Filed 5/31/16 Lample v. Calif. Physicians’ Service CA2/6
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                   DIVISION SIX


AMALIA CORONA LAMPLE,                                                        2d Civil No. B259380
                                                                           (Super. Ct. No. BC441127)
     Plaintiff and Appellant,                                                (Los Angeles County)

v.

CALIFORNIA PHYSICIANS’ SERVICE,

     Defendant and Respondent.



                   This is a class action brought by an insured against her medical insurer
under the unfair competition law. (Bus. & Prof. Code, § 17200.) She alleged that her
insurer charged premiums greater than those allowed by statutes governing the program
under which she obtained her policy. (Health & Saf. Code, §§ 1399.805, 1399.811.)1 A
judgment arising from the trial court’s sustaining of the insurer’s demurrer was reversed
on appeal. (Lample v. California Physicians’ Service (Jan. 30, 2012, B231849) [nonpub.
opn.] (Lample I).) On remand, the parties moved for summary judgment or adjudication.
The trial court denied plaintiff’s motion and granted the insurer’s motion for summary
judgment. We affirm.



                   1 All   statutory references are to the Health and Safety Code unless
otherwise stated.
                                         FACTS
              The Health Insurance Portability and Accountability Act (HIPAA) provides
a safety net for those who, due to job loss or change in employer-provided benefits, have
lost their group health insurance. HIPAA is intended to allow such persons to obtain
affordable health insurance. The law allows a state to adopt its own plan to provide such
insurance.
              California has enacted its own plan. (§§ 1366.35, 1399.805, Ins. Code,
§§ 10900-10902.6.) A health care service plan may not decline coverage or exclude a
preexisting condition for a person who qualifies under HIPAA. (§ 1366.35, subd. (a).)
Sections 1399.805, subdivision (a)(1)(A) and 1399.811, subdivision (a)(1) provide that
the maximum premium for a health service plan that offers a preferred provider
arrangement shall not exceed the average premium paid by a subscriber of the Major Risk
Medical Insurance Program (MRMIP) who is of the same age and resides in the same
geographic area.
              The MRMIP is a state sponsored health care coverage program for high risk
individuals who cannot obtain health care coverage in the individual market. (Former
Ins. Code, § 12700 et seq.)2 Insurance companies participating in the MRMIP are
regulated by the MRMIP Board. MRMIP premium rates are set by the board in a
procedure that is not at issue here.
              California Physicians’ Service doing business under the name Blue Shield
of California (Blue Shield) is not regulated by the MRMIP Board. Instead, as a health
care service plan, Blue Shield is regulated by the California Department of Managed
Health Care (DMHC). The DMHC is prohibited from setting rates. (§ 1367, subd. (j).)
Rates are determined by the average of the MRMIP rates as provided in sections
1399.805 and 1399.811. But service care providers must submit rate changes to the

              2 Repealed by Stats. 2014, ch. 31, § 38, effective January 1, 2016. As
alleged in Amalia Corona Lample’s third amended complaint the overcharges by
California Physicians’ Service doing business under the name Blue Shield of California
occurred between 2001 and 2010. Thus the repeal of the sections do not affect Lample’s
causes of action.

