Uhm v. Humana Inc ( 2008 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
DO SUNG UHM; EUN SOOK UHM, a 
married couple, individually and
for all others similarly situated,
Plaintiffs-Appellants, No. 06-35672
v.
 D.C. No.
CV-06-00185-RSM
HUMANA INC., a Delaware
corporation; HUMANA HEALTH PLAN OPINION
INC., a Kentucky corporation doing
business as Humana,
Defendants-Appellees.

Appeal from the United States District Court
for the Western District of Washington
Ricardo S. Martinez, District Judge, Presiding
Argued and Submitted
March 14, 2008—Seattle, Washington
Filed August 25, 2008
Before: Betty B. Fletcher and Richard A. Paez, Circuit
Judges, and William W Schwarzer,* District Judge.
Opinion by Judge Paez
The Honorable William W Schwarzer, Senior United States District
Judge for the Northern District of California, sitting by designation.
11549
UHM v. HUMANA INC 11553
COUNSEL
Scott C. Breneman and Joseph A. Grube, Ricci Grube Aita &
Breneman, PLLC, Seattle, Washington, for the appellants.
Brian D. Boyle, Mark Davies, Samuel Brown, and Meaghan
McLaine, O’Melveny & Myers, LLP, Washington, D.C., for
the appellees.
William A. Helvestine and Carri L. Becker, Epstein Becker &
Green, P.C., San Francisco, California, for the amicus.
OPINION
PAEZ, Circuit Judge:
Plaintiff-Appellants Do Sung Uhm and Eun Sook Uhm
(“the Uhms”) appeal the district court’s order dismissing their
complaint against Defendant-Appellees Humana Health Plan,
Inc. and Humana, Inc. (collectively “Humana”) on the ground
that their claims are preempted by the express preemption
provision of the Medicare Prescription Drug Improvement
and Modernization Act of 2003 (“Act”). The Uhms also
appeal the district court’s order denying their partial motion
for reconsideration, in which they argued that unlike Humana
Health Plan, Inc., Humana, Inc. is not regulated under the Act,
and therefore the claims against Humana, Inc. cannot be pre-
empted. We have jurisdiction under 28 U.S.C. § 1291. We
affirm.
11554 UHM v. HUMANA INC
I. FACTS
The Act established Medicare Part D (“Part D”), a volun-
tary prescription drug benefit program for seniors. See 42
U.S.C. § 1395w-101 et seq. Under the Act, health insurance
providers contract with the Centers for Medicare and Medic-
aid Services (“CMS”), part of the Department of Health and
Human Services (“HHS”), to offer Part D prescription drug
plans (“PDPs” or “plans”) to Medicare beneficiaries. Humana
Health Plan, Inc. is a CMS-approved PDP provider; Humana,
Inc., its parent company, is not.1
In late 2005, the Uhms—Medicare beneficiaries—chose
Humana as their Part D provider, based in part on the repre-
sentations Humana made in its marketing materials.2 In partic-
ular, the Uhms relied on Humana’s representation that they
would be enrolled in the benefits plan, and therefore receive
coverage for their prescription drugs beginning January 1,
2006, the first day Part D sponsors could provide benefits
under the Act.
The Uhms enrolled in Humana’s PDP by filling out the
Humana Prescription Drug Plan Enrollment Form. The Uhms
chose “Social Security Check Deduction” as their method of
premium payment. Accordingly, the $6.90 plan premium was
deducted from their January 2006 and February 2006 social
security checks.
1
The Uhms allege that Humana, Inc. was involved in marketing and
administering Humana Health Plan, Inc.’s PDP. Because the Uhms do not
distinguish between Humana Health Plan, Inc. and Humana, Inc. with
respect to any specific factual allegations, we refer to them collectively as
“Humana.” In Section II.G, which addresses the Uhms’ claim that the Act
does not apply to Humana, Inc., we address the two entities separately.
2
Because this is an appeal from an order granting a motion to dismiss,
we take the material facts alleged in the Uhms’ complaint as true and con-
strue them in the light most favorable to the Uhms. Sprewell v. Golden
State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).
UHM v. HUMANA INC 11555
To receive benefits under the Humana plan, beneficiaries
were required to submit a mail-order form and allow for at
least two weeks between submission of the form and receipt
of their medications. As their enrollment date approached, the
Uhms had not yet received any information from Humana
about their prescription drug plan, including their identifica-
tion cards, mail-order forms, or instructions on how to com-
plete the forms and request and receive their drug benefits.
Concerned about their ability to obtain their medications
through the plan, the Uhms and their son repeatedly requested
pertinent information from Humana. They called, they sent e-
mails—but Humana was unresponsive. In late December
2005, the Uhms called Humana’s toll-free telephone number
to determine their status under the plan; they were told by a
Humana representative that they were “not recognized as
members of the Humana Part D PDP.”
