Court Opinion

ID: 9389210
Source: CourtListenerOpinion
Date Created: 2023-04-24 21:02:54.68696+00
Date Added: 2024-06-11T17:18:25.952810
License: Public Domain

Filed 4/24/23 Myers v. California State Board of Equalization CA2/3

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                        SECOND APPELLATE DISTRICT
                                     DIVISION THREE

 MICHAEL D. MYERS,                                               B307981

      Plaintiff and Appellant,                                  Los Angeles County
                                                                Super. Ct. Nos.
      v.                                                        BS143436, BS157999,
                                                                BS158655
 CALIFORNIA STATE BOARD
 OF EQUALIZATION et al.,

      Defendants and Respondents;

 CALIFORNIA PHYSICIANS’
 SERVICE et al.,

    Real Parties in Interest and
 Respondents.

     APPEALS from judgments of the Superior Court of Los
Angeles County, Maren E. Nelson, Judge. Affirmed.
     Law Office of Martin N. Buchanan, Martin N. Buchanan;
Gianelli & Morris, Timothy J. Morris; Ajalat, Polley, Ayoob,
Matarese & Broege, Richard J. Ayoob; Consumer Watchdog,
Jerry Flanagan, Pamela Pressley, and Benjamin Powell for
Plaintiff and Appellant.
      Kenneth B. Schnoll, Lucy F. Wang, and Harry J. LeVine for
Ricardo Lara, Insurance Commissioner of the State of California,
as Amicus Curiae on behalf of Plaintiff and Appellant.
      Manatt, Phelps & Phillips, Gregory N. Pimstone, Ronald B.
Turovsky, and Joanna S. McCallum for Real Party in Interest
and Respondent California Physicians’ Service dba Blue Shield of
California.
      Hogan Lovells US, Neal Kumar Katyal, William E.
Havemann, Vanessa O. Wells, Michael M. Maddigan, Jordan D.
Teti, Katherine B. Wellington, and Nathaniel Zelinsky for Real
Party in Interest and Respondent Blue Cross of California dba
Anthem Blue Cross.
      Morgan, Lewis & Bockius, Thomas M. Peterson, and Molly
Moriarty Lane for Real Party in Interest and Respondent Health
Net of California, Inc.
      Sheppard, Mullin, Richter & Hampton, John T. Brooks,
Moe Keshavarzi, and Matthew G. Halgren for Real Party in
Interest and Respondent Kaiser Foundation Health Plan, Inc.
      Sonia R. Fernandes, Shelia F. Gonzalez, and Johnny A.
Colon for California Department of Managed Health Care as
Amicus Curiae on behalf of Real Parties in Interest and
Respondents.
             _______________________________________

                               2
                        INTRODUCTION

       These appeals arise out of related taxpayer suits brought
by appellant Michael D. Myers under Code of Civil Procedure
section 526a. Myers seeks to compel the California State Board of
Equalization, the Insurance Commissioner of the State of
California, and the Controller of the State of California to collect
the gross premium tax (GPT) imposed by article XIII, section 28
of the California Constitution from certain health care service
plans (HCSPs), which are regulated by the Department of
Managed Health Care (DMHC) under a different regulatory
scheme than insurers.
       In Myers v. Board of Equalization (2015) 240 Cal.App.4th
722 (Myers I), a different panel of this Division rejected the
argument that the regulatory status of HCSPs determines
whether they are subject to the GPT, and adopted a standard for
deciding whether HCSPs are insurers for taxation purposes that
requires balancing the indemnity aspects of the business against
the direct service aspects and determining whether indemnity
constitutes a significant financial proportion of the business. Real
Parties in Interest and respondents Blue Cross of California dba
Anthem Blue Cross (Blue Cross), California Physicians’ Service
dba Blue Shield of California (Blue Shield), Health Net of
California, Inc. (Health Net), and Kaiser Foundation Health
Plan, Inc. (Kaiser) (together, Real Parties in Interest) moved for
summary judgment, arguing that the undisputed evidence
demonstrated that they were not insurers where less than 10
percent of the expenses incurred for medical services under their
plans during the relevant periods constituted indemnity under
the Myers I standard. The trial court agreed and granted
summary judgment in their favor.

                                 3
      Myers contends that the trial court incorrectly understood
the meaning of indemnity under the Myers I standard and that it
should have applied a different test to determine whether Real
Parties in Interest are insurers. Myers further contends that the
court erred in excluding portions of expert declarations and other
evidence he submitted in opposition to summary judgment. We
conclude that we are bound by the standard adopted in Myers I,
that the trial court did not err in its application of this standard
to the undisputed facts, and that the court did not abuse its
discretion in excluding certain evidence submitted by Myers. We
therefore affirm.

        FACTS AND PROCEDURAL BACKGROUND

1.    Taxation of Insurers in California
      Article XIII, section 28 of the California Constitution
imposes a tax of 2.35 percent on the amount of gross premiums
received each year by “each insurer doing business in this state.”
(Cal. Const., art. XIII, § 28, subds. (b), (d).) The Constitution
defines “insurers” as including “insurance companies or
associations and reciprocal or interinsurance exchanges together
with their corporate or other attorneys in fact considered as a
single unit, and the State Compensation Insurance Fund.” (Id.,
subd. (a).)1
      The GPT is imposed on insurers “in lieu of all other taxes
and licenses, state, county, and municipal, upon such insurers

1 Article XIII, section 28 was preceded by former article XIII, chapter
14 of the Constitution, which was adopted in 1910 and provided that
“[e]very insurance company or association doing business in this state ”
would be subject to an exclusive GPT.

                                   4
and their property,” with limited exceptions. (Cal. Const., art.
XIII, § 28, subd. (f); see also Mutual Life Ins. Co. v. City of Los
Angeles (1990) 50 Cal.3d 402, 408 (Mutual Life Ins. Co.).) All
other businesses, except for banks and financial corporations, are
subject to a corporate franchise tax which is calculated on the
basis of the business’s net income. (Rev. & Tax. Code, § 23151,
subds. (a), (f).)
       According to a July 2008 report by the Legislative Analyst’s
Office, “ ‘[t]he economics of the insurance industry is a key reason
for the special treatment of insurance companies’ with respect to
taxation in California. The report explains the rationale as
follows: ‘Most [corporate franchise tax] taxpayers calculate their
income by subtracting costs incurred in the production of a good
or service from the revenues received from their sale. Insurance
companies, by contrast, collect their revenues up front [in the
form of premiums], then make payments to policyholders based
on contingent events that occur many months or years later.
Thus, it can be difficult to “match up” revenues to related
expenses. In an income tax framework, insurers ideally would be
allowed to deduct the current value of all future obligations
(claims) covered by the insurance policies they have written when
calculating their taxable income for a given year. [However,]
[b]ecause the actual amount of these obligations is uncertain, as
are the amount of investment earnings on accumulated
premiums received during the intervening period, an accurate
determination of the theoretically appropriate amount of taxable
income proves very difficult to achieve in practice.’ ‘For this
reason,’ the Legislative Analyst’s Office report concludes, ‘a
[gross] premiums tax was adopted.’ ” (Myers I, supra, 240

                                 5
Cal.App.4th at p. 736, quoting Legis. Analyst, Investment Income
and the Insurance Gross Premiums Tax (July 2008) p. 3.)
2.    Legislation and Case Law Concerning the Oversight
      and Taxation of HCSPs
      2.1.   The Origins of HCSPs in California
       In 1939, the Legislature passed a bill creating section 593a
of the Civil Code, which authorized the formation of health
service corporations. (California Physicians’ Service v. Garrison
(1946) 28 Cal.2d 790, 792–793, 802, fn. 1 (Garrison).)
       In Garrison, supra, 28 Cal.2d 790, the Supreme Court held
that California Physicians’ Service (CPS), which served as an
agent to secure medical care for low-income individuals in
exchange for the payment of monthly membership dues through
an employer or professional organization, was not engaged in the
business of insurance under California law. CPS’s contract with
employers and professional organizations provided that the
amounts paid by the employers or professional group “are
accepted by [CPS] and its professional members as full payment
and compensation for all medical and surgical services rendered
during the immediately preceding dues period, and they and each
of them agree to perform the services herein included, without
other, further or additional charge of any kind whatsoever to
those beneficiary members . . . .” (Id. at p. 796.) The Insurance
Commissioner argued that section 593a was invalid, that “[a]ll of
the elements of insurance are present in [CPS’s] plan,” and that
“[t]here is no real distinction between service and insurance, and
by its contracts the corporation has obligated itself to furnish
medical care.” (Id. at pp. 798–799.) CPS argued that it was “not
engaged in the insurance business but is rendering personal

                                 6
service, as distinguished from indemnity, compensation for which
is limited to the resources of a pooled fund; that the professional
members, not the Service, assume any and all risk; and that it is
actually a producer-consumer cooperative.” (Id. at p. 799.)
       The Supreme Court observed that “it is a matter of common
knowledge that there is great social need for adequate medical
benefits at a cost which the average wage earner can afford to
pay,” and that “the Legislature, by enacting section 593a of the
Civil Code, expressly authorized the organization of corporations
such as [CPS]. By this enactment, the state’s social policy in
regard to the corporate practice of medicine, to the limited extent
specified, has been determined and the courts are bound
thereby.” (Garrison, supra, 28 Cal.2d at pp. 801–802, fn. omitted.)
The court stated that “ ‘[t]he question of classification is generally
one for the legislative power, to be determined by it in the light of
its knowledge of all the circumstances and requirements, and its
discretion will not be overthrown unless it is palpably arbitrary.
[Citation.]’ ” (Id. at p. 802.) It further observed that “the
Legislature has defined insurance as ‘a contract whereby one
undertakes to indemnify another against loss, damage, or
liability arising from a contingent or unknown event’ (Ins. Code,
§ 22; Civ. Code, § 2527[]),” and “ ‘insurance generally may be
defined as an agreement by which one person for a consideration
promises to pay money or its equivalent, or to perform some act of
value, to another on the destruction, death, loss, or injury of
someone or something by specified perils.’ [Citation.]” (Id. at
pp. 803–804.) The court concluded that CPS was not an insurer
because it did not assume risk; rather, because the physicians
received pro rata payments per member, “the amount of
compensation of the professional members is variable and may be

                                  7
high or low, depending upon the incidence of sickness and the
number of beneficiary members paying dues. Stated in terms of
insurance, all risk is assumed by the physicians, not by the
corporation.” (Id. at pp. 804–805.)
       The court stated that a further, “more compelling reason
for holding that the Service is not engaged in the insurance
business” was that “[a]bsence or presence of assumption of risk or
peril is not the sole test to be applied in determining its status.
The question, more broadly, is whether looking at the plan of
operation as a whole, ‘service’ rather than ‘indemnity’ is its
principal object and purpose. [Citations.]” (Garrison, supra, 28
Cal.2d at p. 809.) The Garrison court explained that the objects
and purposes of CPS “have a wide scope in the field of social
service.” (Ibid.) It therefore concluded that CPS was not engaged
in the business of insurance within the meaning of the regulatory
statutes. (Id. at p. 811.)
      2.2.   The Knox-Mills Plan Act
      In 1965, the Legislature enacted the Knox-Mills Plan Act
(Knox-Mills Act), which specifically governed health plans. Under
the Knox-Mills Act, health plans were required to register with
the Attorney General and to meet minimum tangible net equity
requirements. In addition, the Attorney General was empowered
to enforce prohibitions against fraudulent advertising. (Sen. Com.
on Health and Welfare, Analysis of Assem. Bill No. 138 (Knox)
(1975–1976 Reg. Sess.) as amended June 27, 1975, p. 1.)
      In People ex rel. Roddis v. California Mut. Assn. (1968) 68
Cal.2d 677, 679 (Roddis), the Supreme Court considered whether
California Mutual Association (CMA) was an insurer subject to
the supervision of the Insurance Commissioner or an HCSP
pursuant to the Knox-Mills Act and thus subject to the

                                 8
supervision of the Attorney General. CMA’s stated purpose was
to make payments in limited amounts for medical and hospital
services rendered to its members using funds derived from
periodic dues. (Id. at p. 678.) At the start of trial, CMA had
contracts with 17 physicians who agreed to render services to
members and to look exclusively to CMA for the payment of the
scheduled fee. (Id. at pp. 678–679.) It was also stipulated that a
majority of CMA’s members were treated by physicians affiliated
with the San Bernardino Foundation for Medical Care and the
Riverside Foundation. (Id. at p. 679.) CMA did not have contracts
with the individual affiliated doctors at either foundation. (Ibid.)
By the end of trial, CMA had terminated its contract with the
San Bernardino foundation and had contracted with 38
physicians who agreed to render services to CMA’s members and
to look exclusively to CMA for payment of the scheduled fee.
(Ibid.) CMA also had about seven physicians who agreed to serve
members but did not restrict themselves as to the source of
payment. (Ibid.) CMA encouraged its members to use the services
of physicians with whom it had contracts, but also paid the bills
of physicians independently chosen by a member in areas where
it did not have contracts for medical services. (Ibid.)
       The Supreme Court observed that the Knox-Mills Act
“permits a health care service plan to ‘reimburse’ a member and
thus indicates that service plans may include some indemnity
features” but also excludes “ ‘insurer’ from the definition of a
‘health care service plan[,]’ ” thus “evinc[ing] an intention to limit
the extent of indemnity features permissible.” (Roddis, supra, 68
Cal.2d at p. 681.) It fell to the court to determine the limit of
indemnity features permissible for an HCSP. (Ibid.) The court,
citing Garrison, observed that there are two policy considerations

                                  9
that must be considered in determining the nature of a plan:
“Where indemnity features are present, the member bears the
risk of personal liability for medical services. This is the
insurance risk which can be protected against by financial
reserves to assure that the member will receive the benefits for
which he has paid. On the other hand, there is a strong social
policy to encourage the services which health plans provide the
public.” (Id. at p. 682.) The court concluded “that where
indemnity is a significant financial proportion of the business,
the organization must be classified as an ‘insurer’ for the
purposes of the Knox-Mills Plan Act.” (Id. at p. 683.) “[T]his
determination involves balancing the indemnity aspects against
the direct service aspects of the business, but only in the context
of the plan as a whole can it be determined whether the
indemnity feature is so significant as to warrant imposing the
Insurance Code financial reserve requirements.” (Ibid.)
       The court observed that “[a]lthough CMA’s contracts with
the 38 physicians provide for direct service without indemnity,
the remainder of the plan is one of insurance[,]” as members were
liable for services procured from the Riverside foundation, from
the seven physicians who did not limit themselves exclusively to
payments from CMA, and from physicians with whom CMA did
not have contracts. (Roddis, supra, 68 Cal.2d at p. 683.) The court
observed that it was unclear from the record “what proportion of
CMA’s members is treated by the 38 physicians” and thus “to
what extent indemnity features are still present” and therefore
instructed the court on retrial “to determine as of that time in
accordance with the views expressed in this opinion the status of
CMA as a health care service plan or as an insurer.” (Id. at
pp. 683–684.)

