Court Opinion

ID: 2672981
Source: CourtListenerOpinion
Date Created: 2014-05-08 17:10:06.176406+00
Date Added: 2024-06-11T13:06:30.377738
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

MARTHA GARCIA,                            No. 13-55468
              Plaintiff-Appellant,
                                             D.C. No.
                v.                       8:12-cv-02022-
                                            JVS-RNB
PACIFICARE OF CALIFORNIA, INC.;
UHC OF CALIFORNIA, DBA
UnitedHealthcare of California,            OPINION
             Defendants-Appellees.

     Appeal from the United States District Court
        for the Central District of California
      James V. Selna, District Judge, Presiding

                Argued and Submitted
        October 7, 2013—Pasadena, California

                     Filed May 8, 2014

   Before: Stephen Reinhardt, Andrew J. Kleinfeld,
        and Morgan Christen, Circuit Judges.

              Opinion by Judge Christen
2           GARCIA V. PACIFICARE OF CALIFORNIA

                           SUMMARY*

                        Health Insurance

    Affirming the district court’s summary judgment in an
action under the Employment Retirement Income Security
Act, the panel held that an insurance company’s categorical
exclusion of myoelectric prosthetics from a health insurance
plan did not violate California Health & Safety Code
§ 1367.18.

                            COUNSEL

Jeffrey Isaac Ehrlich (argued), The Ehrlich Law Firm,
Encino, California, for Plaintiff-Appellant.

Ethan P. Schulman (argued), Crowell & Moring, LLP, San
Francisco, California; Jennifer S. Romano, Crowell &
Moring, LLP, Los Angeles, California, for Defendants-
Appellees.

  *
    This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
             GARCIA V. PACIFICARE OF CALIFORNIA                           3

                               OPINION

CHRISTEN, Circuit Judge:

    This case involves a single issue: does an insurance
company’s categorical exclusion of myoelectric prosthetics
from a health insurance plan violate California Health &
Safety Code § 1367.18? We have jurisdiction under
28 U.S.C. § 1291 and hold that such an exclusion does not
violate this statute.

I. BACKGROUND

    In 1989, eleven-year-old Martha Garcia (“Garcia”)
contracted spinal meningitis, which necessitated the
amputation of her hands at the wrists and her legs below the
knees. From 1990 to 1996 she used body-powered/cable and
harness upper-extremity prostheses. When she was a senior
in high school she was fitted for myoelectric upper-extremity
prostheses.1 The myoelectric prostheses “allowed [her] to
live independently, obtain a college degree, and to work full
time.”

     Since 2006, Garcia has worked for the Regional Center of
Orange County (“Regional Center”). When she began work
at the Regional Center, she was included on her father’s Blue
Cross health insurance policy that covered myoelectric

 1
     A myoelectric prosthesis “uses electromyography signals or potentials
from voluntarily contracted muscles within a person’s residual limb via
the surface of the skin to control the movements of the prosthesis, such as
. . . wrist supination/pronation or hand opening/closing of the fingers.” In
contrast, the more common “body-powered prosthesis” has “a hook at the
end of the arm that the wearer operates by moving the muscles of the
residual limb.”
4                GARCIA V. PACIFICARE OF CALIFORNIA

prostheses. The Regional Center provided health care
coverage through PacifiCare,2 which she selected because it
allowed her to receive treatment from the same doctors and
prosthetic specialists she had been seeing under her father’s
Blue Cross policy.

    In 2009, Garcia’s myoelectric prostheses began to fail, so
her physician submitted a replacement request to Memorial
Healthcare (“Memorial”), the independent practice
association under contract with PacifiCare for Regional
Center employees. Memorial denied the physician’s request
because “myoelectronic prosthetics are not a benefit covered
under [Garcia’s] health plan.” Garcia appealed the decision
to PacifiCare, which upheld the denial of coverage “on the
basis of a specific benefit exclusion” per Garcia’s Evidence
of Coverage document, which states that “myoelectric . . .
prosthetics are not covered.” PacifiCare does not dispute that
Garcia’s physician-prescribed myoelectric devices are
medically necessary.

