Steven A. Mueller, Bradley J. Brown, Mark A. Kruse, Kevin D. Miller, and Larry E. Phipps, on Behalf of Themselves and Those Like Situated v. Wellmark, Inc. D/B/A Wellmark Blue Cross and Blue Shield of Iowa, an Iowa Corporation and Wellmark Health Plan of Iowa, Inc., an Iowa Corporation

IN THE SUPREME COURT OF IOWA
No. 10–0010
Filed July 27, 2012
STEVEN A. MUELLER, BRADLEY J. BROWN, MARK A. KRUSE,
KEVIN D. MILLER, and LARRY E. PHIPPS, on Behalf of Themselves
and Those Like Situated,
Appellants,
vs.
WELLMARK, INC. d/b/a WELLMARK BLUE CROSS AND BLUE
SHIELD OF IOWA, An Iowa Corporation; and WELLMARK HEALTH
PLAN OF IOWA, INC., An Iowa Corporation,
Appellees.
Appeal from the Iowa District Court for Polk County, Eliza J.
Ovrom, Judge.
Plaintiffs appeal the dismissal of claims alleging defendants
engaged in unlawfully discriminatory and anticompetitive conduct
against chiropractors in violation of insurance statutes and the Iowa
Competition Law. AFFIRMED IN PART, REVERSED IN PART, AND
REMANDED.
Glenn L. Norris of Hawkins & Norris, P.C., Des Moines; Steven P.
Wandro of Wandro, Baer & McCarthy, P.C., Des Moines; and Harley C.
Erbe of Erbe Law Firm, Des Moines, for appellants.
Hayward L. Draper, Thomas H. Walton, and Patrick B. White of
Nyemaster Goode, PC, Des Moines, for appellees.
2
WATERMAN, Justice.
In this complex interlocutory appeal from a putative class action,
we must decide whether the district court correctly granted several
dispositive motions. Plaintiffs are doctors of chiropractic who allege they
have been victimized by the discriminatory practices of Iowa’s largest
health insurer, Wellmark, Inc. 1 The plaintiffs claim Wellmark wrongfully
imposes restrictions and pays lower rates for chiropractic services than
for equivalent services offered by medical doctors or osteopathic
physicians. Plaintiffs allege that Wellmark not only has violated various
insurance regulatory statutes, but also has engaged in unlawful
conspiracy and monopolization in violation of the Iowa Competition Law.
First, the district court granted Wellmark’s motion to dismiss
claims brought under Iowa’s insurance regulatory statutes because no
private cause of action is provided therein. We affirm that ruling based
on Seeman v. Liberty Mutual Insurance Co., 322 N.W.2d 35, 42–43 (Iowa
1982). The proper forum for raising alleged violations of those regulatory
statutes is through administrative proceedings in the Iowa Division of
Insurance.
Second, the district court granted Wellmark’s motion for summary
judgment on plaintiffs’ antitrust claims based on the “state action”
exemption found in Iowa Code section 553.6(4) (2009). We reverse in
part because the summary judgment record fails to establish the
challenged conduct falls within the exemption.
1Plaintiffs
filed suit against Wellmark, Inc. d/b/a Wellmark Blue Cross and Blue
Shield of Iowa and Wellmark Health Plan of Iowa, Inc., which is the Health Maintenance
Organization of Wellmark, Inc. The defendants will be collectively referred to as
Wellmark.
3
Third, the district court granted summary judgment on claims
alleging Wellmark breached its obligations under a judicially approved
national class action settlement in Love v. Blue Cross Blue Shield Ass’n,
No. 03–21296–CIV (S.D. Fla. Apr. 19, 2008). We affirm because the
record contains no evidence Wellmark’s implementation of the Love
settlement violated the Iowa Competition Law.
Fourth, we affirm summary judgment on several specific antitrust
claims for reasons explained below. We remand the remaining claims
and defenses for further proceedings.
I. Background Facts and Proceedings.
This litigation began in December 2007 when Steven A. Mueller,
D.C., filed a breach-of-contract claim against Wellmark over a $17,376
billing dispute. On May 20, 2008, plaintiffs filed a first amended petition
adding plaintiffs, Bradley J. Brown, D.C.; Mark A. Kruse, D.C.; Kevin D.