                                            2
DMHC. If it finds the rates are not in compliance with the statutes, it must disapprove of
the plan’s contract. (§ 1399.815, subd. (a).)
                                           Complaint
              Amalia Corona Lample filed a class action alleging Blue Shield violated
California’s unfair competition law (UCL). (Bus. & Prof. Code, § 17200.) Lample
alleged that Blue Shield charged subscribers to its preferred provider health care service
plans premiums that exceeded the rate caps provided in sections 1399.805 and 1399.811.
              The dispute arises because the statutes do not specify a method for
calculating the “average premium paid.” Insurers calculate the averages based on a
“cell”; that is, a particular age group of subscribers within a particular geographical area.
Blue Shield uses a “straight average”; Lample claims Blue Shield is required to use a
“weighted average.” Lample I explains the difference as follows: “If two providers offer
HIPAA PPO plans to eligible individuals in a particular rating cell—one at $100/month;
the other at $150/month—the average monthly rate charged by the providers is $125
regardless of the number of subscribers to each plan. If there are 90 subscribers to the
$100 plan and 10 subscribers to the $150 plan, however, the average monthly premium
paid by a subscriber, using a weighted mean, is $105.” (Lample I, supra, B231849, slip.
opn. at p. 20, fn. 13.) The weighted average is intended to prevent a small group of
subscribers from distorting the average.
              Lample concedes that neither sections 1399.805 nor 1399.811 specify how
the average is to be calculated. Nor has the DMHC adopted any formal regulation
specifying how the average is to be calculated. Lample alleges the DMHC’s
interpretation of sections 1399.805 and 1399.811 require the use of a weighted average,
and that as a regulatory agency, the DMHC’s interpretation of the statutes is entitled to
judicial deference.
              Lample alleged that shortly after sections 1399.805 and 1399.311 were
enacted, “representatives from the [MRMIP], the [DMHC] and the Department of
Insurance (DOI) met to work out implementation details—including how to calculate ‘the
average premium paid.’ They discussed what would be the appropriate way for the


                                                3
[MRMIP] to provide this data to the DMHC and the DOI. The agreement, pursuant to the
requests of the DMHC and the DOI, was that the [MRMIP] provide a weighted average
by region and age range, i.e., the ‘average premium paid.’”
              The trial court sustained Blue Shield’s demurrer to the complaint on the
ground that Blue Shield is entitled to use the procedures it employed to date and
Lample’s procedure is not required by statute. Lample appealed.
                                         Lample I 3
              The UCL bars any “unlawful, unfair or fraudulent” business act or practice.
(Bus. & Prof. Code, § 17200.) The “unlawful” prong of the UCL requires a showing that
some other law has been violated. (Lample I, supra, B231849, slip opn. at p. 10.) The
“unfair” prong of the UCL requires a showing that an act, although not unlawful, is unfair
within the meaning of the UCL. (Ibid.)
              Lample alleged that Blue Shield acted unlawfully in that its use of a straight
average to calculate premiums violates sections 1399.805 and 1399.811, as those sections
are interpreted by administrative agencies.
              Lample I pointed out that ultimately the interpretation of a statute is a
matter of law for the courts. (Lample I, supra, B231849, slip opn. at p. 12.) Depending
on the circumstances, however, an administrative agency’s interpretation of a statute may
be helpful to the court. (Id. at p. 16.) The court left open the question how much
deference an administrative interpretation of the statutes should be given. (Ibid.) The
court pointed out, however, that an administrative interpretation adopted in violation of
the Administrative Procedure Act (APA) (Gov. Code, § 11400 et seq.) receives no
deference at all. (Ibid.)
              Lample contended she could “amend her complaint to allege facts clearly
showing the policy is not akin to an underground regulation, but one that, based on the



              3
              Lample I was decided by Division Seven. After two of the justices
recused themselves, the case was transferred to Division Six.


                                              4
context and circumstances surrounding its adoption, is entitled to judicial deference.”4
(Lample I, supra, B231849, slip opn. at p. 16.) The court reversed, concluding she is
entitled to an opportunity to do so.
              Lample I then asked the parties to brief whether Blue Shield violated the
unfair prong of the UCL. The court adopted the definition of unfair as stated in Camacho
v. Automobile Club of Southern California (2006) 142 Cal.App.4th 1394, 1403. A
business practice is unfair if “(1) the consumer injury is substantial; (2) the injury is not
outweighed by any countervailing benefits to consumers or competition; and (3) the
injury could not have reasonably been avoided by consumers themselves.” (Lample I,
supra, B231849, slip opn. at p. 23.) The court concluded that Lample should be allowed
to amend her complaint to allege an unfair business practice.
                  Lample’s Motion for Summary Judgment or Adjudication
              Lample moved for summary adjudication on her cause of action. She
alleged that Blue Shield violated sections 1399.805 and 1399.811 and acted unlawfully
by using a straight average. She claimed that those sections as interpreted by the DMHC
require Blue Shield to use a weighted average.
              In support of her motion, she submitted portions of a deposition of Laura
Rosenthal, Chief Counsel to the MRMIP. Rosenthal testified that shortly after the law
was enacted, she had discussions with the DMHC about providing it with data to use in
establishing premiums. She said: “[W]e simply assumed that we would be helpful and
give them that information. I don’t think it was more . . . elaborate than that.”
              Amal Abu-Rahma, DMHC’s enforcement counsel, testified the DMHC
received rates annually from the MRMIP related to the calculation of the average
premium paid. The MRMIP calculation was based on a weighted average. This was
based on an agreement that the MRMIP would calculate its rates and provide the
information to the DMHC on an annual basis.