January 1, 2006 came and passed, and the Uhms did not
receive the materials necessary for obtaining their drug bene-
fits. The Uhms were forced to buy their prescription medica-
tions out-of-pocket at costs higher than those provided by
Humana’s plan, despite the fact that the PDP premium was
deducted from their social security checks in both January and
February of that year.
On February 6, 2006, the Uhms filed a complaint against
Humana Health Plan, Inc. and Humana, Inc.3 in the U.S. Dis-
trict Court for the Western District of Washington, claiming
breach of contract, violation of several state consumer protec-
tion statutes, unjust enrichment, fraud, and fraud in the
inducement. The Uhms filed the complaint on behalf of them-
selves and a putative class consisting of “all persons who
paid, or agreed to pay, Medicare Part D prescription drug cov-
3
The Uhms initially sued Humana Medical Plan, Inc., as well, but later
voluntarily dismissed the complaint as to that entity.
11556 UHM v. HUMANA INC
erage premiums to Humana and who did not receive those
prescription drug benefits in either a timely fashion or at all.”4
Humana responded with a motion to dismiss under Federal
Rule of Civil Procedure 12(b)(6), for failure to state a claim,
which the district court granted. The district court concluded
that the standards promulgated by CMS under the Act gov-
erned the Uhms’ grievances as alleged in the complaint, that
the administrative process established by the Act was the
appropriate vehicle for addressing each of the Uhms’ griev-
ances, and that therefore the Uhms’ state law claims were pre-
empted by the Act’s express preemption provision.
The Uhms filed a motion for partial reconsideration, argu-
ing that their claims were not preempted with respect to
Humana, Inc., because Humana, Inc. is not a CMS-approved
PDP provider. The district court similarly denied that motion.
The Uhms timely appealed both orders.5
II. ANALYSIS
A. Standard of Review
We review de novo the district court’s dismissal of a case
under Rule 12(b)(6) for failure to state a claim, Marder v.
Lopez, 450 F.3d 445, 448 (9th Cir. 2006), as well as the dis-
trict court’s determination that state law claims are preempted
by a federal statute, Niehaus v. Greyhound Lines Inc., 173
F.3d 1207, 1211 (9th Cir. 1999). We review for abuse of dis-
cretion the district court’s denial of a motion for reconsidera-
4
In a previous paragraph, the Uhms described the class as those persons
“who paid and/or were billed by Humana, for enrollment in the Humana
Part D PDP and (a) did not receive benefits under the Humana Part D
PDP, and/or (b) whom Humana failed to actually enroll in the Humana
Part D PDP, and/or (c) whom Humana enrolled in the Humana Part D
PDP on a date or dates later than the date or dates promised by Humana.”
5
We granted leave to America’s Health Insurance Plans, Inc. to file an
amicus curiae brief in support of the arguments raised by Humana.
UHM v. HUMANA INC 11557
tion. Bliesner v. Commc’n Workers of Am., 464 F.3d 910, 915
(9th Cir. 2006).
B. Preemption Provision
[1] Humana contends, and the district court ruled, that each
of the Uhms’ state law claims are preempted by the Act’s
express preemption provision. We may find preemption only
where it is the “clear and manifest purpose of Congress.” Rice
v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947).
Because the Act contains an express preemption provision,
the “task of statutory construction must in the first instance
focus on the plain wording of the clause, which necessarily
contains the best evidence of Congress’ pre-emptive intent.”
CSX Transp., Inc. v. Easterwood, 507 U.S. 658, 664 (1993).
[2] Medicare Part D incorporates the express preemption
provision contained in Part C, the Medicare Advantage
(“MA”) program, which provides medical benefits to seniors
through managed care.6 The Part D preemption provision
states:
The provisions of sections 1395w-24(g) [prohibition
of premium taxes] and 1395w-26(b)(3) [preemption]
of this title shall apply with respect to PDP sponsors
and prescription drug plans under this part in the
same manner as such sections apply to MA organiza-
tions and MA plans under part C of this subchapter.
42 U.S.C. § 1395w-112(g).
The Part C preemption provision in turn provides:
The standards established under this part shall super-
cede any State law or regulation (other than State
6
Prior to the Act, Medicare Advantage was called “Medicare+Choice.”
See 42 U.S.C. §1395w-21.
11558 UHM v. HUMANA INC
licensing laws or State laws relating to plan sol-
vency) with respect to MA plans which are offered
by MA organizations under this part.
42 U.S.C. § 1395w-26(b)(3). See also 42 C.F.R. § 423.440(a)
(adopting same language in Part D implementing regulations:
“The standards established under this part supercede any State
law or regulations (other than State licencing laws or State
laws relating to plan solvency) for Part D plans offered by
Part D plan sponsors.”).