Miller, D.C.; and Larry E. Phipps, D.C. Plaintiffs are doctors of
chiropractic who have billed for services provided to patients enrolled in
Wellmark health insurance plans. Their amended pleading asserted
class action claims on behalf of a putative “class of Iowa-licensed doctors
of chiropractic who are citizens of the State of Iowa as of the date of
filing.” 2 Plaintiffs sought damages and injunctive relief against
2The chiropractic profession has special significance to this state:
Chiropractic was founded in Iowa in 1895 by D.D. Palmer, a
Canadian immigrant. Palmer was a practitioner of magnetic healing; he
had no formal medical training but was well read in both anatomy and
physiology. He devoted a great deal of time to the study of the spine and
eventually concluded that all disease was the result of abnormal spinal
function. Palmer performed his first adjustment in 1895. Subsequent to
his initial successes, Palmer’s popularity increased and in 1896 he
founded the first school of chiropractic in Davenport, Iowa, now known
as the Palmer College of [C]hiropractic. One of Palmer’s first patients
gave the profession its name by combining the Greek words “chiro”
(hand) and “praktikos” (done by).
4
Wellmark, alleging discriminatory and anticompetitive practices that
harmed chiropractic doctors. Division I contained the new class action
claims, and Division II retained Mueller’s individual claim. This appeal
only concerns the class action claims in Division I.
Wellmark’s business consists of selling health insurance plans to
employer groups and providing administrative services to assist others
who provide health insurance coverage, such as self-funded
governmental entity plans. Wellmark is one of a dozen health insurers in
the state, but retains the largest market share. Wellmark creates a
network of preferred health care providers, including doctors of
chiropractic, medical doctors, and osteopathic doctors, and incentivizes
its members to use its preferred provider panel. Wellmark develops its
preferred provider panel by entering into contracts with providers that
govern the terms and conditions of treatment as well as fee schedules, at
times on a take-it-or-leave-it basis. Preferred providers must adhere to
these contracts to receive compensation from Wellmark for services
provided to Wellmark’s members. Preferred provider arrangements are
expressly encouraged by the Iowa legislature as a health care cost control
mechanism. See Iowa Code § 514F.2. The legislature has directed the
_______________________
....
In 1906 Palmer’s son, B.J. Palmer, took over the school and is
credited with the development of the chiropractic profession. By 1910
the Palmer School had courses in X-ray studies and was the first to use
this new technology to detect spinal misalignments. In 1935 B.J. Palmer
established a research clinic at the school and is credited with developing
a prototype of the electroencephalogram or EEG.
Kristyn S. Appleby & Joanne Tarver, Medical Records Review § 5.16, at 5–74 (4th ed.
2010). Palmer College of Chiropractic is “[k]nown throughout the profession as The
Fountainhead [because it] changed the world as the first institution to offer chiropractic
education.” Palmer College of Chiropractic, Palmer at a Glance,
http://www.palmer.edu/PalmerAtAGlance/(last visited June 12, 2012).
5
Iowa Insurance Commissioner to regulate these preferred provider
arrangements. Id. § 514F.3.
Stated simply, the plaintiffs in this lawsuit allege Wellmark has
employed preferred provider arrangements in an unlawfully
discriminatory and anticompetitive manner in violation of statutory
insurance provisions and state antitrust laws.
Division I of the first amended petition contains five counts,
spanning forty pages. Count I provides factual background for the
claims that follow. Count II seeks declaratory relief based upon
allegations that Wellmark engages in discriminatory practices that violate
insurance regulatory provisions contained in the Iowa Code that prevent
health insurers from taking actions “on a basis solely related to the
[chiropractor’s] license.” Iowa Code § 514F.2; accord Iowa Code
§§ 509.3(6), 514.7, 514.23(2), 514B.1(5). Count III pleads Wellmark
entered into a contract, combination, or conspiracy to unlawfully restrain
trade against chiropractors in violation of section 553.4 of the Iowa
Competition Law. Count III seeks money damages. Count IV also seeks
money damages, alleging Wellmark “abused [its] monopoly power in the
relevant geographic and product markets” to injure plaintiffs in violation
of section 553.5 of the Iowa Competition Law. 3 Count V repleads the
3Wellmark is a purchaser of health services on behalf of its members. See
Kartell v. Blue Shield of Mass., Inc., 749 F.2d 922, 925 (1st Cir. 1984) (“Blue Shield in
essence ‘buys’ medical services for the account of others . . . .”). Wellmark is thus a
“monopsonist,” not a monopolist, as plaintiffs plead. See Herbert Hovenkamp, Federal
Antitrust Policy: The Law of Competition and Its Practice § 1.2(b), at 14 (4th ed. 2011). “A
monopsonist is a monopoly buyer rather than seller.” Id. “Although most antitrust
litigation of market power offenses has involved monopoly sellers rather than buyers,
monopsony can impose social costs on society similar to those caused by monopoly.”