              4 An “underground regulation” is a regulation that has not been adopted
pursuant to the APA and for which there is no express exemption from the APA. (Cal.
Code Regs., tit. 1, § 250, subd. (a).)

                                               5
               Lample submitted two Public Records Act (PRA) requests (Gov. Code,
§ 6253) to the DMHC. The first request sought the maximum premium rates, the
procedures by which the DMHC calculated those rates and the procedures by which the
DMHC learned of the average premium paid. In response, the DMHC produced the rate
calculations performed by the MRMIP. The second PRA request sought all documents
the DMHC relied on to ascertain whether the insurance providers comply with
methodology or rate limits specified in the statutes. In response, the DMHC provided the
rate filings by Blue Shield and the averages determined by the MRMIP.
               Finally, Lample submitted a heavily redacted position paper produced by
the DMHC in support of an assembly bill. The unredacted portion of the position paper
states: “Current law sets forth a self-certification process for health plans when they file
premium rate changes with the DMHC. For example, currently a health plan files a
statement ‘certifying’ that its premium rates for HIPAA contracts are in compliance with
the law. However, current law does not include express enforcement authority to help
ensure that rate information filed with the DMHC is accurate and compliant with law.”
                       Blue Shield’s Motion for Summary Judgment
               Blue Shield moved for summary judgment.
               The DMHC has the authority to disapprove rate filings if they do not
comply with applicable law. (§ 1399.815, subd. (a).) In an appendix to a letter
responding to a PRA request, the DMHC stated: “Rate filings for HIPAA GI products
are also submitted to the DMHC as amendments to the plans’ license applications. If the
DMHC finds that a HIPAA GI rate filing does not comply with applicable law, the
DMHC will ask the plan to modify its rates to be in compliance.” Blue Shield filed its
original plan in 2000 and annual plan amendments thereafter. DMHC did not disapprove
of any plan.
               On October 15, 2001, Blue Shield officials met with a DMHC director and
deputy director. During the meeting, they discussed how Blue Shield calculated its rates,
specifically that it used a straight average. The DMHC director and deputy director
raised no objection.


                                              6
              A letter dated October 29, 2001, from State Senator Jackie Speier, the
author of sections 1399.805 and 1399.811, to DMHC Director Daniel Zingale, states in
part: “I have been made aware of a discrepancy in the premiums charged by Blue Shield
and Blue Cross as compared to Health Net. Blue Shield and Blue Cross premiums are an
average of ALL of the MRMIP products (PPOs and HMOs) whereas Health Net
premiums are an average of only the MRMIP PPO products. And apparently, the Blue
Cross premium reflects a ‘weighted’ adjustment of all of the MRMIP products based on
the number on enrollees in each plan. [¶] Therefore, HIPAA patients are being charged 3
different rates rather than a single rate. I intended the HIPAA premium to be the non-
weighted average of ALL MRMIP products. [¶] Part of the problem is that the [DMHC]
regulates Blue Shield and Blue Cross PPOs and the California Department of Insurance
regulates Health Net’s PPOs. At the very least, we need [a] single and consistent
interpretation of SB 265 by the State on behalf of HIPAA patients.”
              Blue Shield provided the unredacted DMHC position paper presented by
Lample in a heavily redacted form. The paper was in support of proposed legislation that
the DMHC stated would “clarify statutory caps on premiums charged by health care
service plans for HIPAA PPO contracts,” among other goals. The paper stated the
legislation establishing rate caps for such plans is ambiguous in that it does not define
“average premium.” The paper noted that Blue Cross and Blue Shield use different
methods for determining the average premium. The paper continued: “Initially, the
author of the statutory cap for PPO products intended it to mean a non-weighted average
of all MRMIP products. Further, at least one previous Insurance Commissioner, and the
MRMIB have construed the PPO statutory cap to mean a weighted average of all MRMIP
products. The DMHC never formally adopted a position on the matter; nor has the
current Insurance Commissioner. In fact, none of the three regulators
(DMHC/CDI/MRMIB) have adopted a formal interpretation or regulation to define
‘average premium.’ Thus, the lack of clear guidance in the statute resulted in health
plans selling PPO products using different ‘average premium’ formulas.” (Original
italics.)