[3] The plain language of the statute provides therefore that
CMS “standards” supercede State law or regulations insofar
as the State law or regulation is “with respect to” a “prescrip-
tion drug plan” offered by a “PDP sponsor.”7
[4] The inclusion of the phrase “law or regulation” demon-
strates Congress’ intent to expressly supplant only positive
state enactments. See Sprietsma v. Mercury Marine, 537 U.S.
51, 63 (2002) (interpreting the phrase “law or regulation” as
indicating Congressional intent to expressly preempt only
positive state enactments and not common law). As the Court
in Sprietsma reasoned, if the term “law” was meant to encom-
pass common law claims, “it might also be interpreted to
include regulations, which would render the express reference
to ‘regulation’ in the pre-emption clause superfluous.” Id.7
CMS replaced the phrase “PDP sponsor” in its implementing regula-
tions with “Part D sponsor,” because it “believe[s] that the preemption of
State law . . . should operate uniformly for all Part D sponsors.” 70 Fed.
Reg. 4319 (Jan. 28, 2005). A PDP provides “prescription drug coverage
that is offered under a policy, contract or plan that has been approved . . .
and that is offered by a PDP sponsor that has a contract with CMS . . .”
42 C.F.R. § 423.4. Part D plans include prescription drug plans, as well
as MA-PD plans (which are offered through Medicare Advantage organi-
zations), Programs of All Inclusive Care for the Elderly (PACE) plans
offering qualified prescription drug coverage, and cost plans offering qual-
ified prescription drug coverage. See id.UHM v. HUMANA INC 11559
[5] An express preemption provision, however, may
“reach[ ] beyond positive enactments, such as statutes and
regulations, to embrace common-law duties.” Bates v. Dow
Agrosciences L.L.C., 544 U.S. 431, 443 (2005). Despite Con-
gress’ inclusion of an express preemption clause, we are not
“categorically preclude[d] . . . from applying principles of
implied preemption” to determine what exactly Congress
intended to preempt. Metrophones Telecomm., Inc. v. Global
Crossing Telecomm., Inc., 423 F.3d 1056, 1072 (9th Cir.
2005). The Supreme Court has recognized implied preemp-
tion in two realms:
field pre-emption, where the scheme of federal regu-
lation is so pervasive as to make reasonable the
inference that Congress left no room for the States to
supplement it, and conflict pre-emption where com-
pliance with both federal and state regulations is a
physical impossibility, or where state law stands as
an obstacle to the accomplishment and execution of
the full purposes and objectives of Congress.
Gade v. Nat’l Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 98
(1992) (citations and internal quotation marks omitted). There
is no field preemption here. While it is true that the Act aug-
mented the scope of the preemption provision,8 Congress did
8
The Medicare Part C preemption provision previously provided:
(A) In general: The standards established under this subsection
shall supersede any State law or regulation (including standards
described in subparagraph (B)) with respect to Medicare+Choice
plans which are offered by Medicare+Choice organizations under
this part to the extent such law or regulation is inconsistent with
such standards.
(B) Standards specifically superceded: State standards relating to
the following are superceded under this paragraph: (i) Benefit
requirements (including cost-sharing requirements); (ii) Require-
ments relating to the inclusion or treatment of providers; (iii)
Coverage determinations (including related appeals and griev-
11560 UHM v. HUMANA INC
not signal its intent to occupy the entire field of Medicare reg-
ulation. First, Congress expressly left states the authority to
regulate health plans in the areas of licensure and solvency,
clearly demonstrating Congress’ recognition that the states
maintain some role in the field. See § 1395w-26(b)(3). Sec-
ond, the express provision provides that federal law preempts
state law only to the extent that the federal government estab-
lishes standards. § 1395w-26(b)(3). This express language
signals Congress’ intent to preempt state law only insofar as
federal standards exist. Cf. Metrophones, 423 F.3d at 1072(Congress did not occupy the entire field of payphone regula-
tion by limiting federal preemption to state requirements that
are inconsistent with federal regulations); Total TV v. Palmer
Commc’ns, 69 F.3d 298, 303 (9th Cir. 1995) (recognizing that
a provision superseding inconsistent state laws is “simply a
recognition that Congress did not intend to fully occupy the
field”).
[6] Here, the implied conflict preemption analysis is sub-
stantially similar to the analysis of the Act’s express preemp-
tion provision: State common law is preempted to the extent
that there are federal standards. Allowing a common law
action in a realm where federal standards exist would
“stand[ ] as an obstacle to the accomplishment and execution
of the full purposes and objectives of Congress.” Gade, 505
U.S. at 98 (internal quotation marks omitted). State common
law actions, however, may stand in arenas where neither Con-
ance processes); (iv) Requirements relating to marketing materi-
als and summaries and schedules of benefits regarding a
Medicare+Choice plan.
42 U.S.C. § 1395w-26(b)(3) (2002). In relevant part, the amended pre-
emption provision omits the clause “to the extent such law or regulation
is inconsistent with such standards,” thereby allowing the provision to cast
a wider net. See also Medicare Prescription Drug Benefit, 70 Fed. Reg.
