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Phillips v. WellPoint, Inc.

United States District Court, S.D. Illinois

September 27, 2012

Charlotte PHILLIPS and Bob Myrick, individually and on behalf of all others similarly situated, Plaintiffs,
v.
WELLPOINT, INC., Unicare National Services, Inc., Unicare Illinois Services, Inc., Unicare Health Insurance Company of the Midwest, RightCHOICE Managed Care, Inc., and RightCHOICE Insurance Company, Defendants.

Memorandum Denying Reconsideration Dec. 10, 2012.

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[Copyrighted Material Omitted]

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Clinton A. Krislov, Kenneth T. Goldstein, Krislov & Associates, Jeffrey Mark Friedman, Law Office of Jeffrey Friedman, P.C., Chicago, IL, Mark C. Goldenberg, Goldenberg Heller et al., Edwardsville, IL, Robert C. Wilson, Attorney at Law, Harrisburg, IL, for Plaintiffs.

Margo Weinstein, SNR Denton U.S. LLP, Chicago, IL, Jerome E. McDonald, Campbell, Black et al., Mt. Vernon, IL, Justine N. Margolis, Roger K. Heidenreich, SNR Denton U.S. LLP, St. Louis, MO, for Defendants.

MEMORANDUM AND ORDER

J. PHIL GILBERT, District Judge.

This matter comes before the Court on defendants' motion to dismiss (Doc. 26). Plaintiffs filed a response (Doc. 60) to which defendants replied (Doc. 61). For the following reasons the Court grants in part and denies in part defendants' motion to dismiss.

BACKGROUND

This case consists of substantially the same facts as Cima v. WellPoint Health Networks, Inc., No. 05-cv-4127, a case previously before this Court. Drawing the facts from plaintiffs' well-pleaded complaint, the Court will once again recount the events leading up to the filing of Cima and the present case.

I. Factual Background

During the course of expanding its business, defendant WellPoint, Inc. (" WellPoint" ) [1] acquired defendants RightCHOICE Managed Care, Inc. (" RightCHOICE Managed Care" ) and RightCHOICE Insurance Company in 2002. RightCHOICE Managed Care " was an independent company that operated in two markets," one in Illinois and one in Missouri. Doc. 1-1, p. 27. In Missouri, RightCHOICE Managed Care operated as Blue Cross Blue Shield of Missouri. In

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Illinois, RightCHOICE Managed Care operated as RightCHOICE Insurance Company, servicing approximately 300,000 Illinoisans.

Illinois law required WellPoint to obtain the approval of the Illinois Department of Insurance (" IDOI" ) prior to completing the Illinois portion of the transaction. WellPoint made the following representations to the IDOI:

WellPoint has no present plans to cause [RightCHOICE Managed Care], [RightCHOICE Insurance Company], or any Acquired Subsidiary ... to merge or consolidate them with any person or person, other than the Merger. There also are presently no plans to make any other material change in [RightCHOICE Managed Care], [RightCHOICE Insurance Company], or any other Acquired Subsidiary's business operation or corporate structure, other than as may be provided herein or as may arise in the ordinary course of business, and other than to achieve the synergies that normally arise in substantial acquisitions.

The IDOI ultimately approved the transaction and the merger closed on January 31, 2002. Plaintiffs in both the Cima and present case, however, contend that WellPoint had intentions from the beginning of the transaction to re-price or get rid of Illinois policyholders, but misrepresented their intentions to the IDOI to obtain approval. According to Plaintiffs, WellPoint only desired to acquire the more profitable Missouri Blue Cross business and was not interested in the less-profitable Illinois RightCHOICE Insurance Company operations.

It was only four months later, on May 31, 2002, that Unicare/WellPoint wrote a letter to the IDOI informing them of the conversion, and providing the IDOI with a copy of the proposed letter to be sent to policyholders. Thereafter, WellPoint effected a market withdrawal of RightCHOICE Insurance Company, leaving the Illinois insureds with following options in the transition process: (a) reapply for a Unicare [2] policy, subject to underwriting; (b) be automatically converted to a Unicare policy (with an accompanying 250% premium increase and lesser coverage); or (c) seek coverage elsewhere. The transition process began on December 31, 2002. The practical effect of this transition was to leave the ill and infirm with significantly higher premiums after being forced to convert to a Unicare policy or going through the underwriting process. Thus, as a result of these drastically higher costs, many insureds were forced to withdraw from their insurance policies altogether and either forego insurance coverage or turn to the state for support. In Cima, this Court described defendants' actions as " immoral, oppressive, unethical and unscrupulous."