   In January 2010, Garcia filed a grievance with the
California Department of Managed Health Care (“DMHC”).
DMHC determined that it “did not find a violation of the
California health plan law regarding this issue.” In
November 2012, Garcia brought this action in the Central
District of California under the Employee Retirement Income
Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1132(a)(1)(B),
1132(a)(3), alleging that PacifiCare’s benefit exclusion was
contrary to California Health & Safety Code § 1367.18.3 In

    2
        PacifiCare subsequently changed its name to UnitedHealthcare.
    3
        PacifiCare does not dispute that Garcia’s plan is an ERISA plan.
            GARCIA V. PACIFICARE OF CALIFORNIA                       5

March 2013, the district court granted summary judgment for
PacifiCare.

II. STANDARD OF REVIEW

   We review de novo a district court’s order granting
summary judgment and its interpretation of state law. Nolan
v. Heald College, 551 F.3d 1148, 1153 (9th Cir. 2009);
Matter of McLinn, 739 F.2d 1395, 1397 (9th Cir. 1984) (en
banc).

III.      DISCUSSION

       A. Statutory Text

    California Health & Safety Code § 1367.18 was enacted
in 1985 and amended in 1991 and 2006.4 The original statute
read:

          Every health care service plan, except a
          specialized health care service plan, that
          covers hospital, medical, or surgical expenses
          on a group basis shall offer coverage for
          orthotic and prosthetic devices and services
          under the terms and conditions that may be
          agreed upon between the group subscriber and
          the plan. Every plan shall communicate the
          availability of that coverage to all group
          contractholders and to all prospective group
          contractholders with whom they are
          negotiating.

 4
   Section 1367.18 is a provision of the Knox-Keene Health Care Service
Plan Act. Cal. Health & Safety Code §§ 1340–1399.835.
6           GARCIA V. PACIFICARE OF CALIFORNIA

In 1991, the following language was added:

         Any coverage for prosthetic devices shall
         include original and replacement devices, as
         prescribed by a physician. Any coverage for
         orthotic devices shall provide for coverage
         when the device, including original and
         replacement devices, is prescribed by a
         physician, or is ordered by a licensed health
         care provider acting within the scope of his or
         her license. Every plan shall have the right to
         conduct a utilization review to determine
         medical necessity prior to authorizing these
         services.

In 2006, the statute was again amended, with the existing
language being designated as subpart (a) and the following
language being designated as subpart (b):5

         Notwithstanding subdivision (a), on and after
         July 1, 2007, the amount of the benefit for
         orthotic and prosthetic devices and services
         shall be no less than the annual and lifetime
         benefit maximums applicable to the basic
         health care services required to be provided
         under Section 1367. If the contract does not
         include any annual or lifetime benefit
         maximums applicable to basic health care
         services, the amount of the benefit for orthotic
         and prosthetic devices and services shall not

    5
   The amendment also added language to part (a) allowing surgeons and
podiatrists to prescribe prosthetics and orthotics. That language is not
relevant here.
           GARCIA V. PACIFICARE OF CALIFORNIA                 7

       be subject to an annual or lifetime maximum
       benefit level. Any copayment, coinsurance,
       deductible, and maximum out-of-pocket
       amount applied to the benefit for orthotic and
       prosthetic devices and services shall be no
       more than the most common amounts applied
       to the basic health care services required to be
       provided under Section 1367.

   B. Application

    PacifiCare denied Garcia’s claim based solely on an
express exclusion in its policy; it did not contest the medical
necessity of myoelectric prosthetic devices for Garcia’s
medical condition. Garcia agrees the plan expressly excludes
coverage for myoelectric prosthetic devices, but she argues
that § 1367.18(a) requires plans to cover any prosthetic
device if it is medically necessary and prescribed by a
physician.