4319 (Jan. 28, 2005) (noting that the Act “reversed [the prior] presumption
and provided that State laws are presumed to be preempted unless they
relate to licensure or solvency”).
UHM v. HUMANA INC 11561
gress nor CMS has established standards. Thus, our task is to
determine whether the Uhms’ claims are subsumed by stan-
dards established pursuant to the Act. Humana contends that
CMS has promulgated regulations—or standards—that gov-
ern each of the Uhms’ claims, and therefore all of their causes
of action are preempted.9 Specifically, the Act and the imple-
menting regulations contemplate disputes between PDP spon-
sors and beneficiaries, and CMS has created two mechanisms
to deal with those disputes: “coverage determination” proce-
dures and “grievance” procedures. Humana maintains that the
Uhms’ complaints are actually grievances or requests for a
coverage determination. CMS has also promulgated extensive
regulations governing the marketing of PDPs, which Humana
argues preempts the Uhms’ remaining claims.
The Uhms’ argument, by contrast, is premised on the posi-
tion that their claims exist outside of the Act and its imple-
menting regulations. The Uhms maintain that the CMS
standards are irrelevant because their claims are antecedent to
their participation in the plan; that is, their claims all concern
Humana’s pre-enrollment conduct, and furthermore, they
assert that Humana failed to ever actually enroll them in the
9
Although the term “standard” is not defined in the Act, at the narrowest
cut, a “standard” within the meaning of the preemption provision is a stat-
utory provision or a regulation promulgated under the Act and published
in the C.F.R. See 69 Fed. Reg. 46696 (Aug. 3, 2004) (describing proposed
CMS rule on preemption of state laws and noting that not “every State
requirement applying to PDP sponsors would now become null and
void”); cf. Indep. Energy Producers Ass’n, Inc. v. Cal. Pub. Utils.
Comm’n, 36 F.3d 848, 853 (9th Cir. 1994) (explaining that “a federal
agency acting within the scope of its congressionally delegated authority
may pre-empt state regulation”) (internal quotations omitted). Humana
points to a broad definition of the term “standard” in Black’s Law Dictio-
nary, which reads “criterion for measuring acceptability, quality, or accu-
racy.” Black’s Law Dictionary 1441 (8th ed. 2004). See also Webster’s
New Universal Unabridged Dictionary 1857 (1996) (a standard is “some-
thing considered by an authority or by general consent as a basis of com-
parison; an approved model . . . ; a rule or principle that is used as a basis
for judgment . . .”).
11562 UHM v. HUMANA INC
PDP, making any remedies provided for under the Act inap-
plicable and unavailable to them.
C. Enrollment
[7] Most of the Uhms’ claims center on a single issue:
whether the Uhms are “enrollees” as defined in the regula-
tions. Indeed, at oral argument, counsel for the Uhms con-
ceded that if the Uhms “were enrolled” in Humana’s PDP
“the case would die on those terms.” We conclude that the
pertinent question is not whether the Uhms were “enrolled,”
but rather, whether they were “enrollees” within the meaning
of the Act and its regulations. We conclude that they are prop-
erly classified as “enrollees.”
The Uhms allege that Humana “failed to actually enroll”
them in the PDP, and therefore the Act’s terms do not apply
to them. They maintain that Humana representatives explicitly
told them that they were “not recognized as members of the
Humana Part D PDP” when they called Humana’s toll-free
line in late December 2005. At oral argument, counsel for the
Uhms argued that we must accept the Uhms’ assertion that
they were not enrolled in the PDP because their claims were
dismissed under Rule 12(b)(6). As far as purely factual asser-
tions are concerned, that is correct. However, insofar as “en-
roll” (or its derivative forms—enrollee, enrolled, enrollment,
etc.) has a legal meaning under the statute, our task is to
determine the meaning of that term, and whether the facts as
alleged by the Uhms comport with it or not.10
10
Humana argues that the CMS regulations relating to enrollment are
standards that supercede any otherwise applicable state laws. Humana sug-
gests that because federal standards govern “whether, when, and how
acceptably the Uhms were enrolled in Humana’s PDP,” the Uhms’ claims
are preempted. But the mere existence of regulatory standards does not
mean that the Uhms were in fact “enrollees” within the meaning of the
Act; and whether the Uhms were enrollees within the meaning of the stat-
ute is relevant to the preemption analysis as a whole.
UHM v. HUMANA INC 11563
[8] Section 423.32 of the implementing regulations, titled
“Enrollment process” provides:
A Part D eligible individual who wishes to enroll in
a PDP may enroll during the enrollment periods
specified in § 423.38, by filing the appropriate
enrollment form with the PDP or through other
mechanisms CMS determines appropriate.