                                10
      2.3.   The Knox-Keene Health Care Service Plan Act of
             1975
       The Knox-Mills Act was repealed in 1975, effective July 1,
1976. (Stats. 1975, ch. 941, § 1, p. 2070.) In 1975, the Legislature
adopted the Knox-Keene Health Care Service Plan Act of 1975
(Knox-Keene Act) with the express intent and purpose to
“promote the delivery and the quality of health and medical care
to the people of the State of California who enroll in, or subscribe
for the services rendered by, a [HCSP] by accomplishing all of the
following: [¶] (a) Ensuring the continued role of the professional
as the determiner of the patient’s health needs. . . . [¶]
(b) Ensuring that subscribers and enrollees are educated and
informed of the benefits and services available. . . . [¶]
(c) Prosecuting malefactors who make fraudulent solicitations or
who use deceptive methods. . . . [¶] (d) Helping to ensure the best
possible health care for the public at the lowest possible cost by
transferring the financial risk of health care from patients to
providers. [¶] (e) Promoting effective representation of the
interests of subscribers and enrollees. [¶] (f) Ensuring the
financial stability thereof by means of proper regulatory
procedures. [¶] (g) Ensuring that subscribers and enrollees
receive available and accessible health and medical services
rendered in a manner providing continuity of care. [¶]
(h) Ensuring that subscribers and enrollees have their grievances
expeditiously and thoroughly reviewed by the [DMHC].” (Health
& Saf. Code, § 1342.)
       In relevant part, the Knox-Keene Act defines HCSPs that
are subject to the law’s regulations as “[a]ny person who
undertakes to arrange for the provision of health care services to
subscribers or enrollees, or to pay for or to reimburse any part of

                                11
the cost for those services, in return for a prepaid or periodic
charge paid by or on behalf of the subscribers or enrollees.”
(Health & Saf. Code, § 1345, subd. (f)(1).)2 HCSPs as defined in
and regulated by the Knox-Keene Act are under the jurisdiction
of the DMHC. (Id., § 1341.) Though such entities are authorized
to provide direct payment or reimbursement coverage for their
enrollees’ medical expenses, HCSPs are statutorily exempted
from the Department of Insurance’s jurisdiction and are not
subject to the Insurance Code’s regulations. (Ins. Code, § 740,
subd. (g).) This exemption extends to HCSPs offering fee-for-
service coverage through a preferred provider organization plan.
(Id., § 742, subd. (a).)
        Under the Knox-Keene Act, HCSPs must “establish and
maintain provider networks, policies, procedures, and quality
assurance monitoring systems and processes sufficient to ensure
compliance with this clinical appropriateness standard.” (Health
& Saf. Code, § 1367.03, subd. (a)(1).) They must also ensure a
legally prescribed ratio of members to primary care physicians
(id., § 1375.9; Cal. Code Regs., tit. 28, § 1300.51, subd. (d)(H)(i))
and comply with requirements concerning the timely availability
of appointments. (Cal. Code Regs., tit. 28, § 1300.67.2.2,
subd. (c).) HCSPs must also establish procedures to “continuously

2 Originally, the Knox-Keene Act defined an HCSP as “any person who
undertakes to arrange for the provision of health care services, to
subscribers or enrollees, or to pay for or reimburse any part of the cost
for such services in return for a prepaid or periodic charge paid by or
on behalf of such subscribers or enrollees, and who does not
substantially indemnify subscribers or enrollees for the cost of provided
services.” (Former Health & Saf. Code, § 1345, subd. (f), italics added.)
In 1980, the Legislature removed the reference to indemnity from the
definition. (Stats. 1980, ch. 628, § 2, p. 1716.)

                                   12
review[] the quality of care, performance of medical personnel,
utilization of services and facilities, and costs” (Health & Saf.
Code, § 1370) and must establish and maintain a system,
approved by DMHC, that allows members to submit their
grievances to the plan. (Id., § 1368, subd. (a); Cal. Code Regs.,
tit. 28, § 1300.68.)
       Because HCSPs include, by definition, entities that agree to
“pay for or to reimburse” enrollees for the cost of medical services
in exchange for a “prepaid or periodic charge” (Health & Saf.
Code, § 1345, subd. (f)(1)), the Knox-Keene Act includes
capitalization requirements and vests financial oversight
authority in the DMHC. (Id., §§ 1376, 1377, 1399, subd. (c).)
California law further requires that every contract between a
plan and a health care services provider must state that “the
subscriber or enrollee shall not be liable to the provider for any
sums owed by the plan.” (Id., § 1379, subd. (a).) Moreover, even if
the contract fails to include this provision, the statute provides
that “the contracting provider shall not collect or attempt to
collect from the subscriber or enrollee sums owed by the plan.”
(Id., subd. (b).) Thus, “[t]he clear import of section 1379 is to
protect patients with health care service plan coverage from any
collection attempts by providers of such medical care as
emergency room services.” (Dameron Hospital Assn. v. AAA
Northern California, Nevada & Utah Ins. Exchange (2014) 229
Cal.App.4th 549, 563.)
      2.4.   Recent Legislation Concerning the Taxation of
             HCSPs
      In 2016, new legislation—Senate Bill No. X2-2—was
enacted in response to positions taken by the federal government
regarding the conditions necessary to receive federal monies

                                13
funding the Medi-Cal program. The purpose of Senate Bill No.
X2-2 was to “[r]eform[] the existing managed care organization
(MCO) provider tax that is only paid by Medi-Cal managed care
plans (MCPs) and replace[] it with a tax that would be assessed
on health care service plans licensed by the [DMHC], and/or
managed care plans contracted with the Department of Health
Care Services (DHCS) to provide services to Medi-Cal
beneficiaries, unless exempted, from July 1, 2016 to July 1,
2019.” (Sen. Bill No. X2-2, Proposed Conference Report No. 1,
Feb. 22, 2016, p. 1.) The bill thus imposed an MCO tax on many
HCSPs for the first time. Some health plans, including those of
some of the Real Parties in Interest, also operate an admitted
health insurer. As to those entities, the new statute temporarily
reduced the GPT to 0 percent. (Stats. 2015–2016, 2nd Ex. Sess.,
ch. 2, p. 6030.)
       Assembly Bill No. 115, which became effective July 1, 2019,
“establish[ed] a managed care organization provider tax, with
substantially similar provisions [to the 2016 MCO tax], that
would become effective and operative on the effective date of the
federal approval necessary for receipt of federal financial
participation, as specified[]” and “specif[ied] the applicable tax
amounts for each taxing tier for the 2019–20, 2020–21, and 2021–
22, fiscal years, and the first 6 months of the 2022–23 fiscal
year.” (Stats. 2019–2020, ch. 348, p. 3232.) This bill, like the prior
MCO tax, was intended to comply with federal requirements that
allow states to receive “federal financial participation for
expenditures using health care-related taxes, as long as the taxes
are broad-based, uniformly imposed, and contain no hold-
harmless provision.” (Sen. Rules Com., Off. of Sen. Floor

                                 14
Analyses, 3d reading analysis of Assem. Bill No. 115 (2019–2020
Reg. Sess.) as amended Aug. 29, 2019, p. 1.)
3.    Real Parties in Interest
      3.1.   Blue Cross
       In the mid-to-late 1980’s, Blue Cross operated as a
nonprofit hospital service plan and was facing financial
difficulties. To address Blue Cross’s dire situation, to help ensure
its survival, and to prevent adverse impacts on consumers and
the California health benefits market, the Legislature enacted
Senate Bill No. 785. (Stats. 1990, ch. 1043.) Senate Bill No. 785
essentially required Blue Cross to transition from being a
nonprofit hospital service plan under Chapter 11A of the
Insurance Code to being a health care service plan regulated by
the Department of Corporations (DOC) under the Knox-Keene
Health Care Service Plan Act. Blue Cross undertook a number of
changes required by the DOC and is now a Knox-Keene Act-
licensed HCSP regulated by the DMHC.3
       Blue Cross offers its members access to health maintenance
organization (HMO) and preferred provider organization (PPO)
health plans. Under HMO and PPO plans, members have access
to a network of medical providers, hospitals, and other facilities
that have contracted with Blue Cross to provide medical services
to Blue Cross members at agreed upon rates. For Blue Cross’s
commercial HMO and PPO plans, groups and members pay Blue
Cross a fixed periodic fee for coverage, called the “premium,”
which does not change during the coverage period based on the

3The regulation of HCSPs has transferred from the DOC to the
DMHC.

                                 15
amount of medical services a member uses. Under Blue Cross’s
HMO and PPO plans, the member also may be responsible for a
portion of the costs of the medical care they receive, generally in
the form of deductibles,4 copayments (or “co-pays”),5 or
coinsurance,6 which are sometimes called the “cost share.”
       For both HMO and PPO plans, Blue Cross’s in-network
providers have agreed to accept Blue Cross’s payment at the rate
agreed upon in their contract with Blue Cross as payment-in-full
for the covered services they render to Blue Cross members. Blue
Cross’s in-network providers are contractually prohibited from
billing Blue Cross members for any difference between their
contractually agreed upon rate and their usual charges for the
covered services they provide to Blue Cross members (a practice
known as “balance billing”). For the years 2005 through 2016,
Blue Cross’s HMO and PPO plans have included the following (or

4 A deductible is an amount that a particular plan may require the
member to pay before Blue Cross has any obligation to cover medical
services for that member (e.g., if the plan has a $500 annual
deductible, the member must pay the first $500 of medical services she
receives during the coverage year, and Blue Cross would not cover the
first $500 in medical services). Blue Shield’s, Kaiser’s, and Health
Net’s member contracts contain substantially similar definitions.
5A copayment is an amount the member pays directly to the medical
provider at the time medical services are rendered, and this amount is
not covered by Blue Cross. Blue Shield’s, Kaiser’s, and Health Net’s
member contracts contain substantially similar definitions.
6A plan may require the member to pay a portion of the amount Blue
Cross has negotiated as the price for a particular service, which is
sometimes called “coinsurance” (e.g., a plan may require Blue Cross to
pay 80 percent of the allowed amount for any covered services, while
the member is obligated to pay 20 percent of the cost of those services).
Kaiser’s member contract contains a substantially similar definition.

                                   16
substantially similar) language: “In accordance with California
law, Members will not be required to pay any Participating
Provider for amounts owed to that provider by Anthem (other
than Copayment/Coinsurance and Deductibles) even in the
unlikely event that Anthem fails to pay the provider. Members
are liable, however, to pay Non-Participating Providers for any
amounts not paid to them by Anthem.”
       For the years 2005 through 2016, Blue Cross’s agreements
with participating physicians, hospitals, and medical facilities
stated that, except for copayments, coinsurance, and deductible
amounts required by the applicable agreement, the physicians,
hospitals, and medical facilities would not invoice or balance bill
a member for any difference between the billed charges and the
reimbursement paid by Blue Cross for services provided to the
member. For the same period, Blue Cross’s agreements with
participating physician associations and medical groups required
that the physician association or medical group accept a monthly
capitation payment from Blue Cross as payment in full for
services provided or arranged and not to invoice, balance bill or
otherwise seek payments or compensation from members for
“Covered Medical Services.” Similarly, Blue Cross’s agreements
with participating hospitals and medical facilities during that
period included language stating that the hospital or facility
would look solely to Blue Cross for payment, subject to limited
exceptions, and cannot seek compensation from any member.
       Blue Cross’s PPO plans between 2005 and 2016 included
language generally providing that, for covered out-of-network
services, Blue Cross would cover (i) an amount that is “customary
and reasonable” for medical providers in the same geographical
area to accept for such services, (ii) an amount determined with

                                17
reference to a separate payment schedule (e.g., the Medicare fee
schedule), (iii) an amount based on the provider’s billed charges,
or (iv) a specifically negotiated amount. For the same period,
Blue Cross’s PPO plans have included the following language, or
substantially similar language: “When you use an Out-of-
Network Provider, You may have to pay the difference between
the Out-of-Network Provider’s billed charge and the Maximum
Allowed Amount in addition to any Coinsurance, Copayments,
Deductibles and non-covered charges. This amount can be
substantial.” Blue Cross’s PPO plans generally cover a lower
percentage of the covered amount for out-of-network services
than the percentage they cover for in-network services.
       The annual percentage of Blue Cross’s reported in-network
medical expenses as compared to its total medical expenses for its
commercial plans for the years 2005 to 2016, as reported by Blue
Cross to the DMHC, ranged from approximately 92.1 percent to
96.8 percent. During that period, Blue Cross reported aggregate
expenses for out-of-network claims that were 5.8 percent of its
total claims expenses, and aggregate expenses for in-network
claims that were 94.2 percent of its total claims expenses.
       Between 2005 and 2016, Blue Cross paid between
approximately 87.7 percent and 90.4 percent of claims expenses
incurred for medical services provided to its members within the
same calendar year as the year the services were rendered. For
each year during this period, Blue Cross paid over 99 percent of
claims expenses incurred for medical services provided to its
members by the end of August the following year.
      3.2.   Blue Shield
     Blue Shield is an HCSP regulated by the DMHC under the
Knox-Keene Act. Blue Shield arranges and pays for medical care

                               18
to its members through a variety of managed health care
products, including HMO and PPO plans. In addition to paying
and processing member claims, Blue Shield engages in the
provision of other health care services to its members and spends
more than $100 million annually on service functions other than
processing and paying claims. Examples include developing and
maintaining networks of health care providers, credentialing
contracted providers, reviewing quality of care and performance
of medical personnel, and ensuring appropriate referrals to
specialists.
        Blue Shield contracts with providers who agree in advance
to render services to Blue Shield PPO and HMO plan members at
contracted rates and not to seek payment from the members,
other than contractually required member cost share amounts
(i.e., deductibles, copayments, and coinsurance). Blue Shield’s
HMO and PPO contracts with members also reflect the
prohibition on member financial liability to contracted providers.
Some non-contracted providers are also prohibited from
attempting to collect from plan members, including non-
contracted providers of emergency services, non-contracted
providers who provide services authorized by the plan that
cannot be rendered in-network, and continuity of care services
when a contracted provider becomes a non-contracted provider.
        In the case of HMO plans, members must use contracted
providers for nearly all care for that care to be covered under the
plan. HMO members are required to choose an in-network
primary care physician upon enrollment, and the primary care
physician is responsible for coordinating the medical services
provided to the HMO member. Services from non-contracted
providers are not covered for HMO members except in limited