    In answering a question of California law, this court
“predict[s] how the highest [California] court would decide
the issue.” Credit Suisse First Boston Corp. v. Grunwald,
400 F.3d 1119, 1126 (9th Cir. 2005) (internal quotation marks
and citations omitted). The question presented here is one of
pure statutory interpretation, so this court “look[s] to
California principles of statutory construction.” Id. When
interpreting a statutory provision, California courts look first
to the text of the statute, “giving to the language its usual,
ordinary import and according significance, if possible, to
every word, phrase and sentence in pursuance of the
legislative purpose.” State Farm Mut. Auto. Ins. Co. v.
Garamendi, 88 P.3d 71, 78 (Cal. 2004) (internal quotation
marks and citations omitted). Language that permits “more
8            GARCIA V. PACIFICARE OF CALIFORNIA

than one reasonable interpretation allows [courts] to consider
other aids, such as the statute’s purpose, legislative history,
and public policy.” Cortez v. Abich, 246 P.3d 603, 607 (Cal.
2011) (internal quotation marks and citation omitted).

    The parties agree that, as enacted in 1985, the original
version of the statute only required plans to offer coverage for
prosthetic devices; the statute afforded complete discretion to
the plans to negotiate the “terms and conditions” of
prosthetics coverage.6 Thus, if the 1985 version of the statute
were still in effect, there would be no question about the
correctness of PacifiCare’s position: plans would be obliged
to offer coverage for prosthetic devices, but the type of
prosthetic devices offered would be negotiable as a “term or
condition” to be agreed upon by the parties.

    Section 1367.18 has been amended twice since it was
adopted, and those amendments are the focus of the parties’
briefing. The 2006 amendment limited the ability of plans to
cap the amount of benefits for prosthetic devices; it did not
address the scope of coverage, i.e., the type or types of
devices that plans must offer, or cover. Accordingly, the
2006 amendment is not dispositive of Garcia’s argument,
which hinges instead on the extent to which the 1991
amendment changed the plan’s discretion to negotiate the
types of prosthetics it will cover as a “term and condition” of
coverage.

    6
    Garcia’s brief concedes: “Initially, the statute simply required HMOs
to offer prosthetics coverage to group subscribers (i.e. employers), under
terms and conditions that the plan and employer agreed upon. The
original version of the statute therefore afforded plans complete discretion
about the contents of the prosthetics coverage they offered.”
            GARCIA V. PACIFICARE OF CALIFORNIA                        9

    PacifiCare argues that § 1367.18 has always
required—and continues to require—that prosthetic coverage
must be offered on terms and conditions mutually agreed
upon, and that the 1991 amendment only requires that
whatever coverage is offered must extend to both original and
replacement devices. Garcia views the 1991 amendment
much more expansively. She argues that the 1991
amendment transformed the statute from a “mandate to offer”
into a “mandate to cover.”7 Far from the unfettered discretion
permitted by the original “terms and conditions” language,
Garcia’s reading of the 1991 amendment prevents plans from
adopting “terms and conditions” that defeat what she
interprets to be the California legislature’s 1991 decision to
mandate that medically necessary prosthetics, prescribed by
physicians, must be covered. Specifically, Garcia argues that
the 1991 amendment requires the provision of all original and
replacement prosthetic devices prescribed by a physician that
are “medically necessary.”

    There is some basis for both interpretations of the statute,
but for several reasons we ultimately agree with PacifiCare.
To begin, Garcia’s interpretation of the 1991 amendment
requires coverage for all prosthetic devices prescribed by a
physician (subject to a review for necessity), and, as

 7
  Yeager v. Blue Cross of California, 96 Cal. Rptr. 3d 723, 727–28 (Cal.
Ct. App. 2009), describes the difference between mandate to offer and
mandate to cover statutes. The difference is illustrated by comparing
§ 1367.18 (“Every . . . plan . . . shall offer coverage for orthotic and
prosthetic devices and services under terms and conditions that may be
agreed upon between the group subscriber and the plan”) with § 1374.72
(“Every . . . plan . . . shall provide coverage for the diagnosis and
medically necessary treatment of severe mental illnesses . . . under the
same terms and conditions as specified in subdivision (c)”) (emphases
added).
10         GARCIA V. PACIFICARE OF CALIFORNIA

