A federal judge refused to dismiss most of a class action accusing insurer Centene of fraud through allegedly misleading customers about the breadth and scope of its coverage under the Affordable Care Act and Medicaid.
Six named plaintiffs accused Centene of violating the Racketeer Influence and Corrupt Organizations Act along with allegations of unjust enrichment and claims under several state consumer protection laws. In an opinion filed in May, U.S. District Judge Nancy Maldonado dismissed only claims under the Nebraska Consumer Protection Act and unjust enrichment allegations.
According to Maldonado, Centene “is the largest provider of Medicaid managed-care plans” and those sold on ACA exchanges, where Centene’s subsidiaries sell plans under the Ambetter brand name in 26 states with more than 2 million insured clients. The plaintiffs alleged 26 corporate subsidiaries have “a common purpose of defrauding consumers in an effort to sell more Ambetter insurance.”
The plaintiffs alleged Centene exploits contracts the subsidiaries have with Medicaid to target low-income consumers who range in and out of Medicaid eligibility based on inconsistent income. They said the companies then present “misleading marketing and promotional materials for Ambetter insurance — including inaccurate physician directories — to induce these individuals to purchase Ambetter insurance,” according to Maldonado.
Centene intentionally acquired named defendant Celtic Insurance Company, according to the plaintiffs, because it is licensed to sell insurance nearly nationwide and specifically markets Ambetter plans in eight states and names its plans similar to the managed-care plans Centene’s other subsidiaries offer. They said the intent is to fraudulently convince customers they will have the same benefits despite losing Medicaid coverage when in reality the providers Ambetter promotes do not actually accept the new plans.
Maldonado refused to reject the RICO claim, explaining it rises beyond breach of contract litigation and saying the complaint’s allegations “are sufficient to identify each alleged member’s role” and that the fraudulent conduct alleged could only have happened through the specific corporate enterprise bolstering the complaint.
“Although barely,” Maldonado wrote, the complaint alleges the corporate entities worked for the betterment of the alleged Ambetter scheme, “not merely the affairs of their insurance businesses.” She further said the complaint meets particularity requirement for its mail and wire fraud allegations and agreed those allegations don’t require showing a consumer purchased a plan because the complaint rests on the transmission of promotional materials to potential Ambetter clients.
Because the complaint acknowledges express contracts — coverage Ambetter provided in 26 states — Maldonado explained the plaintiffs cannot sustain their claims of unjust enrichment. She did grant leave to amend that portion of the lawsuit, and further said a decision about whether the named plaintiffs are allowed to bring claims under the laws of states in which none of them reside is not a question for dismissal but suited for resolution during class certification proceedings.
Although Maldonado denied a motion to dismiss the state consumer protection law claims for being too vague, she did say the plaintiffs couldn’t sue under a Nebraska law that exempts “certain activities of heavily regulated businesses.” Though not a blanket exemption, Maldonado agreed with the defendants’ contention the complaint specifically addresses conduct “related to the provider network and directory that is regulated by the Department of Health and Human Services” and therefore cannot be subject to litigation.
An attempt to invoke an exception for conduct that falls under the state’s insurance director failed, she continued, because “the complaint contains to allegations that the Nebraska Department of Insurance regulates defendants’ relevant conduct, nor do plaintiffs attempt to develop this argument in their opposition brief.”
Maldonado gave the plaintiffs two weeks to file an amended complaint.
Centene did not respond to a request for comment.