                                19
circumstances, such as emergencies and instances where a
service or specialist is not available within the contracted
network. HMO members typically are responsible for only a
deductible and/or a copayment for services obtained within their
network, and Blue Shield or the contracted medical group is
responsible for the remainder.
      PPOs offer medical care through a network of providers
who have contracted with Blue Shield to provide services at
predetermined rates. Although PPO members, unlike HMO
members, may choose to obtain services from non-contracted (out-
of-network) providers, PPO plans incentivize the use of
contracted providers by setting lower member deductibles,
copayments, and/or coinsurance rates for services from contracted
providers, and protecting members from the difference between
what Blue Shield pays and the balance of the contracted
providers’ billed rates. PPO members may also be responsible for
deductibles, copayments, or coinsurance.
      Between 2005 and June 2016, Blue Shield’s expenditures to
contracted providers, as reported to the DMHC on quarterly and
year-end financial statements, ranged from 94 percent to 97
percent, averaging 96 percent, and expenditures to non-
contracted providers averaged 4 percent.
      3.3.   Kaiser
      Kaiser is an HCSP licensed under the Knox-Keene Act and
regulated by the DMHC. Kaiser provides medical and hospital
services to its members through a nonprofit organization, Kaiser
Foundation Hospitals, Inc. (KFH), and two medical groups, The
Permanente Medical Group, Inc. and Southern California
Permanente Medical Group (together, the Permanente Medical
Groups). Collectively, these separate legal entities operate under

                                20
the trade name “Kaiser Permanente.” KFH and the Permanente
Medical Groups employ tens of thousands of physicians and
nurses and operate dozens of hospitals and hundreds of other
medical facilities. Kaiser contracts with KFH to directly provide
hospital facilities and related hospital services to Kaiser’s
members. KFH owns all the Kaiser hospitals in California, and
Kaiser and KFH own or lease all the medical offices used by
Kaiser Permanente clinicians to provide care to Kaiser members
in California. To the extent community hospital and related
services are needed to supplement Kaiser’s hospital services,
KFH arranges with community hospitals and providers for such
services. Kaiser and KFH are separate corporations but are
historically and operationally intertwined, with overlapping
boards of directors and top executives in common.
      There are two Hospital Services Agreements between
Kaiser and KFH, one applicable to its Northern California service
area and one applicable to its Southern California service area.
The Permanente Medical Groups are responsible for directly
providing or arranging all the professional medical services that
Kaiser’s California members are entitled to under their
membership agreement with Kaiser. The Permanente Medical
Groups do not contract to provide care to members of other health
care service plans and do not contract with indemnity health
insurers. Since 1990, Kaiser’s contracts with the Southern
California Permanente Medical Group have contained exclusivity
provisions, and from 2006 to 2016, Kaiser’s contracts with The
Permanente Medical Group, Inc. have contained exclusivity
provisions.
      Kaiser and KFH report their financial results on a
combined basis. Until 2016, Kaiser directly reimbursed KFH’s

                               21
net operating expenses as the primary form of compensation for
the provision of hospital services to Kaiser members. In addition,
Kaiser and KFH shared a portion of any combined annual net
operating revenue gain or loss in proportion to the parties’
respective share of financed assets. Beginning in 2016, the
payment structure was modified in part so that, in addition to
continuing to reimburse certain expenses of KFH, Kaiser began
to also pay KFH using a combination of per capita and other
payments.
        Kaiser does not sell contracts that allow members to seek
covered health care services from any provider or hospital of their
choice, nor does Kaiser, with limited exceptions, promise to
reimburse members for care they receive outside of Kaiser
Permanente. Every Kaiser Evidence of Coverage document (EOC)
issued in California between 2005 and 2016 contained the
following (or substantially similar) language: “Kaiser
Permanente provides Services directly to our Members through
an integrated medical care program. Health Plan, Plan Hospitals,
and the Medical Group work together to provide our Members
with quality care. Our medical care program gives you access to
all of the covered Services you may need, such as routine care
with your own personal Plan Physician, hospital care, laboratory
and pharmacy Services, Emergency Services, Urgent Care, and
other benefits described in this Evidence of Coverage. Plus, our
health education programs offer you great ways to protect and
improve health.” Further, every Kaiser EOC sold in California
between 2005 and 2016 states: “As a Member, you are selecting
our medical care program to provide your health care. You must
receive all covered care from Plan Providers inside our Service
Area, except as described in the sections below for the following

                                22
Services[,]” including “ ‘authorized referrals,’ ‘emergency
ambulance Services,’ ‘Emergency Services, Post -Stabilization
Care, and Out-of-Area Urgent Care,’ and ‘Hospice Care.’ ” Every
Kaiser EOC sold in California between 2005 and 2016 also
stated: “Our contracts with Plan Providers provide that you are
not liable for any amounts we owe.” However, Kaiser members
are responsible for copayment, coinsurance, and deductible
amounts when they seek medical care from KFH and the
Permanente Medical Groups.
       The EOCs sold in California between 2005 and 2016
further stated: “If you receive Emergency Services, Post-
Stabilization Care, or Out-of-Area Urgent Care from a Non-Plan
Provider as described in this ‘Emergency Services and Urgent
Care’ section, or emergency ambulance Services described under
‘Ambulance Services’ in the ‘Benefits and Your Cost Share’
section, you are not responsible for any amounts beyond your
Cost Share for covered Emergency Services. However, if the
provider does not agree to bill us, you may have to pay for the
Services and file a claim for reimbursement. Also, you may be
required to pay and file a claim for any Services prescribed by a
Non-Plan Provider as part of covered Emergency Services, Post-
Stabilization Care, and Out-of-Area Urgent Care even if you
receive the services from a Plan Provider, such as a Plan
Pharmacy.”
       Every Kaiser EOC in California between 2005 and 2016
required the member or their employer to prepay premiums on a
periodic basis. Thus, at the time that a service was rendered, the
member’s financial responsibility for covered services was limited
to the member’s cost share (including copayments).

                                23
       The relevant contracts between Kaiser and The
Permanente Medical Group, Inc., Southern California
Permanente Medical Group and KFH, respectively, have member
non-liability provisions, as do Kaiser’s contracts with providers
outside of Kaiser Permanente.
       Between 2007 and 2016, measured by dollars,
approximately 1 to 4 percent of Kaiser’s healthcare expenses
were paid to noncontracting providers or directly reimbursed to
members. The portion of expenses consisting of payments to non-
contracted providers or reimbursements to members mainly
consists of situations in which Kaiser has no control over what
provider a member visits, such as emergency room treatment
which Kaiser is required by law to cover regardless of whether it
is contracted with the emergency provider.
       For the years 2007 through 2014, measured by discrete
visits or consultations, approximately 95 percent of the covered
health services provided to Kaiser members were rendered by
Kaiser Permanente providers (i.e., Kaiser Foundation Hospitals,
Inc., The Permanente Medical Group, Inc., and the Southern
California Permanente Medical Group). In 2015, measured by
discrete visits or consultations, approximately 93.3 percent of the
covered health services provided to Kaiser members were
rendered by Kaiser Permanente providers, while only
approximately 6.7 percent of services were rendered by
contracted or non-contracted providers outside Kaiser
Permanente. In 2016, measured by discrete visits or
consultations, approximately 94.7 percent of the covered health
services provided to Kaiser members were rendered by Kaiser
Permanente providers, while only approximately 5.3 percent of

                                24
services were rendered by contracted or non-contracted providers
outside Kaiser Permanente.
       Kaiser’s contracts with the Permanente Medical Groups
provide for compensation to be paid largely on a prepayment
basis, in which the amount of compensation is determined in
advance (based on factors such as number of members) and not
based on the amount of services actually provided to members.
The principal form of such prepayment is capitation. Kaiser’s
contracts with the Permanente Medical Groups each require
Kaiser to make per capita (capitated)7 payments based on the
number of members served by the medical group, regardless how
many members actually seek services during a given period and
regardless of the amount of services used by the members.
Capitated payments thus represent a substantial majority of the
payments made by Kaiser to the two medical groups.
      3.4.   Health Net
       Health Net is a Knox-Keene Act licensed HCSP. Health
Net offers access to HMO plans to its members, as well as Point
of Service, Medicare, and Medi-Cal plans. ) Health Net does not
offer PPO plans or traditional health and accident insurance
plans to its members.

7“ ‘ “[C]apitated basis” ’ is defined by regulation to mean ‘fixed per
member per month payment or percentage of premium payment
wherein the provider assumes the full risk for the cost of contracted
services without regard to the type, value or frequency of services
provided.’ ” (Centinela Freeman Emergency Medical Associates v.
Health Net of California, Inc. (2016) 1 Cal.5th 994, 1004, fn. 8, quoting
Cal. Code Regs., tit. 28, § 1300.76, subd. (d).) In contrast, non-capitated
payments include fee-for-service payments.

                                    25
       When enrolled in Health Net’s commercial HMO plans,
members (or their employers) pay a fixed periodic fee for
coverage. A Health Net commercial HMO member may be
responsible for cost-share responsibilities, such as copayments,
coinsurance, and deductibles, when they obtain medical services.
Health Net sets its premiums based on the anticipated aggregate
cost of providing future medical and hospital care to members,
which it estimates by predicting future costs of providing medical
care based on past claims “experience” and anticipated changes
in the health care needs of new membership, changes in benefits,
the introduction of new medical treatments, and prescription
drug inflation among other factors.
       When members initially enroll in a Health Net commercial
HMO plan, they are required to choose an in-network primary
care physician. Health Net’s contracted primary care physicians
(in some instances, along with a designated physician group)
coordinate medical services provided to commercial HMO
members and assist members with securing their medical care,
including preventative care and specialist referrals.
       Sample Evidence of Coverage documents for Health Net’s
commercial HMO plans issued in California during the 2007
through 2016 period contain the following (or substantially
similar) language: “When you enroll in this Plan, you must select
a contracting Physician Group where you want to receive all of
your medical care. That Physician Group will provide or
authorize all medical care.” Sample Evidence of Coverage
documents for Health Net’s commercial HMO plans issued in
California during the 2007 through 2016 period contain the
following (or substantially similar) language: “Your Physician
Group will authorize and coordinate all your care, providing you

                                26
with medical services or supplies. You are financially responsible
for any required Copayment . . . . However, you are completely
financially responsible for medical care that the Physician Group
does not provide or authorize except for Medically Necessary care
provided in a legitimate emergency. You are also financially
responsible for care that this Plan does not cover.”
       Health Net’s commercial HMO provider contracts with in-
network providers between 2007 and 2016 contain the following
(or substantially similar) language: “Provider agrees that in no
event shall Provider bill, charge, collect a deposit from, seek
compensation, remuneration, or reimbursement from, or have
any recourse against Beneficiaries or persons acting on their
behalf other than Health Net or a Payor for Contracted Services
provided pursuant to this Agreement except for Copayments,
Coinsurance, Deductibles, Excluded Services or permitted third
party liens.” Health Net compensates health care providers on
both a capitated and fee-for-service basis.
       Health Net maintains a network of providers for its HMO
members, which includes approximately 264 California facilities
and 59,000 California professional providers for Health Net’s
broadest commercial HMO network. Out-of-network care is
restricted within Health Net’s commercial HMOs. Sample
Evidence of Coverage documents for Health Net’s commercial
HMO plans issued in California during the 2007 through 2016
period contain the following (or substantially similar) language:
“Except in an emergency or other urgent medical circumstances,
the covered services of this plan must be performed by your
Physician Group or authorized by them to be performed by
others. You may use other providers outside your Physician
Group only when you are referred to them by your Physician

                                27
Group.” Health Net or a designated physician group, and not
commercial HMO members, are responsible for paying all covered
out-of-network services rendered to commercial HMO members.
       The annual approximate percentage of Health Net’s
reported in-network expenses as compared to its total medical
expenses for all Health Net product lines for the years 2007 to
2016 as reported by Health Net to the DMHC was between 96
percent to 99 percent. In the combined period of 2007 through
2016, approximately 98.6 percent of Health Net’s reported health
care expenses were made to in-network providers as defined by
the DMHC.8
4.    Procedural Background
      In 2013, Myers filed this taxpayer action under Code of
Civil Procedure section 526a against the State Board of
Equalization, the Insurance Commissioner, and the State
Controller (collectively, the State Defendants), to compel the
State Defendants to assess and collect the GPT against Blue
Cross and Blue Shield. Myers alleged that Blue Cross and Blue
Shield are among the largest health “insurers” in this state by
virtue of the significant premiums they collect in exchange for
agreeing to indemnify their enrollees against contingent medical
expenses, largely through preferred provider organization plans.
Myers further alleged that Blue Cross and Blue Shield have not

8 Myers disputed these facts before the trial court. The court concluded
that no material dispute existed because Myers did not identify any
errors or issues with the data relied upon for these conclusions, but
instead relied on deposition testimony concerning another issue and
based on different data. We agree that no material dispute of fact
exists as to these percentages, a point that is not contested on appeal.

                                  28
paid the gross premium tax that is paid by other companies that
issue similar fee-for-service indemnity health insurance
contracts. He therefore sought mandamus requiring the State
Defendants to assess and collect back GPT payments for the
preceding eight years, during which the State Controller had not
directed the collection of the GPT from Blue Cross or Blue Shield.
       The trial court sustained demurrers filed by Blue Cross and
Blue Shield, both on res judicata grounds9 and because Blue
Cross’s and Blue Shield’s status as HCSPs meant that they were
not subject to the statutes regulating insurers and that they were
therefore not “insurers” for GPT purposes. A panel of this
Division reversed the judgment and vacated the order sustaining
the demurrers. (Myers I, supra, 240 Cal.App.4th at p. 745.) As
discussed in greater detail infra, the court in Myers I rejected the
argument that Blue Cross and Blue Shield were not insurers for
GPT purposes because they are regulated as HCSPs and held
that the applicable standard was set forth in Roddis: a court
must “ ‘balanc[e] the indemnity aspects against the direct service
aspects of the business’ ” and determine whether “ ‘indemnity is a
significant financial proportion of the business,’ ” in which case it
is an insurer. (Id., at p. 740.) Applying the Roddis standard to the
allegations of the petitions, the court concluded that Myers had

9 In November 2004, the Foundation for Taxpayer and Consumer
Rights (FTCR) petitioned the court to compel the state agencies to
collect the GPT from Blue Cross. The central theory in the FTCR case
was that Blue Cross must be considered and taxed as an “insurer”
since a substantial portion of its plans were PPO products which are in
the nature of insurance. The court in the FTCR case ruled against
FTCR as a matter of law, holding that (1) FTCR had no standing to
bring an action to enjoin or prevent the collection of a tax, and (2) Blue
Cross, as an HCSP, is not an “insurer” and the GPT does not apply.