PacifiCare notes, the 1991 amendment does not include the
word “all.” See Yeager, 96 Cal. Rptr. 3d at 727 (“We may
not make a silent statute speak by inserting language the
Legislature did not put in the legislation.”). Building on the
admittedly untethered discretion the 1985 statute allowed for
negotiating “terms and conditions” of coverage to be offered,
the 1991 amendment merely states that “[a]ny coverage for
prosthetic devices shall include original and replacement
devices, as prescribed by a physician,” subject to a utilization
review to determine medical necessity. Garcia’s concession
that the original 1985 statutory language allowed plans to
define the scope of coverage they would offer—that is, the
type of prosthetic devices they would cover—among the
“terms and conditions” to be agreed upon by the parties,
seriously undermines her interpretation of the 1991
amendment.

    The 1991 amendment must be viewed in the context of
the original statute because the legislature did not replace the
1985 language; it retained the original statutory language and
added a new provision to it. For this reason, the parties’
agreement that the original statute only required plans to offer
coverage for prosthetics on mutually agreeable terms—an
interpretation with which we agree—informs the meaning to
be given to the amendment. Read in conjunction with the
original 1985 language, the 1991 amendment only requires
that, whatever type or types of prosthetic devices a plan offers
to cover, the coverage must extend to original and
replacement devices. The 1991 amendment requiring that
plans covering a particular type of prosthetic device must
cover original and replacement devices of the same type, as
long as they are prescribed and deemed medically necessary,
cannot be equated to a mandate that a particular type of
device must be covered if it is prescribed and medically
           GARCIA V. PACIFICARE OF CALIFORNIA                11

necessary. The plain terms of the 1991 amendment do not
prohibit a plan from limiting the scope of coverage as a
negotiable term or condition of the plan, except that, after the
1991 amendment, plans are clearly prohibited from adopting
“terms and conditions” that exclude replacement devices.

     A second problem with Garcia’s interpretation is that
§ 1367.18(a) retains language stating that plans “shall offer
coverage” for prosthetic devices under terms and conditions
that may be agreed upon by the group subscriber and the plan.
If the legislature intended the 1991 amendment to transform
the statute from a “mandate to offer” into a “mandate to
cover,” as Garcia suggests, we can see no reason for retaining
the original “mandate to offer” language from the 1985
version of the statute. The legislature’s decision to retain the
requirement that plans “shall offer coverage” subject to
mutually agreeable terms and conditions is consistent with
PacifiCare’s view that the 1991 amendment is limited to
requiring that, whatever prosthetics coverage is offered by a
plan, it must include original and replacement devices.

    Garcia argues that her interpretation of the statute is
supported by Harlick v. Blue Shield of California, 686 F.3d
699 (9th Cir. 2012), but we do not find support for her
position there. Harlick involved the denial of a claim for
residential treatment for anorexia nervosa. After concluding
that the plan excluded this type of care, our court considered
whether California’s Mental Health Parity Act nevertheless
requires that plans within the scope of the Act must provide
all “medically necessary treatment” for “severe mental
illnesses.” We concluded that it does. The Parity Act was
enacted to require plans that provide hospital, medical, or
surgical coverage to also provide coverage for the diagnosis
and treatment of severe mental illnesses under the same terms
12        GARCIA V. PACIFICARE OF CALIFORNIA

and conditions applied to other medical conditions. Id. at
710–11. As summarized in Harlick, the pertinent part of the
Parity Act specifies that plans within its scope “shall provide
coverage for . . . medically necessary treatment of severe
mental illnesses,” including anorexia nervosa. Id. at 711.
Our court explained that the statute contains “only one
limitation on the basic mandate that coverage be provided for
‘medically necessary treatment of severe mental illnesses’:
such coverage must be provided ‘under the same terms and
conditions applied to other medical conditions as specified in
subdivision (c)’” of the statute. Id. (emphasis added). The
parties in Harlick agreed that the phrase “terms and
conditions” in the Parity Act refers to monetary conditions,
such as copayments and deductibles. Id. Thus, given the
language and structure of the Parity Act, our court ruled that
plans within its scope are required to cover all medically
necessary treatment for severe mental illnesses, including
anorexia nervosa, and that plans are permitted to apply the
same financial conditions—such as deductibles and lifetime
benefits—that they apply to coverage for physical illnesses.
Id. at 712.