42 C.F.R. § 423.32(a). Thus, according to this regulation, an
eligible individual “enrolls” by “filing the appropriate enroll-
ment form with the PDP.” That is precisely what the Uhms
allege they did. Their complaint alleges that “Plaintiffs Uhm
signed the Humana Prescription Drug Plan Enrollment Form
(for Medicare Part D prescription drug plan benefits) that
Humana drafted and presented to Plaintiffs Uhm.” The regu-
lations also require, however, that the PDP sponsor must
“timely process an individual’s enrollment request in accor-
dance with CMS enrollment guidelines and enroll Part D eli-
gible individuals who are eligible to enroll in its plan under
§ 423.30(a) and who elect to enroll or are enrolled in the plan
during the periods specified in § 423.38.” § 423.32(c)
(emphasis added).
“Enroll,” therefore has two distinct (if related) usages. An
eligible individual “enrolls” by filing the enrollment form
with the PDP sponsor. See § 423.32(a). The PDP sponsor, in
turn, “enrolls” the individual “during the periods specified”
by “process[ing]” the individual’s “enrollment request in
accordance with CMS enrollment guidelines.” § 423.32(c).
The question remains therefore, at which point an eligible
individual is enrolled in the PDP—when that individual sub-
mits an enrollment form, or only after the PDP sponsor has
effectively processed it.11
11
The regulations also require that “[t]he PDP sponsor must provide the
individual with prompt notice of acceptance or denial of the individual’s
enrollment request, in a format and manner specified by CMS,”
11564 UHM v. HUMANA INC
Although the Uhms allege, and we accept, that a Humana
customer service representative told the Uhms that they were
“not recognized as members of the Humana Part D PDP,” the
Uhms do not allege that Humana issued them a “notice of . . .
denial of their enrollment request, in a format and manner
specified by CMS.” See § 423.32(d). Moreover, on the facts
alleged in the complaint, we can reasonably infer that
Humana engaged in some “processing” of the Uhms’ enroll-
ment request because Humana managed to obtain premium
deductions from their social security checks.
Fortunately, this case does not require us to discern the
exact moment when a medicare beneficiary becomes “en-
rolled” in a PDP.12 That is because the operative term for our
purposes is “enrollee.” As we explain below, the Uhms’ com-
mon law claims are better understood as coverage determina-
tions and grievances—procedures for resolving disputes
between plans and beneficiaries under the Act. The regula-
tions specify that the coverage determination and grievance
procedures are available to “enrollees.” See § 423.566(a)
(“Each Part D plan sponsor must have a procedure for making
timely coverage determinations . . . regarding the prescription
drug benefits an enrollee is entitled to receive under the plan
. . . .” ); § 423.566(c) (“Individuals who can request a stan-
dard or expedited coverage determination are (1) The
enrollee; (2) The enrollee’s appointed representative, on
behalf of the enrollee; or (3) The prescribing physician, on
behalf of the enrollee.”); § 423.562(b) (“[E]nrollees have . . .
§ 423.32(d), which suggests that an individual is not enrolled simply by
filing the enrollment form, which in this provision is styled as an enroll-
ment “request.” And yet, the regulations require the PDP sponsor to enroll
all eligible individuals who elect to enroll (i.e. submit a completed form).
See § 423.32(c).
12
We note that reading §§ 423.32(a), 423.32(c), and 423.32(d) together
suggests that an individual is not “enrolled” until the plan sponsor pro-
vides her with “notice of acceptance . . . of the individual’s enrollment
request.”
UHM v. HUMANA INC 11565
[t]he right to have grievances between the enrollee and the
Part D plan sponsor heard and resolved by the plan sponsor,
as described in § 423.564.”).
[9] According to the regulation, “[e]nrollee means a Part D
eligible individual who has elected or has been enrolled in a
Part D plan.” § 423.560. That is, the Uhms are enrollees if
they “elected . . . a Part D plan.” Although the term “elected”
is not defined, we discern from the above regulations that an
eligible individual “elects” a Part D plan when he submits an
enrollment form to the Part D sponsor. See § 423.32(c) (“A
PDP sponsor must timely process an individual’s enrollment
request in accordance with CMS enrollment guidelines and
enroll Part D eligible individuals who are eligible to enroll in
its plan under § 423.30(a) and who elect to enroll or are
enrolled in the plan during the periods specified in § 423.38.”)
(emphasis added); § 423.32(a) (“A Part D eligible individual
who wishes to enroll in a PDP may enroll during the enroll-
ment periods specified in § 423.38, by filing the appropriate
enrollment form with the PDP or through other mechanisms
CMS determines are appropriate.”); see also Webster’s New
Universal Unabridged Dictionary 731 (1993) (defining elect
as “to pick out, choose, select”).13 Because the Uhms’ com-
13
The Uhms argue that the term “elected” means someone who is auto-
matically enrolled in a PDP (i.e. dual-benefit individuals who are entitled
to both Medicare and Medicaid coverage). They point to a passage in 70
Fed. Reg. 4344 which provides:
Comment: We received one comment requesting that the defini-
tion of enrollee be revised to include people who are automati-
cally enrolled in a PDP or MA-PD.