                                   29
adequately alleged that a significant financial proportion of Blue
Cross’s and Blue Shield’s business was indemnity. (Id. at pp.
740–741.) The court further held that the public interest
exception to the res judicata doctrine applied. (Id. at pp. 742–
743.)
       In 2015, Myers filed two further actions seeking to compel
the State Defendants to assess and collect the GPT against
Kaiser and Health Net. Myers once again sought mandamus
requiring the State Defendants to assess and collect back GPT
payments for the preceding eight years. Both actions were found
to be related with the Blue Cross and Blue Shield action and
were reassigned to the same judge.
       Following the enactment of Senate Bill No. X2-2 in 2016,
Myers stipulated that he seeks the collection of the GPT prior to
June 30, 2016 and does not seek the collection of the GPT against
Real Parties in Interest after June 30, 2016.10 In 2017, Kaiser
and Health Net demurred and Blue Cross and Blue Shield moved
for judgment on the pleadings, arguing that the change in law
demonstrated that they were not insurers and that Myers I was
no longer binding. In 2018, the court found that many of the facts
urged by the moving parties were not properly subject to judicial
notice and therefore denied the motions for judgment on the
pleadings and overruled the demurrers. Blue Shield filed a
petition seeking writ review of the denial of the motion. A panel
of this Division issued an order to show cause why the motion
should not be granted. Following briefing, another panel

10 Accordingly, the relevant period for Blue Cross and Blue Shield is
2005 through 2016, and the relevant period for Kaiser and Health Net
is 2007 through 2016.

                                 30
discharged the order, having determined that review of the issues
raised in this proceeding should await entry of a final judgment
in the trial court.11
       In 2019 and 2020, Real Parties in Interest moved for
summary judgment, arguing that they were not insurers under
the Roddis standard adopted in Myers I because more than 90
percent of their medical expenses during the relevant period were
for in-network services, for which members are not personally
responsible beyond cost-share payments. In support of these
contentions, Real Parties in Interest submitted declarations from
executives, advisors, and actuaries, annual reports made to the
DMHC, and sample contracts with members and providers,
among other evidence.
       Myers did not dispute the majority of the evidence relied
upon by Real Parties in Interest.12 However, Myers argued that
the correct test for whether Real Parties in Interest are insurers
is whether they spread and underwrite a policyholder’s risk, and
submitted evidence, including policy forms, agreements, actuarial
memoranda and certifications, and deposition testimony, to
support that Real Parties in Interest engage in risk-shifting and

11 We grant Blue Shield’s motion for judicial notice filed February 2,
2022, which sought judicial notice of this order, as well as briefs filed
by the Insurance Commissioner of the State of California in the Myers
I appeal. (Evid. Code, § 452, subd. (d); Glaski v. Bank of America (2013)
218 Cal.App.4th 1079, 1090 [“Courts can take judicial notice of the
existence, content and authenticity of public records and other
specified documents . . . .”].)
12 In many instances, Myers disputed inferences that might be drawn
from facts he did not dispute. The trial court correctly concluded that
disputing facts with argument is insufficient to create a dispute of
material fact.

                                   31
held themselves out as insurers. In support of his oppositions,
Myers also filed declarations from Ian Duncan, Ph.D., who opined
that Real Parties in Interest use actuaries to calculate reserves
and premium rates, hold free capital, and effectively operate in
the same manner as insurers.
      Real Parties in Interest raised evidentiary objections to
portions of the Duncan declarations, primarily on relevancy and
foundation grounds, and argued that whether Real Parties in
Interest assume risk and distribute it among their members, how
they set rates and compensate healthcare providers, and their
actuarial practices have no bearing on whether they are insurers
under the Roddis standard. Health Net and Blue Cross further
objected to evidence of the payouts they received as insurers
under the federal Affordable Care Act. Blue Cross and Blue
Shield also objected to evidence that the PPO plans offered by
companies affiliated with Blue Cross and Blue Shield are similar
to those offered by Blue Cross and Blue Shield and that their
websites and actuarial certificates refer to both as insurers, on
grounds that such evidence was irrelevant.
      In 2020, the trial court granted the summary judgment
motions of Real Parties in Interest. The court concluded that the
Roddis test adopted in Myers I controlled and that indemnity
under this test means whether the member bears the risk of
personal liability for medical services.13 The court further
concluded that, although Real Parties in Interest take on the risk
that they will pay for the health care needed for their members,
the record demonstrated that Real Parties in Interest were

13As to Blue Cross and Blue Shield, the court concluded that Myers I is
law of the case.

                                  32
largely in the business of providing health care and their model is
therefore one primarily of “service” rather than of “indemnity” as
those terms are used in Roddis and Myers I. The court sustained
most of the objections Real Parties in Interest made to the
Duncan declarations, primarily on relevancy grounds. It also
sustained many of the additional objections made by Blue Cross,
Blue Shield, and Health Net on relevancy grounds.
      Myers timely appealed.

                          CONTENTIONS

      Myers argues that the trial court incorrectly applied the
Roddis standard adopted in Myers I. His amicus curiae, the
Insurance Commissioner, echoes this argument.14 Myers further
contends that the court in Myers I held that non-capitated
payments constitute indemnity and that Real Parties in Interest
are insurers because their payments to healthcare providers are
primarily non-capitated. He asserts that this court should follow
federal and California cases that have held that HMOs are
insurers for purposes of federal preemption law. Myers also
argues that the business of Real Parties in Interest implicates
the reasoning underlying the adoption of the GPT.
      Real Parties in Interest and their amicus, the DMHC,
contend that the trial court correctly understood and applied the
Roddis standard. They argue that Real Parties in Interest are not
insurers because it is undisputed that over 90 percent of their
respective claims costs during the relevant periods were for in-

14Although identified as a respondent by Myers, the Insurance
Commissioner argues that summary judgment was not sought against
him and that he is “not clearly a respondent.” He therefore sought and
obtained permission to file an amicus curiae brief in support of Myers.

                                  33
network services, for which members bear no risk of liability.
Although Blue Shield and Blue Cross argue that they are not
insurers under the standard adopted in Myers I, they argue that
this court should determine that Myers I is no longer the law of
the case following the adoption of the 2016 MCO tax, which they
contend demonstrates the Legislature’s understanding that the
GPT does not apply and never has applied to HCSPs. The DMHC
similarly contends that the Legislature has never defined or
treated HCSPs as insurers. Blue Cross also argues that, if this
court concludes that the law of the case doctrine applies and that
it is an insurer under the Myers I standard, we should not apply
Myers I retroactively.

                          DISCUSSION

1.    The court correctly granted summary judgment in
      favor of Real Parties in Interest.
      1.1.   Standard of Review
       “ ‘In evaluating the propriety of a grant of summary
judgment our review is de novo, and we independently review the
record before the trial court. [Citation.] In practical effect, we
assume the role of a trial court and apply the same rules and
standards which govern a trial court’s determination of a motion
for summary judgment. [Citation.]’ [Citation.] Section 437c,
subdivision (c) provides that a motion for summary judgment
shall be granted if all the papers submitted show there is no
triable issue as to any material fact such that the moving party is
entitled to judgment as a matter of law. [¶] Where the trial court
grants summary judgment solely upon the basis of its
interpretation of statutory and case law, ‘[i]t is well settled that
the interpretation and application of a statutory scheme to an

                                34
undisputed set of facts is a question of law [citation] which is
subject to de novo review on appeal. [Citation.]’ [Citation.] In
such a case, the appellate court is not bound by the trial court’s
interpretation. [Citations.]” (City of San Diego v. Dunkl (2001) 86
Cal.App.4th 384, 395.)
      1.2.   Under Myers I, Roddis supplies the relevant
             standard for determining whether Real Parties in
             Interest are insurers.
       The first issue before us is the appropriate law to apply to
the undisputed facts to determine whether Real Parties in
Interest are insurers for purposes of imposing the GPT tax. The
trial court concluded that Myers I is law of the case as to Blue
Cross and Blue Shield and applied the Myers I standard to the
motions brought by all Real Parties in Interest. Myers and Real
Parties in Interest argue in the first instance that the trial court’s
decision was error or correct by reference to Myers I. Thus, we
begin our analysis with an examination of Myers I before turning
to the parties’ competing interpretations of that decision.
      1.2.1. Myers I
       In Myers I, a panel of this Division concluded that Myers’s
petition adequately alleged that Blue Cross and Blue Shield are
insurers under the GPT provision in the Constitution. (Myers I,
supra, 240 Cal.App.4th at p. 737.) The allegations of the
complaint focused on Blue Cross’s and Blue Shield’s PPO plans
and alleged that Blue Shield paid over three times for non-
capitated medical expenses than for capitated medical expenses
and that Blue Shield’s fee-for-services payments on behalf of
members are five to six times larger than its prepaid capitation
payments. (Id. at pp. 730–731.) Myers therefore alleged that Blue

                                 35
Cross and Blue Shield “receive a substantial portion of their
premiums each year in exchange for agreeing to indemnify their
enrollees against a risk of loss occasioned by contingent medical
expenses, and in doing so, [Blue Cross’s and Blue Shield’s]
contracts effectively spread the financial risk posed by those
contingent medical events among the millions of Californians
who pay premiums to enroll in [Blue Cross’s and Blue Shield’s]
plans.” (Id. at pp. 738–739.) Myers argued that the trial court
erred in resolving the “factual issue” of whether Blue Cross and
Blue Shield are insurers based on their regulatory status as
HCSPs and that the court “should have applied the test set forth
in Roddis to assess whether the complaint’s allegations
concerning [Blue Cross’s and Blue Shield’s] business activities
supported the claim that they are “insurers” under the
Constitution’s gross premium tax.” (Id. at p. 739.)
         The Myers I court discussed the taxation of insurance
companies under California law and the regulatory regime
applicable to HSCPs before turning to relevant case law. The
court summarized Roddis, including the “ ‘two policy
considerations’ ” that drove the Supreme Court’s analysis: “First,
. . . ‘[w]here indemnity features are present, the member bears
the risk of personal liability for medical services. This is the
insurance risk which can be protected against by financial
reserves to assure that the member will receive the benefits for
which he has paid.’ [Citation.] As for the second consideration,
the court emphasized, ‘there is a strong social policy to encourage
the services which health plans provide the public,’ and the
Insurance Code’s financial reserve requirements should not
inhibit the development of health plans to meet that need.
[Citation.]” (Myers I, supra, 240 Cal.App.4th at p. 740.) The court

                                36
then concluded that “Roddis provides the appropriate standard
for determining whether an entity should be regarded as an
‘insurer’ for purposes of assessing the gross premium tax under
article XIII, section 28 of the Constitution.” (Id. at pp. 740–741.)
It further concluded that the “the critical role that financial
solvency concerns played in the Supreme Court’s formulation of
the Roddis test” constituted “a distinction without difference”
when it came to assessing whether an entity is an “insurer”
under the Constitution’s GPT provision. (Id. at p. 741.)
       The Myers I court also cited another Supreme Court
decision, Metropolitan Life Ins. Co. v. State Bd. of Equalization
(1982) 32 Cal.3d 649 (Metropolitan Life), for the proposition that
“the gross premium tax’s purpose is to ‘exact payments from
insurers doing business in California’ by ‘approximat[ing] the
volume of business done in this state, and thus the extent to
which insurers have availed themselves of the privilege of doing
business in California[,]’ ” and that courts must therefore “ ‘look
beyond the formal labels the parties have affixed to their
transactions” and instead “ ‘discern the true economic substance’
of the arrangement.” (Myers I, supra, 240 Cal.App.4th at p. 741,
quoting Metropolitan Life, at p. 656.)
       With this background in mind, the Myers I court concluded
that the mere fact that Blue Cross and Blue Shield were
designated HCSPs for regulatory purposes was not
determinative. (Myers I, supra, 240 Cal.App.4th at p. 741.) It
observed that “the underlying reason for this state’s adoption of
the gross premium tax was to simplify the taxation of insurance
companies that, in contrast to other businesses, have difficulty
calculating their net profits in a given tax year because they
collect revenues up front in the form of premiums, then make

                                 37
indemnity payments to policyholders based on contingent events
that occur many months or years later.” (Id. at pp. 741–742.)
Because Myers had alleged that “under [Blue Cross’s and Blue
Shield’s] PPO policies they collect premiums up front, but do not
make payments on the policies unless and until a contingent
medical event occurs” and that “a significant financial portion of
their business operations allegedly consist of indemnity
contracts, the underlying rationale for applying the gross
premium tax to other insurance companies applies equally to
Blue Cross and Blue Shield.” (Id. at p. 742.)
      1.2.2. The Roddis definition of indemnity was not
             dictum.
       Myers contends that the Myers I court did not intend to
adopt the definition of indemnity set forth in Roddis—that is,
that indemnity aspects are present where a member bears the
risk of personal liability for medical services. He argues that
Roddis’s definition of indemnity does not apply because it was a
case concerning regulatory statutes rather than the GPT, and
Myers I’s reference to that definition was mere dictum. Relying
on Metropolitan Life, Myers argues that Blue Cross’s and Blue
Shield’s PPO plans and the HMO plans of all Real Parties in
Interest constitute insurance under the California Constitution
because their plans involve the shifting and distribution of risk.
Real Parties in Interest contend that the Myers I court gave no
indication that it was adopting the Roddis standard but not its
definition of indemnity, nor did it suggest that Metropolitan Life’s
discussion of the elements of insurance supplied the relevant
definition. We agree with Real Parties in Interest that the Myers
I court’s adoption of the Roddis standard included its definition of
indemnity.