II. Procedural History

a. Cima v. WellPoint Healthcare Networks, Inc., 05-cv-4127

The Cima complaint was first filed on March 21, 2003, in the Circuit Court for the Second Judicial Circuit, Jefferson County, Illinois, against Unicare Illinois Services, Inc. and WellPoint Health Networks, Inc. The complaint alleged violations of the Illinois Health Insurance Portability and Accountability Act (" Illinois HIPAA" ), breach of contract, violations of the Illinois Consumer Fraud Act (" CFA" ) and Uniform Deceptive Trade Practices Act (" UDTPA" ), common law fraud, and breach of defendants' duties of good faith and fair dealing. In their first amended complaint, the Cima plaintiffs added Unicare National Services, Inc., Unicare Health Insurance Company of the Midwest,

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RightCHOICE Managed Care, Inc., and RightCHOICE Insurance Company as defendants.

On June 28, 2005, the Cima defendants removed the case to federal court. In its order dated July 11, 2006, granting in part and denying in part the Cima defendants' motion to dismiss, this Court dismissed plaintiffs' Illinois HIPAA, CFA and UDTPA deceptive practices, common law fraud, and breach of duty and good faith and fair dealing claims. Cima v. Wellpoint Healthcare Networks, Inc., No. 05-cv-4127, 2006 WL 1914107 (S.D.Ill. July 11, 2006). This Court denied plaintiffs' motion for class certification on March 18, 2008. Cima v. WellPoint Health Networks, Inc., 250 F.R.D. 374 (S.D.Ill.2008). Thereafter, on October 22, 2008, this Court granted defendants' motion for partial summary judgment, dismissing plaintiffs' breach of contract claim. Cima v. Wellpoint Health Networks, Inc., No. 05-cv-4127, 2008 WL 4671707 (S.D.Ill. Oct. 22, 2008). The parties then settled the remaining CFA unfair practices claim, and the Court entered judgment on August 27, 2009. Cima v. WellPoint Healthcare Networks, Inc., No. 05-cv-4127, Doc. 256 (S.D.Ill. Aug. 27, 2009).

b. Current Case— Phillips v. WellPoint, Inc., 10-cv-357

On March 27, 2010, plaintiffs Charlotte Phillips and Bob Myrick filed their four-count class action complaint in the Circuit Court for the Third Judicial Circuit, Madison County, Illinois, against defendants WellPoint, Inc., Unicare National Services, Inc., Unicare Illinois Services, Inc., Unicare Health Insurance Company of the Midwest, RightCHOICE Managed Care, and RightCHOICE Insurance Company. Plaintiffs alleged violations of Illinois HIPAA, breach of contract, and violations of the CFA and UDTPA. Thereafter, defendants filed a notice of removal removing this action on the basis of federal question jurisdiction and the Class Action Fairness Act. Presently before the Court is defendants' motion to dismiss plaintiffs' complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6).

ANALYSIS

When considering a Rule 12(b)(6) motion to dismiss, the Court must " construe [the complaint] in the light most favorable to the nonmoving party, accept well-pleaded facts as true, and draw all inferences in [the non-moving] party's favor." Reger Dev., LLC v. Nat'l City Bank, 592 F.3d 759, 763 (7th Cir.2010). The complaint must " contain sufficient factual matter, accepted as true to ‘ state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). With this standard in mind, the Court will now consider defendants' arguments for the dismissal of plaintiffs' claims.

I. Illinois HIPAA: Counts I and II

Counts I and II of plaintiffs' complaint allege violations of Illinois HIPAA. Specifically, the following portions of Illinois HIPAA are at issue:

(C) Requirements for uniform termination of coverage
(1) Particular type of coverage not offered. In any case in which an issuer decides to discontinue offering a particular type of health insurance coverage offered in the individual market, coverage of such type may be discontinued by the issuer only if:
(a) the issuer provides notice to each covered individual provided coverage of this type in such market of such discontinuation at least

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90 days prior to the date of the discontinuation of such coverage;
(b) the issuer offers, to each individual in the individual market provided coverage of this type, the option to purchase any other individual health insurance coverage currently being offered by the issuer for individuals in such market; and
(c) in exercising the option to discontinue coverage of that type and in offering the option of coverage under subparagraph (b), the issuer acts uniformly without regard to any health status-related factor of enrolled individuals or individuals who may become eligible for such coverage
(2) Discontinuance of all coverage
(a) In general. Subject to subparagraph (c), in any case in which a health insurance issuer elects to discontinue offering all health insurance coverage in the individual market in Illinois, health insurance coverage may be discontinued by the issuer only if:
(i) the issuer provides notice to the Director and to each individual of the discontinuation at least 180 days prior to the date of the expiration of such coverage;
(ii) all health insurance issued or delivered for issuance in Illinois in such market is discontinued and coverage under such health insurance coverage in such market is not renewed; and
(iii) in the case where the issuer has affiliates in the individual market, the issuer gives notice to each affected individual at least 180 days prior to the date of the expiration of the coverage of the individual's option to purchase all other individual health benefit plans currently offered by any affiliate of the carrier.
(b) Prohibition on market reentry. In the case of a discontinuation under subparagraph (a) in the individual market, the issuer may not provide for the issuance of any health insurance coverage in Illinois involved during the 5-year period beginning on the date of the ...

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