                                              7
              In late 2008, the DMHC conducted an investigation to determine whether
Anthem or Blue Shield had violated the rate cap mandated by sections 1399.805 and
1399.811. Blue Shield informed the DMHC that it had always used a straight average.
DMHC enforcement counsel, Abu-Rahma, testified the DMHC was unable to calculate
what the rate should be because the law is ambiguous.
                                       DISCUSSION
                                              I.
              Summary judgment is granted only if all papers submitted show there is no
triable issue as to any material fact and the moving party is entitled to a judgment as a
matter of law. (Code Civ. Proc., § 437c, subd. (c).) The court must draw all reasonable
inferences from the evidence set forth in the papers except where such inferences are
contradicted by other inferences or evidence that raise a triable issue of fact. (Ibid.) In
examining the supporting and opposing papers, the moving party’s affidavits or
declarations are strictly construed and those of his opponent liberally construed, and
doubts as to the propriety of granting the motion should be resolved in favor of the party
opposing the motion. (Szadolci v. Hollywood Park Operating Co. (1993) 14 Cal.App.4th
16, 19.)
              The moving party has the initial burden of showing that one or more
elements of a cause of action cannot be established. (Saelzler v. Advanced Group 400
(2001) 25 Cal.4th 763, 768.) Where the moving party has carried that burden, the burden
shifts to the opposing party to show a triable issue of material fact. (Ibid.) Our review of
the trial court’s grant of the motion is de novo. (Id. at p. 767.)
              Summary adjudication employs the same procedure as a motion for
summary judgment. (Toigo v. Town of Ross (1998) 70 Cal.App.4th 309, 324.)
                                              II.
              Lample contends the trial court erred in denying her motion and granting
Blue Shield’s motion on her cause of action for violation of the “unlawful” prong of the
UCL.



                                               8
              Lample alleged that the DMHC’s interpretation of sections 1399.805 and
1399.811 required Blue Shield to use a weighted average. But Lample’s evidence shows
nothing more than that the MRMIP provided the DMHC with calculations using the
weighted average. The MRMIP did not provide the information to the DMHC pursuant
to any rule or regulation, but by an informal agreement between the two agencies.
Lample produced no evidence to show the DMHC ever required any health care plan
provider to use the MRMIP’s calculations or interpreted the statutes as requiring the use
of the MRMIP formula.
              Lample’s reliance on her PRA requests is misplaced. A PRA request is not
the equivalent of an interrogatory propounded to a party pursuant to Code of Civil
Procedure section 2019.010, subdivision (b). A PRA request produces nothing more than
whatever written records an agency has on the topic of the request. In this case, it
produced only the MRMIP rate calculations. Lample’s own evidence put those records
into context as information provided to the DMHC on an informal basis. They do not
show DMHC’s interpretation of any statute.
              On the other side, Blue Shield produced uncontradicted evidence that: The
DMHC was well aware of how Blue Shield was calculating its rates. The DMHC had the
power to disapprove of the rates but did not. DMHC even undertook an active
investigation of Blue Shield’s rates. DMHC found no fault with the rates. DMHC’s
enforcement counsel testified the DMHC was unable to calculate what the rate should be
because the law is ambiguous. The DMHC position paper in support of legislation to
clarify the matter states DMHC has not adopted a formal interpretation or regulation to
define average premium.
              Blue Shield’s uncontradicted evidence shows that the DMHC did not
interpret sections 1399.805 and 1399.811 as requiring the use of a weighted average.
Instead, the DMHC determined the statutes are too ambiguous to require the use of any
particular formula to calculate the average premium.
              In any event, even if the DMHC had adopted a policy of interpreting
sections 1399.805 and 1399.811 as requiring the use of a weighted average, that policy