                                38
       With respect to Myers’s first contention, the court in
Myers I recognized that Roddis arose in a different context than
the case before it and acknowledged that financial solvency
concerns played a “critical role” in the Supreme Court’s
determination of Roddis, but concluded that it was “a distinction
without difference.” (Myers I, supra, 240 Cal.App.4th at p. 741.)
The court explained that, “[i]n Roddis, the court’s concern over
financial solvency stemmed from the fact that CMA had promised
to pay for future contingent medical expenses, yet its ultimate
liability for such expenses was unknown at the time it collected
dues from its covered members. The same concern supported
adoption of the gross premium tax. According to the Legislative
Analyst’s Office, the economics of insurance indemnity
arrangements—that is, the fact that insurers receive premiums
up front, without knowing what related expenses will be paid on
those premiums in the future, thereby rendering them unable to
determine the net profits attributable to those premiums at the
end of the tax year—was the ‘key reason’ for adopting the gross
premium tax.” (Ibid., italics added.) We find the Myers I court’s
reasoning persuasive.
       Moreover, there is no indication that the Myers I court
considered the definitions of indemnity and service set forth in
Roddis dicta when it summarized and quoted Roddis at length
and adopted the standard it set forth. (Myers I, supra, 240
Cal.App.4th at pp. 739–740.) Had the Myers I court intended to
adopt other definitions of terms that are fundamental to the
Roddis standard, it presumably would have made that intention
clear for the benefit of the parties and the trial court.
       Second, although the court in Myers I relied on
Metropolitan Life for the proposition that the court must look

                               39
beyond labels and “ ‘discern the true economic substance’ of the
arrangement” to determine whether an HSCP is an insurer
(Myers I, supra, 240 Cal.App.4th at p. 741, quoting Metropolitan
Life, supra, 32 Cal.3d at p. 656), we find no basis to conclude that
Metropolitan Life provides the relevant standard for making that
determination.
       The issue before the Supreme Court in Metropolitan Life
was “whether certain amounts, though never formally paid to
Metropolitan Life Insurance Company (Metropolitan),
nevertheless are to be included within the gross premiums
measure of the tax imposed on its business done in California.”
(Metropolitan Life, supra, 32 Cal.3d at p. 652.) Metropolitan’s
“Mini-Met” plan was the subject of the controversy before the
court. Prior to Mini-Met, Metropolitan offered employers a
standard group policy pursuant to which the employers paid a
premium in return for Metropolitan’s assumption of the entire
obligation to provide health coverage to benefitted employees.
(Ibid.) To reduce the cost of insurance coverage for employers and
to improve their cash-flow situation, Metropolitan developed the
Mini-Met rider to the standard group policy, which shifted
certain cash-flow advantages to the employers and sought to
substantially reduce Metropolitan’s GPT liability. (Id. at p. 653.)
“The Mini-Met rider required employers to assume the obligation
to pay all employee claims for benefits up to a ‘trigger-point’
amount, defined as the actuarially predicted, monthly average
level of aggregate employee claims. Metropolitan remained
obligated to pay all claims in excess of that amount.” (Ibid.) For
the three tax years in question, Metropolitan argued that it was
entitled to a 90 percent reduction in its GPT liability as a
consequence of the Mini-Met rider, but the California Insurance

                                40
Commissioner levied a tax based upon the sum of the amounts
employers paid to Metropolitan as premiums plus the aggregate
yearly claims paid to employees from employers’ funds. (Ibid.)
Metropolitan sued for a refund of the tax assessments and
interest it had paid the State Board of Equalization and obtained
a judgment for the full amount requested, which the Board
appealed. (Id. at p. 654.)
       Ruling in bank, the Supreme Court reversed. (Metropolitan
Life, supra, 32 Cal.3d at p. 662.) The court observed that
“insurance necessarily involves two elements: (1) a risk of loss to
which one party is subject and a shifting of that risk to another
party; and (2) distribution of risk among similarly situated
persons. [Citations.]” (Id. at p. 654.) The court explained that
“[t]he presence or absence of insurance risk on the part of the
employers is not alone determinative of Metropolitan’s tax
liability . . . . In attempting to fulfill the purpose of the gross
premiums tax, it is preferable to look beyond the formal labels
the parties have affixed to their transactions and seek, rather, to
discern the true economic substance of the Mini-Met
arrangement.” (Id. at pp. 656–657.) The court concluded that “the
employers under the Mini-Met arrangement functioned not as
independent insurers but as ‘mere [agents] or [distributors] of
funds[,]’ ” as Metropolitan “determined the amount of all benefits
to be paid in satisfaction of employee claims, both above and
below the trigger point.” (Id. at p. 657.) The court concluded that
“that there was but one insurer under the Mini-Met package and
that the employers functioned as agents of that insurer.” (Id. at
p. 659.)
       Thus, Metropolitan Life was not a case concerning the
classification of HCSPs for regulatory or taxation purposes, nor

                                41
was there any dispute in that case as to whether Metropolitan
was an insurer or subject to the GPT. Further, and more
importantly for our purposes, the Myers I court stated
unequivocally that Roddis provides the relevant standard. (Myers
I, supra, 240 Cal.App.4th at p. 740.) The court was clearly aware
of Metropolitan Life and could have concluded that the presence
of the two elements of insurance described in Metropolitan Life
determined whether an HCSP is an insurer. It did not do so.
Indeed, to conclude that the presence of risk of loss and
distribution of risk settle the question would not comport with
Metropolitan Life’s acknowledgment that “[t]he presence or
absence of insurance risk” is not determinative of GPT liability
(Metropolitan Life, supra, 32 Cal.3d at pp. 656–657), or with the
Supreme Court’s observation in Garrison that the “[a]bsence or
presence of assumption of risk or peril is not the sole test to be
applied in determining its status” and that the more important
question is “whether looking at the plan of operation as a whole,
‘service’ rather than ‘indemnity’ is its principal object and
purpose. [Citations.]” (Garrison, supra, 28 Cal.2d at p. 809.)
Thus, while Metropolitan Life is relevant to our analysis, we find
no basis to prioritize language in that decision over the standard
expressly adopted by the Myers I court.
      1.2.3. Whether the payments made by Real Parties in
             Interest for in-network services were capitated
             or non-capitated is not part of the standard
             adopted in Myers I.
       Myers further argues that the trial court incorrectly
applied the law when it concluded that whether payments made
by Real Parties in Interest were capitated or non-capitated was
irrelevant under Roddis. In Myers I, the court recited the

                               42
allegations that Blue Shield’s and Blue Cross’s non-capitated
payments exceeded their capitated payments. (Myers I, supra,
240 Cal.App.4th at p. 730.) The complaint alleged that non-
capitated payments were indemnity payments and that capitated
payments were not. The Myers I court accepted these allegations
and concluded that Myers had adequately stated a claim that
Blue Cross and Blue Shield should be regarded as “insurers” for
purposes of the GPT. (Id. at p. 742.) Myers therefore argues that
the court in Myers I made a legal determination that non-
capitated payments constituted indemnity. We again disagree.
       Myers fails to explain how we can reconcile the Myers I
court’s explicit adoption of Roddis as the relevant standard with
a legal conclusion that non-capitated payments constitute
indemnity for purposes of determining whether an HCSP is an
insurer. The payments CMA made to the 38 physicians in Roddis
were non-capitated—that is, CMA paid its contracted physicians
scheduled fees for services rendered, rather than fixed amounts
per member (Roddis, supra, 68 Cal.2d at pp. 678–679)—and the
court concluded that “CMA’s contracts with the 38 physicians
provide for direct service without indemnity[]” because the
physicians had agreed not to seek reimbursement from CMA’s
members. (Id. at p. 683, italics added.) If non-capitated payments
constituted indemnity under the standard set forth in Roddis, the
Supreme Court could have concluded that CMA was primarily in
the business of indemnity without instructing the trial court to
retry the case and determine what proportion of CMA’s members
was treated by the 38 contracted physicians.
       Further, the conclusion that non-capitated payments are
indemnity does not follow logically from the Roddis standard.
The method an HCSP chooses to compensate its healthcare

                               43
providers has no bearing on whether its members are at risk of
personal liability for medical services. If we accepted Myers’s
contention that the Myers I court made a legal determination
that non-capitated payments constitute indemnity because they
“effectively spread the financial risk posed by those contingent
medical events among the millions of Californians who pay
premiums to enroll in Real Parties in Interest’s . . . plans,” as
Myers alleged (Myers I, supra, 240 Cal.App.4th at p. 739), it
would follow that Myers I did not actually follow the Roddis
standard, as it claimed to do. The Roddis opinion does not
mention risk shifting or spreading, much less state that the
spreading of risk is the test for indemnity. Rather, citing
Garrison, the Supreme Court observed that “ ‘[a]bsence or
presence of assumption of risk or peril is not the sole test to be
applied in determining its status[,]’ ” and instead adopted a test
in which indemnity was associated with a member’s risk of
personal liability. (Roddis, supra, 68 Cal.2d at p. 682.)
       Faced with two possible standards, one of which the Myers
I court expressly adopted and the other which may, at best, be
implied by the conclusion it reached based on the allegations of
the complaint, which it was required to accept as true (Myers I,
supra, 240 Cal.App.4th at p. 727, fn. 1), we choose the former. We
therefore agree with the trial court that whether payments are
capitated or non-capitated does not determine whether Real
Parties in Interest are insurers.
      1.3.   The law of the case doctrine requires us to apply
             the Roddis standard in this appeal.
      Having established our understanding of the standard
adopted in Myers I, we consider whether we remain bound by
that decision. “Under the law of the case doctrine, when an

                               44
appellate court ‘ “states in its opinion a principle or rule of law
necessary to the decision, that principle or rule becomes the law
of the case and must be adhered to throughout [the case’s]
subsequent progress, both in the lower court and upon
subsequent appeal . . . .” ’ [Citation.] Absent an applicable
exception, the doctrine ‘requir[es] both trial and appellate courts
to follow the rules laid down upon a former appeal whether such
rules are right or wrong.’ [Citation.] As its name suggests, the
doctrine applies only to an appellate court’s decision on a
question of law; it does not apply to questions of fact. [Citation.]”
(People v. Barragan (2004) 32 Cal.4th 236, 246.) “The doctrine of
law of the case . . . governs later proceedings in the same case
[citation] with regard to the rights of the same parties who were
before the court in the prior appeal. [Citations.]” (In re
Rosenkrantz (2002) 29 Cal.4th 616, 668.) Myers, Blue Cross and
Blue Shield do not dispute that the adoption of the Roddis
standard was necessary to the court’s decision in Myers I, or that
they were parties to the prior appeal.15 Thus, unless an exception
to the law of the case principle applies, we are bound by the legal
standard set forth in Myers I.

15Though Health Net and Kaiser are not bound by Myers I under the
law of the case doctrine because they were not parties in the prior
appeal, both argue that the Roddis standard should apply. Although
we are generally not bound by decisions made by a different panel of
this Division (Tourgeman v. Nelson & Kennard (2014) 222 Cal.App.4th
1447, 1456, fn. 7), “ ‘[w]e respect stare decisis . . . which serves the
important goals of stability in the law and predictability of decision.’ ”
(People v. The North River Ins. Co. (2019) 41 Cal.App.5th 443, 455.)
Since neither Kaiser nor Health Net advances a “ ‘good reason to
disagree[]’ ” with the standard adopted in Myers I (ibid.), we decline to
consider whether a different rule of law should apply to those parties.

                                   45
       Exceptions to the law of the case doctrine are limited to two
situations: if its application will result in an unjust decision or if
the controlling rules of law have changed in the interim. (People
v. Stanley (1995) 10 Cal.4th 764, 787.) For the “unjust decision”
exception to apply, “there must at least be demonstrated a
manifest misapplication of existing principles resulting in
substantial injustice.” (People v. Shuey (1975) 13 Cal.3d 835, 846,
disapproved on another ground in People v. Bennett (1998) 17
Cal.4th 373, 389, fn. 5.) An intervening change in the law exists
“ ‘where the controlling rules of law have been altered or clarified
by a decision intervening between the first and the second
determinations of the appellate courts.’ [Citation.]” (In re
Saldana (1997) 57 Cal.App.4th 620, 625.) This includes
legislative changes or clarifications. (Renee J. v. Superior Court
(2002) 96 Cal.App.4th 1450, 1463 (Renee J.).)
       Although Myers repeatedly states that Myers I is law of the
case and thus binding on this court, he argues that this court
should follow cases that were not mentioned in the Myers I
opinion and which conclude that HMOs are insurers for purposes
of federal preemption law. He also contends that the Roddis
standard yields results that are both inconsistent with the
purpose underlying the GPT and absurd when applied to other
insurers. Notwithstanding the inconsistency of these contentions,
we opt to consider whether Myers demonstrates that Myers I
constitutes “a manifest misapplication of existing principles
resulting in substantial injustice” that would permit us to apply
another legal standard. (People v. Shuey, supra, 13 Cal.3d at
p. 846.) We further address Blue Cross’s and Blue Shield’s
contention that the 2016 MCO tax constitutes a change in the
controlling law that requires us to set Myers I aside. We conclude

                                 46
that neither exception applies and that Myers I remains law of
the case.
      1.3.1. Cases defining insurance for purposes of federal
             preemption law do not override the application
             of the law of the case doctrine.
        Myers argues that cases concluding that HMOs are
insurers for purposes of federal preemption dictate the conclusion
that Real Parties in Interest are insurers subject to the GPT.
These cases are inapposite and do not demonstrate that Myers I’s
adoption of the Roddis standard is inconsistent with existing
legal principles or substantially unjust.
        In Rush Prudential HMO, Inc. v. Moran (2002) 536 U.S.
355, 359, the United States Supreme Court considered whether
an Illinois statute, which “provides recipients of health coverage
by such organizations with a right to independent medical review
of certain denials of benefits,” was preempted by the Employee
Retirement Income Security Act of 1974 (ERISA). “To ‘safeguard
. . . the establishment, operation, and administration’ of employee
benefit plans, ERISA . . . contains an express preemption
provision that ERISA ‘shall supersede any and all State laws
insofar as they may now or hereafter relate to any employee
benefit plan[,]’ ” but a “saving clause then reclaims a substantial
amount of ground with its provision that ‘nothing in this
subchapter shall be construed to exempt or relieve any person
from any law of any State which regulates insurance, banking, or
securities.’ ” (Id. at p. 364.) The court adopted a “ ‘common-sense
view of the matter[,]’ ” under which “ ‘a law must not just have an
impact on the insurance industry, but must be specifically
directed toward that industry.’ [Citation.]” (Id. at pp. 365–366.)
This inquiry also “focuses on ‘primary elements of an insurance