    Garcia argues that Harlick supports her position because
the Parity Act was deemed to require coverage for all
medically necessary treatment, even though the Parity Act
does not include the word “all.” But Garcia overlooks that
the Parity Act mandates coverage, not just offers to cover.
She also overlooks our court’s observation that the only
limitation on the Parity Act’s basic mandate for coverage is
that it be offered on the same monetary conditions that apply
to other types of coverage. Id. at 711.

   Finally, Garcia overlooks our court’s observation in
Harlick that the Knox–Keene Act and the Parity Act “operate
          GARCIA V. PACIFICARE OF CALIFORNIA                13

in fundamentally different ways.” Id. at 716. “Because the
Parity Act applies to severe mental illnesses, some of which
are life threatening, it makes sense that the Act requires
insurers to cover all medically necessary treatments. It makes
equal sense that the Knox–Keene Act, which applies to the
full range of physical illnesses, does not require insurers to
cover all medically necessary treatments.” Id. We do not
doubt that the most advanced prosthetics are capable of
greatly improving a user’s quality of life, but they cost more
than other options. The California legislature knows how to
mandate insurance coverage when it chooses. See Yeager,
96 Cal. Rptr. 3d at 727. Consistent with the distinction
explained in Harlick, in § 1367.18 the legislature left the
choice between lower costs and better prosthetics to the plan
and its subscriber.

    Though the district court found § 1367.18 to be
unambiguous, it considered some of the pertinent legislative
history and found that it supported PacifiCare’s interpretation
of the statute. We agree. The statute’s original sponsor,
Assemblyman Bill Filante, M.D., also offered the 1991
amendment. He made clear that the 1991 amendment was
intended to require coverage for replacement devices. In his
floor remarks introducing the bill and in a letter to the
governor, he wrote:

       Approximately 7 years ago I introduced
       legislation which required insurers to offer
       optional coverage for orthotic and prosthetic
       devices. Subsequently, many insurers have
       included this coverage as an option.
       Unfortunately, some insurers have begun to
       unfairly limit this coverage to only one device
       per policy. This bill would allow these
14         GARCIA V. PACIFICARE OF CALIFORNIA

        devices to be replaced when medically
        necessary.

(Emphasis added). A Senate Rules Committee analysis of the
1991 amendment described it similarly: “This bill requires
health care service plans . . . to also include original and
replacement devices when prescribed by a physician. . . .
Current law requires health care service plans . . . to offer
coverage for orthotic and prosthetic devices and services
under mutually agreed terms and conditions. . . . Many times,
coverage is limited to one device.” Other legislative history,
such as a report prepared for the Assembly Committee on
Insurance and a report prepared for the Assembly’s third
reading of the bill, also supports this view of the
amendment’s purpose.

    Garcia argues that the district court’s interpretation of the
statute defeats the legislative purpose by excluding
myoelectric devices through the “terms and conditions”
clause. But as previously explained, the legislature did not
express an intent to mandate coverage. Further, though this
case does not require that we define the limits of how a policy
could fairly be restricted by the inclusion of restrictions
within its “terms and conditions,” PacifiCare’s counsel
conceded at oral argument that restrictive “terms and
conditions” would have to be reasonable, and from this we
understand that, at a minimum, there is no dispute that such
terms could not permissibly render coverage illusory. The
record before us does not support a finding that the prosthetic
coverage offered by PacifiCare was unreasonably restricted.

    Because we agree with PacifiCare’s interpretation of the
plain language of § 1367.18, we need not reach PacifiCare’s
          GARCIA V. PACIFICARE OF CALIFORNIA            15

argument that we should defer to the DHMC’s interpretation
of the statute.

IV.    CONCLUSION

   For the forgoing reasons, we AFFIRM the district court’s
order granting summary judgment for PacifiCare. We also
DENY AS MOOT Garcia’s motion to certify to the
California Supreme Court the question whether California
Health & Safety Code § 1367.18 requires PacifiCare to cover
Garcia’s myoelectric prostheses.