                                             9
would be void. The APA defines regulations very broadly to include every rule,
regulation, order, or standard of general application adopted by any state agency to
implement, interpret, or make specific the law enforced or administered by it, or to
govern its procedure. (Gov. Code, § 11342.600.) Policies of state agencies that interpret
statutes constitute regulations, and are void if they are not adopted in accordance with the
APA. (Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, 561.)
              Here it is uncontested that if the DMHC adopted the policy of interpreting
the statute as requiring the use of a weighted average, it was not adopted pursuant to the
APA. Lample argues that establishing such a policy is exempt from the provisions of the
APA. Lample points out that the APA does not apply to a regulation that establishes or
fixes prices. (Gov. Code, § 11340.9, subd. (g).)
              But the regulation alleged here does not establish any price. Instead, the
alleged regulation establishes a policy or procedure for setting prices. In California Assn.
of Nursing Homes etc., Inc. v. Williams (1970) 4 Cal.App.3d 800, nursing homes
complained that the Medi-Cal administrator was setting reimbursement rates without first
adopting regulations for setting rates in compliance with the APA. Medi-Cal argues it
was exempt from complying with the APA under former Government Code
section 11380, subdivision (a)(1). That subdivision is the predecessor to the current
Government Code section 11340.9, subdivision (g). Like the current statute, the former
statute exempted regulations that establish or fix rates, prices or tariffs. In rejecting
Medi-Cal’s argument, the court pointed out that the agency is empowered to establish
policies for the fixing of rates for the payment of services. The court stated: “[T]he
scope of the agency’s regulations is much broader than the Administrative Procedure
Act’s narrow exemption of rates, prices or tariffs. Although the Medi-Cal agency’s
regulations deal with rates or establish rate formulae, they are not within the dispensation
provided in section 11380, subdivision (a)(1).” (Id. at p. 821.)
              Thus where, as here, a regulation does not establish or fix a price itself, but
establishes a policy or procedure under which prices are fixed, it is not exempt from the
APA.


                                              10
                In any event, the DMHC is prohibited from establishing prices. Section
1367 states: “Nothing in this section shall be construed to permit the director to establish
the rates charged subscribers and enrollees for contractual health care services.” Even if
the alleged regulation was exempt from complying with the APA, it would be void under
section 1367.
                                             III.
                Lample contends she is entitled to a judgment on her unfair prong of the
UCL.
                Lample I adopts the definition of unfair as stated in Camacho v. Automobile
Club of Southern California, supra, 14 Cal.App.4th at p. 1403. Under that definition,
Lample must show that the consumer’s injury is substantial; the injury is not outweighed
by countervailing benefits to consumers or competition; and the injury could not have
been reasonably avoided by consumers.
                Lample claims she suffered substantial injury because she paid $4,475.88
more than she would have, had Blue Shield used the MRMIP’s weighted average. But as
we have explained, Blue Shield was not required to use the MRMIP’s weighted average.
The unfair prong of the UCL does not require a business to charge the lowest possible
price. Lample was not injured within the meaning of the UCL simply because Blue
Shield could have charged her less. Lample’s failure to show injury is alone fatal to her
cause of action.
                Moreover, the undisputed evidence shows Lample could have avoided
paying more. She could have chosen among other similar HIPAA PPO policies offered
by companies such as Aetna, Health Net and PacifiCare. In fact, Lample’s complaint
alleges that all other HIPAA PPO providers offered coverage for less money. Thus,
Lample could have easily avoided the alleged injury.
                Lample claims that at the time she purchased her Blue Shield policy she did
not know Blue Shield used a straight average. But Lample had the opportunity to
compare coverage and price. How the price was calculated is irrelevant to her
opportunity to avoid the injury.