                                47
contract[, which] are the spreading and underwriting of a
policyholder’s risk.’ [Citation.]” (Id. at p. 366.) The court observed
that “ ‘[t]he defining feature of an HMO is receipt of a fixed fee
for each patient enrolled under the terms of a contract to provide
specified health care if needed.’ [Citation.] ‘The HMO thus
assumes the financial risk of providing the benefits promised: if a
participant never gets sick, the HMO keeps the money
regardless, and if a participant becomes expensively ill, the HMO
is responsible for the treatment . . . .’ ” (Id. at p. 367.) The court
concluded that the defendant, an HMO, “cannot checkmate
common sense by trying to submerge HMOs’ insurance features
beneath an exclusive characterization of HMOs as providers of
health care” in order to argue that the Illinois law was preempted
by ERISA. (Id. at p. 370.)
       The court also “test[ed] the results of the commonsense
enquiry by employing the three factors used to point to insurance
laws spared from federal preemption under the McCarran-
Ferguson Act, 15 U.S.C. § 1011 et seq. [(McCarran-Ferguson
Act)].” (Rush Prudential HMO, Inc. v. Moran, supra, 536 U.S. at
p. 366.) “A law regulating insurance for McCarran-Ferguson
purposes targets practices or provisions that ‘have the effect of
transferring or spreading a policyholder’s risk; . . . [that are] an
integral part of the policy relationship between the insurer and
the insured; and [are] limited to entities within the insurance
industry.’ ” (Id. at p. 373.) The court concluded that at least the
second and third requirements were “clearly satisfied” by the
Illinois statute at issue. (Ibid.)
       In Smith v. PacifiCare Behavioral Health of California, Inc.
(2001) 93 Cal.App.4th 139 (Smith), the issue before the court was
“whether a health care service plan may enforce an arbitration

                                 48
clause contained in the plan and in related subscriber
agreements which does not comply with the [state] statutory
disclosure requirements applicable to such clauses.” Specifically,
the court considered whether the McCarran-Ferguson Act
overrode the Federal Arbitration Act (9 U.S.C. § 1 et seq.) and
precluded its preemptive impact on the state statute on the
ground that the statute “constitutes a regulation of the business
of insurance within the meaning of McCarran-Ferguson.” (Id. at
p. 143.) This Division observed that “HMO’s or health care
service plans . . . are engaged in providing a service that is a
substitute for what previously constituted health insurance.” (Id.
at p. 157.) The court concluded that, for purposes of the
McCarran-Ferguson Act, the defendant, “PacifiCare, as a health
care service plan (or HMO), is engaged in the business of
insurance.” (Ibid.) The Smith court noted that “the Legislature
has reached the same conclusion in a very public way. It has
expressly recognized that health care service plans in California
are engaged in the business of insurance within the meaning of
the McCarran-Ferguson Act[]” by enacting the Managed Health
Care Insurance Accountability Act of 1999, Statutes 1999,
chapter 536 (Sen. Bill No. 21) section 2, partially codified at Civil
Code section 3428. (Id. at p. 158.) “In an uncodified section 2 to
the act, the Legislature stated: ‘SEC. 2. (a) The Legislature finds
and declares as follows: [¶] “(1) Based on the fundamental nature
of the relationships involved, a health care service plan and all
other managed care entities regulated under the Health and
Safety Code are engaged in the business of insurance in this state
as that term is defined for purposes of the McCarran-Ferguson Act
. . . . Nothing in this act shall be construed to impose the

                                 49
regulatory requirements of the Insurance Code on health care
service plans regulated by the Health and Safety Code.” ’ ” (Ibid.)
      The Smith court rejected PacifiCare’s reliance on Williams
v. California Physicians’ Service (1999) 72 Cal.App.4th 722 for
the proposition that it was not in the business of insurance for
McCarran-Ferguson purposes, noting that Williams “did not even
address the issue before us. Williams simply held that a health
care service plan regulated by the Knox-Keene Act was not
necessarily the equivalent to an insurance company for
regulatory purposes. Williams did not purport to address the
issue confronting this court. Rather, it simply recognized that the
Legislature has elected to subject insurers and health care service
plans to distinct regulatory regimes.” (Smith, supra, 93
Cal.App.4th at pp. 158–159.)
      The cases on which Myers relies do not purport to address
whether HCSPs are insurers for state taxation purposes and thus
do not bear on our determination of whether Real Parties in
Interest are insurers for purposes of taxation under California
law. “The clear purpose of McCarran-Ferguson was . . . to insure
that the states would continue to enjoy broad authority in
regulating the dealings between insurers and their
policyholders.” (Smith, supra, 93 Cal.App.4th at p. 153.) This
purpose has no relevance to the case before us.
      Article XIII, section 28 of the California Constitution
defines “insurer” as including, among other things, “insurance
companies”—not as any company or association that is “in the
business of insurance,” the test applied in the ERISA and
McCarran-Ferguson contexts. Courts interpreting McCarran-
Ferguson have declined to limit its reach to laws specifically
concerning insurance companies. (See Barnett Bank of Marion

                                50
County, N.A. v. Nelson (1996) 517 U.S. 25, 39–41 [law that
permitted banks to act as agents of insurance companies was
related to the business of insurance, even if statute did not
“relate predominantly to insurance” but to banking]; Gordon v.
Ford Motor Credit Co. (N.D. Cal. 1992) 868 F.Supp. 1191, 1194
[rejecting auto financing company’s contention that the
McCarran-Ferguson Act exemption should apply only to
traditional insurers].) Further, as set forth in Smith, it is
sufficient for McCarran-Ferguson Act purposes that a company is
“engaged in providing a service that is a substitute for what
previously constituted health insurance.” (Smith, supra, 93
Cal.App.4th at p. 157.) In contrast, in Roddis, the California
Supreme Court discussed how “a health plan is similar to
insurance in that it purports to cover a future contingency,” yet
concluded that whether HCSPs were insurers depended on the
application of the balancing of its service and indemnity
functions. (Roddis, supra, 68 Cal.2d at p. 681.) In other words,
our Supreme Court declined to hold that the mere assumption
and transfer of risk, or the fact that insurers and HCSPs fulfill
similar functions, rendered HCSPs insurers for regulatory
purposes. We see no reason why these similarities would be
sufficient to render an HCSP an insurer for tax purposes under
California law either.
       Further, our Legislature has acknowledged that HCSPs are
insurers for purposes of the McCarran-Ferguson Act while
making it clear that such interpretation does not render them
subject to regulation as insurers for purposes of state law.
(Smith, supra, 93 Cal.App.4th at p. 158.) Just as the court in
Smith concluded that Williams v. California Physicians’ Service,
supra, 72 Cal.App.4th 722 did not provide guidance as to whether

                               51
an HCSP is in the business of insurance for McCarran-Ferguson
purposes because it concerned California regulations, cases
holding that HCSPs are insurers for purposes of McCarran-
Ferguson and ERISA are not instructive in determining whether
Real Parties in Interest are insurers for state taxation purposes.
(Smith, at pp. 158–159.)
      Thus, the Myers I court did not misapply existing legal
principles under California law when it declined to adopt the
assumption of risk as its standard for whether an entity is an
insurer.
      1.3.2. Myers fails to otherwise establish the
             application of the Roddis standard will yield
             unjust or absurd results.
       Myers also argues that the businesses of Real Parties in
Interest implicate the key reason for adopting the GPT. Because
the Roddis standard does not require the court to consider
whether HCSPs are able to match their revenues and related
expenses, we understand this to be another contention that Myers
I adopted a standard that is inconsistent with existing legal
principles and results in unjust outcomes.
       As discussed, the GPT was adopted because it is difficult
for traditional insurers to match revenues with related expenses
because they “collect their revenues up front [in the form of
premiums], then make payments to policyholders based on
contingent events that occur many months or years later.” (Myers
I, supra, 240 Cal.App.4th at p. 736, quoting Legis. Analyst,
Investment Income and the Insurance Gross Premiums Tax (July
2008) p. 3.) Accordingly, “an accurate determination of the
theoretically appropriate amount of taxable income proves very
difficult to achieve in practice.” (Ibid.) Myers contends Real

                                52
Parties in Interest do not know the total expenses incurred by
members, or their net profits by the end of each year. Myers
relies on reports Real Parties in Interest filed with the DMHC,
which reflect that Real Parties in Interest had incurred but not
reported (INBR) claims and claims payable as of December 31 of
each year. Because Real Parties in Interest were unable to fully
match revenues and expenses by the end of the year, he argues
that their businesses implicate the purpose behind the GPT.
        Real Parties in Interest offer several responses to this
contention. First, Real Parties in Interest point out the business
of HCSPs differs from that of traditional insurers in a
fundamental way. A claim for an automobile accident or work
injury encompasses all costs associated with that accident or
injury and will not close until all costs relating to the triggering
event are paid, which results in the possibility that a claim may
be open for years or even decades. In contrast, HCSP claims are
defined by the individual medical service provided. A claim is
incurred when the service is provided and closes when the bill for
that specific service is paid, and HCSPs are required by law to
pay claims within a short period: 30 working days for PPOs and
45 working days for HMOs. (Health & Saf. Code, § 1371, subd.
(a)(1).) Health Net notes that, under its plans, charges for
member coverage are paid for services rendered within the period
associated with the charge. In other words, a monthly charge to a
member is associated with and covers that month of coverage,
and thus there can be no significant temporal disconnect between
its revenues and expenses.
        Kaiser argues that the short delay in pinning down its
expenses is an artifact of the accounts payable cycle and is not
because it has potential liabilities stretching months or years into

                                53
the future. An HCSP may incur expenses late in the calendar
year which a provider may not immediately submit, and the
HCSP then has another 30 or 45 working days to pay or contest
that claim under the Knox-Keene Act. Further, Kaiser notes that
the DMHC reports on which Myers relies demonstrate that the
vast majority of its revenues and expenses are known with
certainty as of the end of the tax year. As an example, in 2014,
Kaiser’s DMHC reports show that 97.4 percent of its revenues
and related expenses occurred and were known as of December
31, 2014—that is, Kaiser’s total medical and hospital expenses
were approximately $50.6 billion and its claims payable and
INBR totaled approximately $1.4 billion.
       Similarly, Blue Shield contends that Myers has failed to
dispute the trial court’s conclusion that the nature of Blue
Shield’s payment obligations shows the rationale for applying the
GPT to insurers does not exist. Blue Shield submitted evidence to
the trial court that it pays most claims within 30 days and almost
all claims within 90 days. For example, in 2015, Blue Shield paid
an average of approximately 77 percent of claims within 30 days
of receiving them and paid approximately 97 percent within 90
days. Blue Shield also contends that its INBR claims and claims
payable reports establish that Blue Shield can and does match
revenues and expenses because they show known costs that have
been incurred and will be paid shortly, and thus are comparable
to a short-term accounts payable.
       Finally, Blue Cross argues that the December 31 cutoff in
the DMHC reports on which Myers relies is not pertinent to its
business. During the relevant period, Blue Cross submitted its
tax returns by the state and federal due date (under extension) of
October the following year, by which time it had paid more than

                               54
99 percent of its claims expenses. For each tax year during the
relevant period, Blue Cross was able to and did use its actual
claims expenses from January through August of the following
tax year for purposes of determining its taxable income for that
tax year. Thus, by the time it paid its taxes, Blue Cross knew all
but the smallest fraction of its expenses.
       Myers’s sole response to these varied arguments is that
Real Parties in Interest cannot actually identify the bulk of their
expenses by the time that they must pay their taxes because
“they collectively report billions of dollars in ‘Incurred But Not
Reported’ and ‘Unpaid Claims’ in their annual statements at the
end of each calendar year that attempt to estimate those
unknown claim costs.” However, Myers makes no attempt to
contextualize this figure. As noted, Kaiser’s total medical and
hospital expenses in 2014 were approximately $50.6 billion. The
record indicates that Blue Cross’s total medical and hospital
expenses for the same year were approximately $9.6 billion, Blue
Shield’s were approximately $9.5 billion, and Health Net’s were
approximately $6.4 billion. Thus, the fact that Real Parties in
Interest collectively reported billions in INBR and claims payable
to the DMHC does not refute their contention that they do not
face unknown expenses extending far into the future that are
significant in the context of their businesses. We further reject
Myers’s suggestion that any unknown expenses as of December
31 demonstrates that the logic underlying the GPT applies. We
conclude that Myers has failed to identify evidence supporting
that the application of Myers I would be substantially unjust
considering the purpose underlying the GPT’s adoption.
       Myers also argues that the Roddis standard adopted in
Myers I would yield absurd results if applied to certain types of

                                55
insurers. For example, an insured has no personal liability for
risks covered by life or disability insurance. Thus, entities
providing those types of insurance would be found not to be
insurers under the Roddis standard. However, as Kaiser points
out, Roddis did not set forth an all-purpose test for determining
whether any entity is an insurer. The Roddis court observed that
“[h]ealth care service plans were given special legislative
treatment because of the direct service feature” and made clear
that any workable test to determine whether an HCSP is an
insurer must take that function into consideration. (Roddis,
supra, 68 Cal.2d at p. 683.) Insurers that do not have a direct
service component to their business have no grounds to argue
that this standard applies to them. Accordingly, this argument
does not persuade us that the adoption of the Roddis standard is
absurd or unjust.
      1.3.3. The 2016 MCO tax does not constitute an
             intervening change or clarification of law that
             overrides the law of the case doctrine.
       Blue Cross and Blue Shield argue that the 2016 MCO tax
constitutes an intervening clarification of the law that overrides
the application of the law of the case. They argue that the
Legislature could not impose an MCO tax on HCSPs if it
understood them to be insurers, which are subject to the GPT in
lieu of nearly all other taxes. Thus, even though the HCSPs were
not subject to an MCO tax during the relevant periods for this
litigation, the 2016 MCO tax demonstrated the Legislature’s
understanding that HCSPs are not and never were insurers
under article XIII, section 28 of the Constitution.
       Myers contends that this argument is flawed for two
reasons. He argues that the Legislature lacks the authority to

                                56
limit a constitutional tax like the GPT. He also contends that the
legislative history demonstrates that the Legislature did not
enact the 2016 MCO tax or the subsequent 2019 tax with the
intent of removing HCSPs from the definition of insurers subject
to the GPT.
       With respect to the first contention, Myers argues that the
Legislature lacks the authority to interpret the definition of
insurer because the Supreme Court “perceive[d] no ambiguity
either patent or latent in section 28 that would authorize us to
look beyond the plain meaning of the words.” (Mutual Life Ins.
Co., supra, 50 Cal.3d at p. 407.)16
       “[A]n act of the [L]egislature which conflicts with the
Constitution is void [citation] . . . .” (Robison v. Payne (1937) 20
Cal.App.2d 103, 106.) The constitutional amendment providing
for the GPT was originally adopted in 1910 (Bankers Life Co. v.
Richardson (1923) 192 Cal. 113, 114–116; former Article XIII,
§ 14, subd. (b)), but was enacted in its current form in 1974,
decades after the advent of HCSPs. If the constitutional
definition of insurers included HCSPs, the Legislature would lack
the authority to exclude them from the GPT. It does not.
       Moreover, “ ‘[i]nsurer’ ” is defined by the Constitution to
“include[] insurance companies or associations and reciprocal or
interinsurance exchanges . . . and the State Compensation
Insurance Fund.” (Cal. Const., art. XIII, § 28, subd. (a), italics
added.) “The term ‘includes’ is ordinarily a word of enlargement

16In Mutual Life, there was no dispute that Mutual Life Insurance
Company of New York was an insurer, only whether it was subject to
the GPT when it owned and rented out property and operated a
parking lot in California but did not conduct insurance business in the
state. (Mutual Life Ins. Co., supra, 50 Cal.3d at p. 406.)

