 2015 WL 5449221(E.D. Tenn. 2015); Humana Ins. Co. v. Farmers Tex. Cnty. Mut. Ins. Co., 95 F.Supp.3d 983 (W.D. Tex. 2014); Humana v. Shrader, 584 B.R. 658 (S.D. Tex. March 16, 2018); and Humana Ins. Co. v. Paris Blank LLP, 187 F. Supp.3d 676 (E.D. Va. 2016).
[5]The court defined “first tier” or “downstream entities” as follows:
As defined by CMS regulations, a “first tier entity” is “any party that enters into a written arrangement, acceptable to CMS, with an [MAO] to provide administrative services or health care services for a Medicare eligible individual under the MA program,” and a “downstream entity” is “any party that enters into a written arrangement, acceptable to CMS, with persons or entities involved with the MA benefit, below the level of the arrangement between an [MAO] and a first tier entity.” 42 C.F.R. § 422.2 Such entities can incur financial costs associated with making conditional payments or reimbursing MAOs for their conditional payments. See MSP Recovery Claims, Series LLC v. ACE Am. Ins. Co., 974 F.3d 1305, 1314 (11th Cir. 2020). The GEICO Defendants assert that any conditional payments made by such entities are made pursuant to contracts with MAOs, not with CMS, so these entities have no statutory remedy to seek recovery for those payments. The GEICO Defendants cite no authority for this argument other than a district court case that was later abrogated by the United States Court of Appeals for the Eleventh Circuit. Mot. at 25 (citing MSPA Claims I, LLC v. Infinity Prop. & Cas. Grp., 374 F. Supp. 3d 1154, 1163 (N.D. Ala. 2019), abrogated by MSP Recovery Claims, v. ACE Am. Ins. Co., 974 F.3d 1305, 1315 (11th Cir. 2020)). MAO-MSP Recovery II, LLC v. Government Employers Ins. Co., 2024 WL 2924063 (D. Maryland, June 10, 2024), at *9.
[6] MAO-MSP Recovery II, LLC v. Government Employers Ins. Co., 2024 WL 2924063 (D. Maryland, June 10, 2024), at *2.
[7] Id.
[8] MAO-MSP Recovery II, LLC v. Government Employers Ins. Co., 2024 WL 2924063 (D. Maryland, June 10, 2024), at *3. Very generally, regarding the defendant insurers’ motion to dismiss, the defendants made several technical arguments challenging the plaintiffs’ standing based on allegations that the plaintiff’s improperly named the defendant insurer entities and other grounds unrelated to the Medicare Secondary Payer issues which are the focus of this article. See generally, MAO-MSP Recovery II, LLC v. Government Employers Ins. Co., 2024 WL 2924063 (D. Maryland, June 10, 2024), at *4-6.
[9] The MSP’s private cause of action statute is codified at 42 U.S.C. § 1395y(b)(3)(A) which states, in full, as follows: “There is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).” Id.
[10] The Fourth Circuit has jurisdiction over federal cases originating from Maryland, Virginia, West Virginia, North Carolina, and South Carolina. See, https://www.ca4.uscourts.gov/about-the-court
[11] MAO-MSP Recovery II, LLC v. Government Employers Ins. Co., 2024 WL 2924063 (D. Maryland, June 10, 2024), at *7.
[12] MAO-MSP Recovery II, LLC v. Government Employers Ins. Co., 2024 WL 2924063 (D. Maryland, June 10, 2024), at *7. By way of note, the 3rd Circuit has jurisdiction over federal cases originating in Delaware, New Jersey, Pennsylvania, and the U.S. Virgin Islands; the 11th Circuit has jurisdiction over federal cases originating in Alabama, Florida, and Georgia; while the Second Circuit has jurisdiction over federal cases originating in Connecticut, New York, and Vermont.
[13] MAO-MSP Recovery II, LLC v. Government Employers Ins. Co., 2024 WL 2924063 (D. Maryland, June 10, 2024), at *9.
[14] MAO-MSP Recovery II, LLC v. Government Employers Ins. Co., 2024 WL 2924063 (D. Maryland, June 10, 2024), at *9, citing 42 C.F.R. § 422.2.