Response: We agree with the commenter and have revised the
definition of enrollee in this final rule to mean a Part D eligible
individual who has elected or has been enrolled in a Part D plan.
The Uhms’ reading of the term “elected” is not persuasive. The plain
text of the regulation permits only one reading—that a person who has
“elected . . . a Part D plan” is one who has chosen or selected it; a person
who has “been enrolled” is one who has been automatically enrolled. This
11566 UHM v. HUMANA INC
plaint alleges that they filed an enrollment form with Humana,
the Uhms are properly classified as “enrollees” for purposes
of the Act. As enrollees, the coverage determination and
grievance procedures were available and applicable to them.
Having determined that the Uhms were PDP enrollees, we
proceed to determine whether each of their claims is pre-
empted.
D. Claims Involving the Failure to Provide Benefits
1. Coverage Determinations
[10] The Act provides that disputes between PDP sponsors
and enrollees will be resolved through the coverage determi-
nation process. See 42 U.S.C. § 1395w-104(g). The regula-
tions define a coverage determination as:
(1) A decision not to provide or pay for a Part D
drug (including a decision not to pay because the
drug is not on the plan’s formulary, because the drug
is determined not to be medically necessary, because
the drug is furnished by an out-of-network phar-
macy, or because the Part D plan sponsor determines
that the drug is otherwise excludable under section
1862(a) of the Act if applied to Medicare Part D)
that the enrollee believes may be covered by the
plan;
(2) Failure to provide a coverage determination in a
timely manner, when a delay would adversely affect
the health of the enrollee;
is further supported by the proposed regulation—before it was amended
to clarify the inclusion of dual-benefit individuals—which read: “Enrollee
means a Part D eligible individual, or his or her authorized representative,
who has elected a prescription drug plan offered by a PDP sponsor.” 69
Fed. Reg. 46632, 46841 (Aug. 3, 2004).
UHM v. HUMANA INC 11567
(3) A decision concerning an exceptions request
under § 423.578(a);
(4) A decision concerning an exceptions request
under § 423.578(b); or
(5) A decision on the amount of cost sharing for a
drug.
42 C.F.R. § 423.566(b).
[11] Although the Uhms argue that their claim is anteced-
ent to the coverage determination process—that is, their com-
plaint is that they were never able to request drug benefits in
the first instance, let alone dispute the plan’s potential denial
of a particular drug—we agree with Humana that the plain-
tiffs raise a “classic” coverage dispute.
The Uhms’ primary complaint, and the basis of their breach
of contract and unjust enrichment claims, is that despite hav-
ing paid their monthly premiums and filed the appropriate
enrollment documents, Humana failed to provide them with
drug benefits. See, e.g., Comp. ¶ 4.12 (“Plaintiffs Uhm bring
this action against Defendants on behalf of all persons who
paid and/or were billed by Humana, for enrollment in the
Humana Part D PDP and (a) did not receive benefits under the
Humana Part D PDP . . .” ); ¶ 6.4 (“Defendants breached each
contract with Plaintiffs and with each Class member when
they failed to provide prescription drug benefits as prom-
ised.”); ¶ 8.2 (“Defendants received monies as a result of pay-
ments made by Plaintiffs and Class member for prescription
drug benefits that Defendants failed to provide to Plaintiffs
and Class members.”).
[12] The appropriate recourse under the Act was for the
Uhms to file with Humana a request for a coverage determi-
nation, requesting reimbursement for the drugs they pur-
chased out-of-pocket. See § 423.568(a), (b) (allowing for
11568 UHM v. HUMANA INC
either a request for drug benefits or payment).14 The coverage
determination procedure and its related regulations preempt
the Uhms’ breach of contract and unjust enrichment claims.
2. Grievances
[13] The other means to seek redress for a complaint
against a PDP under the Act is the grievance procedure. See
42 U.S.C. § 1395w-104(f). A grievance is defined as “any
complaint or dispute, other than one that involves a coverage
determination, expressing dissatisfaction with any aspect of
the operations, activities, or behavior of a Part D plan spon-
sor, regardless of whether remedial action is requested.” 42
C.F.R. § 423.560. Insofar as the Uhms’ claims are based
solely on failure to provide ID cards and mail-order forms, the
Uhms should have filed a grievance to seek resolution of
those issues. See § 423.564 (outlining the grievance proce-
dure). To the extent that their complaint against Humana
regarding the documents is linked to the failure to receive
benefits, that is a coverage determination dispute. Accord-
ingly, the Uhms’ claims based on failure to receive relevant
PDP documents from Humana are preempted by the griev-
ance procedure.15
14
The Uhms assert that they are seeking a refund of their premium pay-
ments, not benefits under the plan. Their remedy under the Act, however,
is to secure the benefits to which they are entitled. The Uhms’ attempt to
repackage a coverage determination dispute into a common law claim for
restitution or damages does not alter that at bottom, their claims involve
a coverage determination.