                                  57
and not of limitation.” (People v. Western Air Lines, Inc. (1954) 42
Cal.2d 621, 639.) “When a word in the California Constitution . . .
is capable of several interpretations, a statutory construction of
that word is to be afforded substantial deference. [Citation.] This
rule of deference arises from the fact that the state Constitution,
unlike the federal Constitution, is a limitation on the power of
the Legislature rather than a grant of power to it. Any
constitutional limitation on legislative power is to be narrowly
construed, and a strong presumption of constitutionality supports
the Legislature’s acts. [Citation.] The Legislature’s efforts to
interpret a word in the state Constitution are to be upheld ‘unless
they are disclosed to be unreasonable or clearly inconsistent with
the express language or clear import of the Constitution.’
[Citation.]” (People v. 8,000 Punchboard Card Devices (1983) 142
Cal.App.3d 618, 620–621; cf. Heckendorn v. City of San Marino
(1986) 42 Cal.3d 481, 488.) The plain language of the GPT
provision leaves open the possibility that other entities than
those expressly listed may be insurers subject to the GPT. Since
the Legislature has the authority to determine what, if any,
entities beyond insurance companies, interinsurance exchanges,
and the State Compensation Insurance Fund constitute insurers,
it follows that the Legislature has the authority to determine
that an entity not expressly listed in the constitutional definition
is not an insurer. Thus, we reject Myers’s contention that the
Legislature lacks the authority to exclude HCSPs from the
definition of “insurers” under the Constitution.
        Whether Senate Bill No. X2-2 overrides the application of
the law of the case doctrine presents a closer question. The
legislative history of Senate Bill No. X2-2 reflects that its purpose
was to reform the existing MCO provider tax, which was paid

                                 58
only by Medi-Cal plans, and replace it with a tax that would be
imposed on all HCSPs for a period of three years with the goal of
“generat[ing] an amount of nonfederal funds for the Medi-Cal
program, equivalent to the sales tax currently imposed on MCPs”
and thus “comply[ing] with federal Medicaid requirements.”
(Former Welf. & Inst. Code, § 14199.50; Sen. Bill No. X2-2,
Proposed Conference Report No. 1, Feb. 25, 2016, p. 1.) The 2016
MCO tax would not be collected unless and until DHCS received
approval from the federal government that the tax was
permissible under federal regulations. (Stats. 2015–2016, 2nd Ex.
Sess., ch. 2, pp. 6029–6030.) Thus, although we agree with Blue
Cross and Blue Shield that the imposition of the MCO tax on
HCSPs is inconsistent with an understanding that HCSPs are
insurers subject to the GPT, the history and language of Senate
Bill No. X2-2 does not support that its purpose was to address
Myers I or to clarify that HCSPs are not “insurers” under the
Constitution for periods before the MCO tax took effect. We
therefore consider whether the 2016 legislation may be
understood as a change or clarification of the law that overrides
the application of the law of the case doctrine, even if the
Legislature did not express this intent.
       As our Supreme Court has explained, “[i]t is true that if the
courts have not yet finally and conclusively interpreted a statute
and are in the process of doing so, a declaration of a later
Legislature as to what an earlier Legislature intended is entitled
to consideration. [Citation.] But even then, ‘a legislative
declaration of an existing statute’s meaning’ is but a factor for a
court to consider and ‘is neither binding nor conclusive in
construing the statute.’ [Citations.] This is because the
‘Legislature has no authority to interpret a statute. That is a

                                59
judicial task. The Legislature may define the meaning of
statutory language by a present legislative enactment which,
subject to constitutional restraints, it may deem retroactive. But
it has no legislative authority simply to say what it did mean.’ ”
(McClung v. Employment Development Dept. (2004) 34 Cal.4th
467, 473.)
       Contrary to Myers’s contention, neither Roddis nor
Metropolitan Life offers a final and conclusive interpretation of
the Knox-Keene Act with respect to the issues raised in this
appeal, as Roddis arose under a prior legislative scheme and did
not address taxation issues, and Metropolitan Life did not
concern HCSPs at all. Nevertheless, McClung is instructive. To
the extent Senate Bill No. X2-2 addressed the appropriate
taxation of HCSPs before July 2016 in light of the Knox-Keene
Act, it did so only implicitly. Senate Bill No. X2-2 did not “define
the meaning of statutory language by a present legislative
enactment”—for example, by enacting language establishing that
HCSPs regulated under the Knox-Keene Act are not insurers
under article XIII, section 28—or deem any such definition
retroactive. (McClung v. Employment Development Dept., supra,
34 Cal.4th at p. 473.) Thus, even if we accept that Senate Bill No.
X2-2 reflects the Legislature’s understanding of what an earlier
Legislature intended with respect to the effect of the Knox-Keene
Act on the tax treatment of HCSPs, the Legislature’s non-binding
interpretation of existing law does not appear to constitute a
change or clarification of the law that would override the
application of the law of the case doctrine.
       Renee J., supra, 96 Cal.App.4th 1450 provides further
guidance. In that case, the appellant argued that the trial court
had erred in terminating her reunification services based upon a

                                60
Supreme Court decision at an earlier phase of proceedings that
interpreted the relevant statute, since the Legislature
subsequently amended that statute. (Id. at p. 1459.)17 Quoting
Western Security Bank v. Superior Court (1997) 15 Cal.4th 232,
the court in Renee J. explained that “ ‘a legislative declaration of
an existing statute’s meaning is neither binding nor conclusive in
construing the statute. Ultimately, the interpretation of a statute
is an exercise of the judicial power the Constitution assigns to the
courts. [Citations.] Indeed, there is little logic and some
incongruity in the notion that one Legislature may speak
authoritatively on the intent of an earlier Legislature’s
enactment when a gulf of decades separates the two bodies.
[Citation.] Nevertheless, the Legislature’s expressed views on the
prior import of its statutes are entitled to due consideration, and
we cannot disregard them . . . . [E]ven if the court does not accept
the Legislature’s assurance that an unmistakable change in the
law is merely a “clarification,” the declaration of intent may still
effectively reflect the Legislature’s purpose to achieve a

17The statute at issue was Welfare and Institutions Code section
361.5, former subdivision (b)(10). (Renee J., supra, 96 Cal.App.4th at p.
1455.) The question before the Supreme Court was whether a clause
stating that reunification services must be provided if the parent has
made a reasonable effort to treat the problems that led to the child ’s
removal was applicable to subpart (A) of former subdivision (b)(10),
which stated that reunification services need not be provided where
past efforts at reunification proved unsuccessful after removal of
another child, and where parental rights to another child have been
severed. (Id. at pp. 1455–1457.) After the Supreme Court concluded
that it was not applicable, the Legislature introduced an amendment
that “restructured the clauses of subdivision (b)(10), creating a new
subparagraph (b)(11), to clarify that the ‘no reasonable effort’ clause
did apply” to subpart (A). (Id. at p. 1457.)

                                   61
retrospective change. [Citation.] Whether a statute should apply
retrospectively or only prospectively is, in the first instance, a
policy question for the legislative body enacting the statute.
[Citation.] Thus, where a statute provides that it clarifies or
declares existing law, “[i]t is obvious that such a provision is
indicative of a legislative intent that the amendment apply to all
existing causes of action from the date of its enactment. In
accordance with the general rules of statutory construction, we
must give effect to this intention unless there is some
constitutional objection thereto.” [Citations.]’ [Citation.]”
(Renee J., at pp. 1460–1461, italics added.)
       The court in Renee J. observed that “the Legislature acted
swiftly to clarify an existing law in the wake of court
interpretation . . . at the express invitation of the Supreme Court,
which declared the prior law to be ambiguous” and that the
Senate Rules Committee “explain[ed] that the amendment of the
statute [was] necessary merely to rectify a perceived problem
with the prior version, and not the product of any desire to take
the law in a new direction.” (Renee J., supra, 96 Cal.App.4th at
pp. 1461–1462.) Thus, “it was the intent of the Legislature to give
its clarification retroactive effect” and “the Legislature’s
clarification . . . is properly applied to all open cases, including
this one.” (Id. at pp. 1461, 1463.) Accordingly, “the new
legislation should have been applied, and properly overrode the
effect of the Supreme Court’s decision, which would otherwise
have been law of the case.” (Id. at p. 1463.)
       Here, unlike in Renee J., the 2016 legislation imposed a
new MCO tax on HCSPs for a period of three years and was
clearly intended to take the law in a new direction to comply with
new federal funding requirements. The statutory language did

                                62
not provide or declare that the imposition of the new MCO tax
demonstrated its understanding that HCSPs under the Knox-
Keene Act are not insurers for any purposes, including in
preceding periods, and the legislative history did not discuss
Myers I or the appropriate taxation of HCSPs when explaining
the purpose of the legislation.18 In the absence of any of the facts
that supported overriding the law of the case doctrine in Renee J.,
we cannot conclude that Senate Bill No. X2-2 effected a change or
clarification of the law such that Myers I is no longer binding.
       Myers also contends that the 2016 tax was one in a series
of MCO taxes imposed by the Legislature and thus cannot
constitute an intervening change in the law. Although the earlier
legislation imposed MCO taxes on Medi-Cal plans and facilities,
we agree that this history is relevant. For example, in 2009, the
Legislature enacted Assembly Bill No. 1422, which temporarily
extended the GPT to Medi-Cal managed care (MCMC) plans on
an urgency basis. The Assembly concurrence to Senate
amendments to the bill noted that “[m]ost MCMC plans are
Knox-Keene licensed health plans[]” and that “Knox-Keene
licensed plans do not pay the gross premiums tax.” (Concurrence
in Senate Amendments of Assem. Bill No. 1422, Sept. 3, 2009,
pp. 1–2, 5; Stats. 2009, ch. 157, p. 820.) As of 2009, the
Legislature apparently understood that Knox-Keene Act licensed
plans were not insurers for any purposes and were generally not
subject to the GPT, notwithstanding its imposition of the GPT on
certain plans. In 2013, the Legislature passed Senate Bill No. 78,

18The legislative history refers to Myers I and subsequent proceedings
in this matter only in the context of discussing litigation related to the
legislation, and expresses no opinion about the decision in Myers I.

                                   63
which set a sunset date for the GPT tax and imposed a sales and
use tax on MCMCs from 2013 to 2016. (Stats. 2013, ch. 33, pp.
1116–1117; Senate Third Reading of Sen. Bill No. 78 (2013–2014
Reg. Sess.) as amended June 13, 2013, p. 1.) Thus, at the time
that Myers I was decided, the Legislature had already passed
legislation reflecting its understanding—repeated in a 2015
report from the Assembly Public Health and Developmental
Services Committee cited by Blue Cross—that Knox-Keene Act
licensed plans are not insurers and thus “are not generally
prohibited from other taxation.” (Assem. Pub. Health &
Developmental Services Comm., Informational Hearing:
Supporting and Enhancing California’s Medi-Cal and
Developmental Services Programs (2015–2016 2d Ex. Sess.) July
9, 2015, p. 9.) The 2016 MCO tax did not communicate this
understanding in a more direct or explicit manner than the prior
legislation, which further undermines the claim that it
constitutes an intervening change or clarification of the law.
       In support of its arguments, Blue Shield cites a letter
printed in the Assembly Daily Journal which stated that, through
the 2016 MCO legislation, “the Legislature levied an MCO tax on
licensed health care service plans, recognizing that health care
service plans are not and have not been insurers as defined by
Article XIII, §28 of the California Constitution and California
Insurance Code §§ 22 and 23.” (Assem. Daily Journal, Sept. 14,
2019, p. 3589.) Myers argues that the letter, written three years
after Senate Bill No. X2-2 was signed into law, is not relevant to
our determination of the Legislative intent behind the 2016 MCO
tax. We agree.
       “When construing a statute, our task is to ascertain the
intent of the Legislature as a whole. [Citation.] Generally, the

                               64
motive or understanding of an individual legislator is not
properly received as evidence of that collective intent, even if that
legislator was the author of the bill in question. [Citation.] Unless
an individual legislator’s opinions regarding the purpose or
meaning of the legislation were expressed in testimony or
argument to either a house of the Legislature or one of its
committees, there is no assurance that the rest of the Legislature
even knew of, much less shared, those views. [Citation.]
Moreover, if a legislator’s views were never expressed in a
legislative forum, those legislators or other interested parties
with differing opinions as to the bill’s meaning and scope had no
opportunity to present their views in rebuttal. [Citation.]”
(McDowell v. Watson (1997) 59 Cal.App.4th 1155, 1162, fn. 3.)
The author of the letter voted on Senate Bill No. X2-2 in 2016 but
was not the author of the bill. Even if he had been, his
understanding of legislation passed three years prior is not
determinative of the understanding of the Legislature as a whole
as to the purpose of Senate Bill No. X2-2 absent any evidence
that it was shared with the Legislature at that time.
       In sum, although the Legislature has the authority to pass
legislation stating that Knox-Keene Act licensed plans are not
insurers for any purposes, the 2016 MCO tax had the stated
purpose of complying with federal funding requirements after the
periods relevant to this litigation and contains no express
statement that it was intended to be an exercise of that
authority. Thus, no intervening clarification of existing law
overrides the application of the law of the case doctrine.19

19 Blue Cross and Blue Shield assert that, in the absence of a bright
line test, HCSPs will continue to face uncertainty as to how they are

                                  65
      1.4.   Applying the Roddis standard to the undisputed
             facts, Real Parties in Interest are not insurers.
       Having concluded that Roddis supplies the applicable
standard and that we remain bound by the Myers I court’s
adoption of that standard under the law of the case doctrine, we
now apply it to the undisputed facts before us.
       Pursuant to Roddis, we balance the direct service aspects of
the businesses of Real Parties in Interest against the indemnity
aspects and determine whether indemnity is a significant
financial proportion of the business. (Roddis, supra, 68 Cal.2d at
p. 683.) As discussed, indemnity exists where a member bears the
risk of personal liability for medical services—i.e., the healthcare
provider may seek payment directly from the member for medical
services, who must then seek reimbursement from the HCSP. (Id.
at p. 682.) “On the other hand, there is a strong social policy to
encourage the services which health plans provide the public.”
(Roddis, supra, 68 Cal.2d at p. 682.) Roddis indicates that the
direct service offered by HCSPs is the provision of medical
services to members for which they are not personally liable.
(Ibid.)

taxed. Considering that Real Parties in Interest have consistently paid
over 90 percent of claims costs to in-network providers every year for
approximately 10 years and members of their plans (including PPO
plans) have strong incentives to seek care from in-network providers, it
seems unlikely that the application of the Roddis balancing test would
yield different results for the parties before us if further litigation
arose. In any event, these concerns are best addressed by the
Legislature, which may wish to enshrine in law its understanding that
Knox-Keene Act licensed plans are not insurers for any purpose and
are not subject to the GPT.