[15] MAO-MSP Recovery II, LLC v. Government Employers Ins. Co., 2024 WL 2924063 (D. Maryland, June 10, 2024), at *9, citing See MSP Recovery Claims, Series LLC v. ACE Am. Ins. Co., 974 F.3d 1305, 1314 (11th Cir. 2020).
[16] MAO-MSP Recovery II, LLC v. Government Employers Ins. Co., 2024 WL 2924063 (D. Maryland, June 10, 2024), at *9.
[17] Id.
[18] Id.
[19] MAO-MSP Recovery II, LLC v. Government Employers Ins. Co., 2024 WL 2924063 (D. Maryland, June 10, 2024), at *9 and 10.
[20] MAO-MSP Recovery II, LLC v. Government Employers Ins. Co., 2024 WL 2924063 (D. Maryland, June 10, 2024), at *10.
[21] 42 C.F.R. § 411.24 (e).
[22] MAO-MSP Recovery II, LLC v. Government Employers Ins. Co., 2024 WL 2924063 (D. Maryland, June 10, 2024), at *10.
[23] Id.
[24] Of note, 42 C.F.R. § 422.108(f) states, in full, as follows: “(f) MSP rules and State laws. Consistent with § 422.402 concerning the Federal preemption of State law, the rules established under this section supersede any State laws, regulations, contract requirements, or other standards that would otherwise apply to MA plans. A State cannot take away an MA organization’s right under Federal law and the MSP regulations to bill, or to authorize providers and suppliers to bill, for services for which Medicare is not the primary payer. The MA organization will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations in subparts B through D of part 411 of this chapter.” Id.
[25] MAO-MSP Recovery II, LLC v. Government Employers Ins. Co., 2024 WL 2924063 (D. Maryland, June 10, 2024), at *11.
[26] MAO-MSP Recovery II, LLC v. Government Employers Ins. Co., 2024 WL 2924063 (D. Maryland, June 10, 2024), at *12.
[27] See generally, MAO-MSP Recovery II, LLC v. Government Employers Ins. Co., 2024 WL 2924063 (D. Maryland, June 10, 2024), at *12-14. Regarding “champerty” and “barratry,” the court noted that the U.S. Fourth Circuit Court of Appeals defined champerty as a “’bargain with a [party] ... to divide the land or other matter sued for between them ... whereupon the champertor is to carry on the party’s suit at his own expense’; barratry, defined as ‘frequently ... stirring up suits’; and maintenance, defined as ‘officious intermeddling in a suit that no way belongs to one, by maintaining or assisting either party with money or otherwise to prosecute or defend it.’” MAO-MSP Recovery II, LLC v. Government Employers Ins. Co., 2024 WL 2924063 (D. Maryland, June 10, 2024), at *12-14, citing Accrued Financial Services, Inc. v. Prime Retail, Inc., 298 F.3d 291, 298 n.5, 300 (4th Cir. 2002).
[28] MAO-MSP Recovery II, LLC v. Government Employers Ins. Co., 2024 WL 2924063 (D. Maryland, June 10, 2024), at *14. On this point, the court stated: “Here, the answer to the questions of whether there is a Maryland public policy relating to barratry or champerty that is violated by Plaintiffs’ assignments, and whether that public policy is sufficiently strong to displace choice-of-law provisions, may be determinative of an issue in this case and may even be dispositive as to the entire case. As discussed above, there is no controlling appellate decision, constitutional provision, or statute that clearly resolves this issue. For these reasons, the Court will certify the following questions to the Maryland Supreme Court: (1) whether it is the current fundamental public policy of Maryland to prohibit schemes to stir up and promote litigation for the benefit of the promoter rather than for the benefit of the real party in interest; (2) if there is such a public policy, what are the specific terms of such a public policy; and (3) if there is such a public policy, whether it is sufficiently strong that any agreement that violates it cannot be enforced by courts in Maryland, regardless of any choice-of-law provision contained in the agreement.” Id.
[29] MAO-MSP Recovery II, LLC v. Government Employers Ins. Co., 2024 WL 2924063 (D. Maryland, June 10, 2024), at *14.
[30] Id.
[31] Id.