15
The Uhms argue that Congress could not have meant the coverage
determination and grievance procedures would preempt their claims
because those procedures are woefully inadequate.
The coverage determination procedure is no doubt arduous. See
§ 423.562(a)(1)(ii) (providing that first level recourse for a coverage deter-
mination is with the plan sponsor); § 423.562(b)(4)(i), (ii) (providing for
a redetermination by the plan sponsor); § 423.562(b)(4)(iii) (allowing the
enrollee to appeal to an independent review entity (“IRE”);
§ 423.562(b)(4)(iv), (v) (allowing enrollee to appeal to an administrative
UHM v. HUMANA INC 11569
E. Failure To Enroll
As discussed above, the Uhms’ complaint also alleges that
Humana failed to properly enroll them in the PDP. It is not
clear which, if any, of the Uhms’ claims are actually based on
an alleged failure to enroll. The essence of their complaint is
not that they were improperly enrolled in the plan, but that
they did not receive the benefits of being enrolled in the plan.
Their breach of contract claim is premised on the fact that
they were enrolled in the plan and were not “provide[d] pre-
scription drug benefits as promised.” The consumer protection
act claims allege that Humana promised “prescription drug
coverage would begin January 1, 2006 for those Class mem-
bers who enrolled by December 31, 2005, when in fact Defen-
dants knew, or should have known, that Defendants would not
be providing prescription drug coverage beginning January 1,
2006.”
[14] To the extent that any of the Uhms’ claims can be con-
strued to allege that Humana did not properly or timely pro-
cess their enrollment requests, standards governing
enrollment preempt those claims. See, e.g., 42 U.S.C.
§ 1395w-101(b)(1)(A) (“The Secretary shall establish a pro-
law judge (“ALJ”) if he meets the amount in controversy requirement, and
then to the Medicare Appeals Council (“MAC”); § 423.562(b)(4)(vi)
(allowing enrollee to seek judicial review of the MAC’s decision if he
meets an even higher amount in controversy requirement); 71 Fed. Reg.
240 (Dec. 14, 2006) (stating that the ALJ amount in controversy require-
ment was $110 and the judicial review amount in controversy requirement
was $1,090 for the 2006 calendar year). Although the grievance procedure
is less cumbersome, it does not allow an enrollee to appeal an adverse
determination to an ALJ or to seek judicial review. See § 423.562(b)(1),
(4).
That Congress in its wisdom adopted administrative procedures that are
arduous and limited in scope and restricted the availability of judicial
review does not prevent those procedures from preempting the Uhms’
common law claims.
11570 UHM v. HUMANA INC
cess for the enrollment, disenrollment, termination, and
change of enrollment of part D eligible individuals in pre-
scription drug plans consistent with this subsection.”); 42
U.S.C. § 1395w-101(b)(3)(B) (“In the case described in sec-
tion 1395p(h) of this title (relating to errors in enrollment), in
the same manner as such section applies to part B of this sub-
chapter.”); 42 C.F.R. § 423.32(c) (“A PDP sponsor must
timely process an individual’s enrollment request in accor-
dance with CMS enrollment guidelines and enroll Part D indi-
viduals who are eligible to enroll . . . .” ); § 423.32(d)
(providing that a plan sponsor must “provide the individual
with prompt notice of acceptance or denial of the individual’s
enrollment request, in a format and manner specified by
CMS.”); § 423.36 (outlining the CMS-prescribed disenroll-
ment process); § 423.50(a)(1) (providing that a plan sponsor
my not distribute an enrollment form until it has been
approved by CMS).
F. Claims Involving Deceptive Marketing
The Uhms’ consumer protection act and fraud claims allege
that Humana made material misrepresentations and engaged
in other deceptive acts in the marketing and advertising of
their Part D plan to induce the Uhms to enroll. Specifically,
the Uhms allege that Humana represented that their prescrip-
tion drug coverage would begin on January 1, 2006, and that
Humana is committed to providing “reliable customer ser-
vice” and “has been a trusted Medicare insurer for more than
20 years, helping the Medicare population with their health
insurance needs.” The Uhms’ claims are preempted by the
extensive CMS regulations governing PDP marketing materi-
als and practices.
The Act provides that CMS must approve all PDP market-
ing materials before they are made available to medicare ben-
eficiaries. See 42 U.S.C. § 1395w-101(b)(1)(B)(vi)
(incorporating § 1395w-21(h)). The Act requires that each
PDP sponsor “shall conform to fair marketing standards,”
UHM v. HUMANA INC 11571
§ 1395w-21(h)(4), and that CMS “shall disapprove (or later
require the correction of) such material or form if the material
or form is materially inaccurate or misleading or otherwise
makes a material misrepresentation.” § 1395w-21(h)(2). CMS
has promulgated detailed regulations governing how PDP
sponsors market their plans. See 42 C.F.R. § 423.50(a)-(f).