                                  66
       Further, although Myers I held that an HCSP’s regulatory
status does not determine whether it is an insurer for tax
purposes, we agree with the trial court that the Knox-Keene Act
is a relevant consideration when considering the service functions
of HCSPs. Health and Safety Code section 1342 demonstrates
that the Legislature contemplated that HCSPs would provide
various services, including “ensur[ing] the best possible health
care for the public at the lowest possible cost by transferring the
financial risk of health care from patients to providers.” (Health
& Saf. Code, § 1342, subd. (d).) The regulatory scheme also
imposes additional obligations on HCSPs, such as requiring the
establishment and maintenance of provider networks (id.,
§ 1367.03), quality assurance monitoring processes (id., § 1370),
and a system for submitting grievances (id., § 1368, subd. (a);
Cal. Code Regs., tit. 28, § 1300.68).
       As HCSPs licensed under the Knox-Keene Act, the Health
and Safety Code requires that the contracts between Real Parties
in Interest and their providers state that a plan member will not
be liable to the provider for amounts owed for services provided
under the plan. (Health & Saf. Code, § 1379, subd. (a).) Even if a
provider contract does not include this provision, the contracting
provider is barred by law from attempting to collect the amounts
owed under the plan from the member. (Id., subd. (b).) Because
HCSP members bear no risk of personal liability for in-network
care, only out-of-network care provided to members may be
equated to “indemnity” under Roddis and Myers I.
       With this legal framework and regulatory background in
mind, we turn to the undisputed evidence. We conclude that Real
Parties in Interest are not insurers as a matter of law under the
relevant standard.

                                67
      1.4.1. Blue Cross
        Under Blue Cross’s HMO and PPO plans, members have
access to a network of medical providers, hospitals, and other
facilities that have contracted with Blue Cross to provide medical
services to Blue Cross members at agreed upon rates. From 2005
through 2016, Blue Cross’s contracts with these providers stated
that members would not be required to pay providers for amounts
owed to that provider by Blue Cross, other than copayments,
coinsurance, or deductibles, even if Blue Cross fails to pay the
provider. Thus, beyond copayments, coinsurance, or deductibles,20
a member could never be liable for payments owed by Blue Cross
to providers of in-network services. Between 2005 and 2016,
between approximately 92 and 97 percent of Blue Cross’s claim
costs (for both HMO and PPO plans) were for in-network claims,
for which providers may only seek payment from Blue Cross.
Thus, approximately 3 to 8 percent of its claim costs were
indemnity payments for out of network services for which
members were liable.
        Thus, a far greater proportion of Blue Cross’s business was
devoted to direct service than to indemnity under Myers I and
Roddis.21

20Myers does not argue on appeal that member cost share payments
constitute indemnity.
21 Because we conclude that Blue Cross is not an insurer under Myers
I, we do not address its alternative argument that the court should not
subject it to retroactive liability under Myers I.

                                  68
      1.4.2. Blue Shield
      Under Blue Shield’s HMO plans, members must use
contracted providers for nearly all care for the care to be covered
under the plan. Although PPO members, unlike HMO members,
may choose to obtain services from non-contracted (out-of-
network) providers, PPO plans incentivize the use of contracted
providers. Blue Shield’s provider contracts make clear that “in no
event” may providers seek payment from plan members for
covered services. Blue Shield’s HMO and PPO contracts with
members also reflect the prohibition on member financial liability
to contracted providers. Even under HMO plans, certain non-
contracted providers are prohibited from attempting to collect
from plan members, including out-of-network providers of
emergency services or services authorized by the plan that cannot
be rendered by a contracted provider, and continuity of care
services when a contracted provider becomes non-contracted.
      During the relevant period of 2005 to June 2016, Blue
Shield’s direct payments to contracted providers for which its
members bore no financial responsibility beyond cost share
payments ranged from 94 percent to 97 percent, and averaged 96
percent, of its total payments for members’ health care. Blue
Shield’s expenditures to non-contracted providers over the same
period averaged 4 percent. Emergency services and other out-of-
network services for which members are not liable are included in
the 4 percent, meaning that the proportion of Blue Shield’s
indemnity is likely lower, though the record does not identify
what portion of this figure was for emergency services.
      Even if the indemnity payments made by Blue Shield were
no lower than approximately 3 to 6 percent during the relevant
period, the proportion of Blue Shield’s business that constituted

                                69
indemnity was not significant in comparison to the portion that
comprised direct service.
      1.4.3. Kaiser
       Kaiser does not sell contracts that allow members to seek
covered health care services from any provider or hospital of their
choice, nor does Kaiser, with limited exceptions, promise to
reimburse members for care they receive outside of Kaiser
Permanente. During the relevant period, Kaiser members were
responsible for copayment, coinsurance, and deductible amounts
when they sought medical care from KFH and the Permanente
Medical Groups. However, Kaiser’s EOCs during the relevant
period stated: “Our contracts with Plan Providers provide that
you are not liable for any amounts we owe.” To the extent that
the out-of-network care was in connection with emergency
services, Kaiser’s contracts with its members provide that
members are not responsible for any amounts beyond cost share
payments.
       Between 2007 and 2016, measured by dollars,
approximately 1 to 4 percent of Kaiser’s healthcare expenses
were paid to noncontracting providers or directly reimbursed to
members. For the years 2007 through 2014, measured by discrete
visits or consultations, approximately 95 percent of the covered
health services provided to Kaiser members were rendered by
Kaiser Permanente providers. In 2015, approximately 93.3
percent of the covered health services provided to Kaiser
members were rendered by Kaiser Permanente providers, and in
2016, approximately 94.7 percent of the covered health services
provided to Kaiser members were rendered by Kaiser
Permanente providers.

                                70
       Even disregarding that some portion of the out-of-network
visits and expenses were likely for emergency services for which
members are not personally liable, the portion of Kaiser’s
business that constitutes indemnity was not significant compared
to the direct service component.
     1.4.4. Health Net
       During the relevant period, Health Net’s EOCs for its
commercial HMO plans provided that members must choose a
physician group that would provide or authorize all medical care
and that members were completely financially responsible for
medical care that was not authorized by that physician group,
with the exception of emergency medical care. Between 2007 and
2016, Health Net’s commercial HMO provider contracts with in-
network providers required the provider to agree not to bill or
seek compensation or reimbursement from members for
contracted services they provided to members, except for
copayments, coinsurance, or deductibles.
       The annual approximate percentage of Health Net’s
reported in-network expenses as compared to its total medical
expenses for all Health Net product lines for the years 2007 to
2016 was between 96 percent to 99 percent. In the combined
period of 2007 through 2016, an average of approximately 98.6
percent of Health Net’s reported health care expenses were made
to in-network providers as defined by the DMHC. Thus, the
portion of Health Net’s business that constituted indemnity
(between approximately 1 and 4 percent) was not significant.

                               71
2.    The trial court did not abuse its discretion in
      sustaining the evidentiary objections of Real Parties in
      Interest.
      2.1.   Standard of Review
       Myers asserts that there is a split of authority in California
as to the appropriate standard of review of evidentiary rulings.
He contends that Pipitone v. Williams (2016) 244 Cal.App.4th
1437, which in turn cites Reid v. Google, Inc. (2010) 50 Cal.4th
512, supports that the de novo standard should apply. However,
in Reid, the Supreme Court applied the de novo standard of
review to evidentiary objections on which the trial court had
failed to rule, reasoning that “because there was no exercise of
trial court discretion, the Court of Appeal had no occasion to
determine whether the trial court abused it.” (Reid, at p. 535.)
The Supreme Court expressly declined to consider “whether a
trial court’s rulings on evidentiary objections based on papers
alone in summary judgment proceedings are reviewed for abuse
of discretion or reviewed de novo.” (Ibid.) “[T]he weight of
authority since Reid supports application of the abuse of
discretion standard. Cases considering this question and applying
the abuse of discretion standard after Reid have been published
by the First District, Second District, Third District, Fourth
District (Division One), Fifth District, and Sixth District— in
other words, essentially every district of the appellate courts of
the State of California . . . .” (Doe v. SoftwareONE, Inc. (2022) 85
Cal.App.5th 98, 103, fn. omitted; LAOSD Asbestos Cases (2020)
44 Cal.App.5th 475, 485 [“The weight of authority in this state is
that we apply an abuse of discretion standard when we review
trial court evidentiary rulings.”].)

                                 72
       As courts have observed, “application of the abuse of
discretion standard is eminently sensible in light of the practical
realities of evidentiary objections in summary judgment
proceedings.” (Doe v. SoftwareONE, Inc., supra, 85 Cal.App.5th
at p. 103; cf. Ducksworth v. Tri-Modal Distrib. Servs. (2020) 47
Cal.App.5th 532, 544, revd. on other grounds in Pollock v. Tri-
Modal Distribution Services, Inc. (2021) 11 Cal.5th 918.) Given
the large number of evidentiary objections that frequently
accompany summary judgment motions, “trial courts typically
rule on evidentiary objections in summary fashion, which often
prevents us from determining the precise nature (i.e., principally
legal or factual) of the trial court’s ruling. And rulings on
evidentiary objections often ‘involve trial courts making
qualitative and sometimes equitable determinations,’ which are
the sort of decisions we typically review for abuse of discretion.
[Citation.]” (Doe, at p. 103; cf. Ducksworth, at p. 544 [“Because of
the daunting complexity, volume, and pace of [the trial court’s]
decisionmaking task, the latitude implied by the abuse-of-
discretion standard thus does make ‘great sense.’ [Citation.]”].)
       We therefore follow the weight of authority and apply the
abuse of discretion standard. Under this standard, “[a]n
‘erroneous evidentiary ruling requires reversal only if “there is a
reasonable probability that a result more favorable to the
appealing party would have been reached in the absence of the
error.” [Citation.]’ [Citation.” (Daimler Trucks North America
LLC v. Superior Court (2022) 80 Cal.App.5th 946, 960.)
      2.2.   The court did not err in sustaining the
             evidentiary objections of Real Parties in Interest.
     The trial court sustained multiple evidentiary objections to
the Duncan declarations, primarily on relevance and foundation

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grounds. These objections related to statements in the Duncan
declarations that Real Parties in Interest employ actuaries and
engage in actuarial analyses, make the majority of their
payments to providers on a fee-for-service basis, hold reserves
and free capital, assume and spread risk, file the same
documents as insurers do, and thus that Real Parties in Interest
operate as insurers, among others.
       As discussed above, the Roddis standard does not require a
court to consider whether an HCSP engages in risk pooling or
spreading, whether its payments to providers are fee-for-service
or capitated, or whether it otherwise operates in a manner
comparable to insurers. Thus, the trial court did not abuse its
discretion in concluding that the portions of the Duncan
declarations to which Real Parties in Interest objected were
irrelevant.
       Evidence that Health Net and Blue Cross received payouts
as insurers under the federal Affordable Care Act was also
properly excluded. The trial court did not abuse its discretion in
concluding that such payments are immaterial, as “the question
of whether a law applies to HCSPs as well as insurers depends on
the purpose of the law” and is not determined by labels that may
apply to Real Parties in Interest in different contexts. This
determination is consistent with Myers I, which instructed that
courts must “ ‘look beyond the formal labels the parties have
affixed to their transactions’ ” and instead “ ‘discern the true
economic substance’ of the arrangement.” (Myers I, supra, 240
Cal.App.4th at p. 741, quoting Metropolitan Life, supra, 32 Cal.3d
at pp. 656–657.) The standard adopted in Myers I to determine
the true economic substance of an HCSP’s business does not

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require a court to consider whether the HCSP is classified as an
insurer by the federal government.
       Finally, the trial court did not abuse its discretion when it
excluded evidence that PPO plans offered by insurance
companies affiliated with Blue Cross and Blue Shield are similar
to the PPO plans offered by Blue Cross and Blue Shield and that
their websites and actuarial certificates refer to both as insurers.
Whether HCSPs and related insurers offer similar plans or fulfill
similar functions has no bearing under the Roddis standard.
Moreover, as discussed, whether Blue Cross and Blue Shield
refer to their PPO plans as insurance in certain contexts is a
question of labeling, not economic substance, and is therefore of
no relevance under Myers I.
       In sum, the court did not abuse its discretion in excluding
evidence that had no bearing on the application of the controlling
legal standard. For the same reason, there is no reasonable
probability that Myers would have reached a more favorable
result had this evidence been admitted.

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                            DISPOSITION

      The judgments are affirmed. Real Parties in Interest shall
recover their costs on appeal.

    NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

                                                 LAVIN, Acting P.J.
WE CONCUR:

       EGERTON, J.

       NGUYEN, J.*

*Judge of the Los Angeles Superior Court, assigned by the Chief
Justice pursuant to article VI, section 6 of the California Constitution.

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