                                             11
                                             IV.
              Lample contends the trial court erred in overruling her objections to Blue
Shield’s evidence.
              Many of Lample’s arguments are based on what she considers the law of
the case as established in Lample I. But Lample I was decided on review of a judgment
arising from the sustaining of a demurrer. On demurrer, the court is limited to
considering evidence of which it may take judicial notice. (See Code Civ. Proc.,
§ 430.30, subd. (a).) In ruling on a motion for summary judgment or adjudication, the
court is not so limited. (See id., § 437c, subd. (b)(1).) A principle doctrine stated by a
reviewing court is only law of the case when it is necessary for the court’s decision. (See
Water Replenishment Dist. of Southern California v. City of Cerritos (2012) 202
Cal.App.4th 1063, 1071.) Here Lample I did not purport to rule on what evidence is
admissible in a motion for summary judgment or adjudication. Even if it had so ruled, it
would not be law of the case because such a ruling would not be necessary to the
decision.
              Lample made a hearsay objection to the admission of an unredacted DMHC
position paper in support of legislation that would clarify statutory caps. The trial court
overruled the objection. Lample had submitted a heavily redacted version of the same
position paper in support of her motion. Evidence Code section 356 provides in part:
“Where part of [a] . . . writing is given in evidence by one party, the whole on the same
subject may be inquired into by an adverse party . . . .” Thus, Blue Shield’s unredacted
position paper is admissible.
              Nor does Lample cite any authority to support the claim that the unredacted
portion of the position paper cannot be considered for the truth of the matter asserted
therein. (See People v. Vines (2011) 51 Cal.4th 830, 862 [“Nor, as defendant argues,
would the confrontation clause of the Sixth Amendment to the United States Constitution
have precluded the admission under the hearsay exception embodied in Evidence Code
section 356”].) Lample cites People v. Lewis (2008) 43 Cal.4th 415, 458, for the
proposition that Evidence Code section 356 “permits the introduction of statements that


                                             12
are necessary for the understanding of, or to give context to, statements already
introduced.” She argues Blue Shield’s unredacted position paper fails to do so.
              But Blue Shield’s unredacted version is both necessary for the
understanding of and gives context to Lample’s heavily redacted version. Contrary to
what Lample attempted to show in the heavily redacted version, the unredacted version
shows that the DMHC had no rule or statutory interpretation in place requiring the use of
a weighted average. The unredacted version includes the statement, “[t]he DMHC never
formally adopted a position on the matter [of using a non-weighted or weighted
average].”
              We need not consider other objections raised by Lample. The trial
court properly admitted the unredacted version of the DMHC position paper. In addition,
Abu-Rahma, the DMHC’s enforcement counsel, testified in a deposition that the DMHC
conducted an investigation to determine whether Blue Shield had violated the rate cap
mandated by sections 1399.805 and 1399.811; Blue Shield informed the DMHC that it
always was a straight average; and that the DMHC was unable to calculate what the rate
should be because the law is ambiguous. The DMHC position paper and Abu-Rahma’s
testimony were properly admitted into evidence and uncontradicted. They unequivocally
show the DMHC had no regulation requiring Blue Shield to use a weighted average.
Thus, even if the trial court erred in admitting other evidence presented by Blue Shield,
the error was harmless. (See 9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, § 445,
p. 499.) Moreover, even had the DMHC adopted such a regulation, as we have stated, it
would be void as violating the APA.




                                            13
                                   DISPOSITION
             The judgment is affirmed. Costs on appeal are awarded to respondent.
             NOT TO BE PUBLISHED.



                                       PERREN, J.

We concur:



             YEGAN, Acting P. J.




             TANGEMAN, J.




                                         14
                                  Jane L. Johnson, Judge

                           Superior Court County of Los Angeles

                           ______________________________


              Kiesel Boucher Larson, William L. Larson and Herbert L. Greenberg, for
Plaintiff and Appellant.
              Manatt, Phelps & Phillips, Gregory N. Pimstone, Craig S. Bloomgarden
and Joanna S. McCallum, for Defendant and Respondent.
