California Supreme Court rules CMA can sue Aetna Health under Unfair Competition Law

7/18/2023 8:21:35 AM   

Sacramento, CA — The California Medical Association (CMA) has achieved a significant victory for providers, consumers and public interest advocates in the case of California Medical Association v. Aetna Health of California Inc. The California Supreme Court ruled unanimously in favor of CMA, confirming the organization's legal standing to sue Aetna Health for alleged violations of the Unfair Competition Law (UCL).

The lawsuit is centered on an Aetna Health policy that targeted the use of out-of-network benefits by its PPO plan members. CMA alleged that the insurance company discouraged its members from going out of network even though their PPO plans included such benefits, and that Aetna Health harassed or terminated its contracted physicians for referring PPO members to out-of-network facilities. Such a policy, according to CMA, directly interfered with the doctor-patient relationship and physicians’ independent medical judgment, in violation of numerous state laws. CMA sued Aetna Health to stop the harmful and illegal policy.

"The practice of threatening physicians who refer patients to out-of-network providers is unlawful, and we are pleased that the court agrees that CMA has the right to challenge these practices in court," said CMA President Donaldo Hernandez, M.D.

Aetna Health argued that CMA does not have legal standing to pursue its lawsuit because Proposition 64 (2004) permits organizational plaintiffs to sue under the UCL only if they have suffered injury in fact and lost money or property. Despite the fact that CMA diverted a  substantial amount of staff time and resources to deal with the policy and its impact on physicians and the public, a lower court ruled that the association did not meet these requirements. 

In a landmark decision, the California Supreme Court overruled the lower courts and clearly confirmed that CMA has UCL standing to proceed with the lawsuit against Aetna Health. Recognizing it had never before addressed the issue, the Court held that a public interest advocacy organization like CMA can have UCL standing if, in furtherance of a bona fide, preexisting mission, the organization incurs costs to respond to perceived unfair competition that threatens that mission, so long as those expenditures are independent of costs incurred in UCL litigation or preparations for such litigation. The Court further explained that the incursion of costs may include diversion of staff time to deal with the challenged policy because such staff time has real economic value for the organization.

The Court recognized that CMA has a well-established mission and long record of striving to better the medical profession and the public health. To serve that mission, CMA was compelled to divert its staff to educate, advise and respond to physicians, conduct investigations, and develop resources and guides advising how to mitigate the unlawful policy’s direct consequences on physicians and patients.

The outcome of this case highlights the importance of the UCL to combat unfair and deceptive business practices in the health insurance industry and beyond. The ruling empowers membership organizations like CMA and other public interest advocates in California to defend their interests and the interests of their constituents against corporations engaging in unlawful conduct.

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