PDP sponsors may not “distribute any marketing materials . . .
or enrollment forms, or make such materials or forms avail-
able to Part D eligible individuals” unless they have been
CMS-approved. 42 C.F.R. § 423.50(a)(1). CMS regulations
also extend to marketing “activities.” See 42 C.F.R.
§ 423.50(f)(iv) (prohibiting activities that could mislead, con-
fuse, or misrepresent).
Marketing materials are defined in the regulations as “any
informational materials targeted to Medicare beneficiaries
which—(1) Promote the Part D plan. (2) Inform Medicare
beneficiaries that they may enroll, or remain enrolled in a Part
D plan. (3) Explain the benefits of enrollment in a Part D
plan, or rules that apply to enrollees. (4) Explain how Medi-
care services are covered under a Part D plan, including con-
ditions that apply to such coverage.” § 423.50(b). Examples
of marketing materials include “brochures, newspapers, mag-
azines, television, radio, billboards, yellow pages, or the inter-
net . . . marketing representative materials such as scripts or
outlines for telemarketing . . . letters to members about con-
tractual changes . . . [and] membership or claims processing
activities.” § 423.50(c)(1), (2), (6), (7). Enrollment forms are
also governed by these regulations. See § 423.50(a)(1).
[15] The materials referenced by the Uhms are marketing
materials as defined by the regulations. The promotional
statements that are the focus of their claims are directly gov-
erned by the regulatory standards set out by CMS. Section
423.50(d)(4) provides that CMS will not approve marketing
materials or enrollment forms that are “materially inaccurate
or misleading or otherwise make material misrepresenta-
tions.” CMS also requires that all marketing materials and
11572 UHM v. HUMANA INC
enrollment forms provide adequate descriptions of all rules,
an explanation of the grievance and appeals process, and “any
other information necessary to enable beneficiaries to make
an informed decision about enrollment.” § 423.50(d)(1)(i)-
(iii). Accordingly, the Uhms’ fraud and consumer protection
claims are preempted.
G. The Uhms’ Motion for Reconsideration
[16] The Uhms argued in their motion for reconsideration
that regardless of whether the Act preempts their claims
against Humana Health Plan, Inc., their claims against
Humana, Inc. are not preempted because Humana, Inc. is not
a CMS-approved PDP sponsor, and the Act’s preemption pro-
vision applies only to PDP sponsors. Humana, Inc. argues that
preemption under the statute is determined by whether federal
standards exist with respect to the prescription drug plan, not
by the identity of the defendant. We agree.
To recall, the Act’s preemption provision provides:
The standards established under this part shall super-
cede any State law or regulation (other than State
licensing laws or State laws relating to plan sol-
vency) with respect to [PDPs] which are offered by
[PDP sponsors] under this part.
42 U.S.C. § 1395w-26(b)(3).16 See also 42 C.F.R.
§ 423.440(a) (“The standards established under this part
supercede any State law or regulations (other than State
licencing laws or State laws relating to plan solvency) for Part
D plans offered by Part D plan sponsors.”).
16
See 42 U.S.C. § 1395w-112(g) (providing that “the provisions of sec-
tions 1395w-24(g) and 1395w-26(b)(3) of this title shall apply with
respect to PDP sponsors and prescription drug plans under this part in the
same manner as such sections apply to MA organizations and MA plans
under part C of this subchapter”).
UHM v. HUMANA INC 11573
[17] Section 1395w-26(b)(3) provides that standards pre-
empt state laws with respect to PDPs; the language about PDP
sponsors modifies or describes what a PDP is—it does not
shift the locus of preemption from the prescription drug plan
to the sponsor. Here, the claims against Humana, Inc. are
entirely derivative of its relationship with Humana Health
Plan, Inc. The Uhms allege that Humana, Inc. participated
alongside its subsidiary Humana Health Plan, Inc. in market-
ing the PDP, processing PDP enrollment forms, and failing to
provide the Uhms with necessary PDP materials and access to
their prescription drug benefits.17 As we discussed above, the
conduct underlying each of these allegations is directly gov-
erned by federal standards. Therefore the Uhms’ state law
claims, with respect to the PDP, are preempted. This case
does not require us to consider whether allegations related to
a third party’s involvement with a PDP that differ from those
alleged here might be preempted under the Act.
III. CONCLUSION
Because the allegations brought by the Uhms fall precisely
within the ambit of the federal standards provided for in the
Act and its implementing regulations, the Uhms’ claims are
preempted. The judgment of the district court is AFFIRMED.
17
At no point in the complaint, their briefing, or at oral argument did the
Uhms distinguish between allegations against Humana, Inc. and Humana
Health Plan, Inc.