Id. The distinction is not relevant for the issues decided in this opinion, but may be
relevant under other substantive areas of antitrust law. See id. at 14–16.
6
statutory insurance violations alleged in Count II, but seeks injunctive
relief.
Division I of the first amended petition alleges Wellmark engaged in
substantially similar unlawful conduct for each count in ways that
(a) violate the various provisions of H.F. 2219 (1986
(71 G.A.) ch. 1180)) in their contracts and dealings with
chiropractors and chiropractic patients in order to diminish
and restrict the care for human ailments by chiropractors for
which payment will be made by the Wellmark Defendants;
(b) impose definitions of “chiropractic” and “medical
necessity” contrary to Chapter 151, Code of Iowa (2007) in
order to diminish and restrict the care for human ailments
by chiropractors for which payment will be made by the
Wellmark Defendants;
(c) usurp the authority of the Iowa General Assembly,
to the detriment of Iowa chiropractors and the treatment and
therapy offered to their patients, in requiring the use of and
promulgating standards and rules of practice for
“Chiropractic Assistants,” a category of health care
practitioner found nowhere in the present Code of Iowa in
Chapters 147 through 158 or elsewhere, and in limiting the
employment of certain modes of physiotherapy if not applied
by chiropractors or “chiropractic assistants;”
(d) impose maximum fee schedules to which
chiropractors must agree with defendants and with each
other in order to provide diagnostic and treatment services
for their patients in Iowa;
(e) prescribe fees for chiropractic services which are
discriminatory to doctors of chiropractic in relation to the
fees for other health care practitioners for the same or
similar services;
(f) prescribe limitations upon and make optional the
coverage of diagnostic and treatment services of
chiropractors while not imposing the same standards and
practices to the coverage of diagnostic and treatment
services of other practitioners of health care in Iowa licensed
under the chapters of Title IV, subtitle 3, of the Code of Iowa
[Chapters 147 through 158];
(g) agree with over 95% of all Iowa Doctors of Medicine
(M.D.’s) and Doctors of Osteopathy (D.O.’s) in active practice
to numerous items of preferential treatment, discriminatory
to plaintiff, as found in Section 7 of a Settlement Agreement
7
dated April 27, 2007, . . . [See Love, No. 03–21296–CIV (S.D.
Fla. Apr. 19, 2008)];
(h) enter into agreements with various subdivisions of
the State of Iowa to limit or exclude chiropractic coverage
from health plans offered to employees of various
subdivisions of the State of Iowa, based upon the
encouragement of and false information provided by the
Wellmark Defendants.
Wellmark moved to dismiss plaintiffs’ class action claims on
several grounds. Wellmark asserted plaintiffs’ insurance claims were
within the exclusive jurisdiction of the Iowa Insurance Commissioner
and the insurance provisions plaintiffs relied upon do not create a
private cause of action. As to plaintiffs’ Iowa Competition Law claims,
Wellmark alleged (1) it was immune from liability pursuant to Iowa Code
section 553.6(4), which exempts “activities or arrangements expressly
approved or regulated” by the state; (2) plaintiffs “failed to adequately
plead an antitrust injury and therefore lack standing”; and (3) plaintiffs
“failed to adequately plead facts plausibly suggesting the existence of an
agreement to restrain trade.” Plaintiffs resisted all grounds. 4
On October 22, 2008, the district court granted Wellmark’s motion
to dismiss plaintiffs’ statutory insurance claims, but not their antitrust
claims. As to the statutory insurance claims, the district court found no
implied cause of action:
4Wellmark supported its motion with numerous exhibits, including 1986 Iowa
Acts ch. 1180 (H.F. 2219), which enacted the insurance provisions relied on by
plaintiffs; an affidavit by Wellmark’s associate general counsel and assistant board
secretary, Michele Druker, attesting Wellmark’s preferred provider contracts require
insurance commissioner approval; preferred provider agreement prototypes from 2007
and 2001 stamped “Approved” by the insurance commissioner; and the insurance
commissioner’s administrative regulations governing preferred provider agreements,
Iowa Admininstrative Code rule 191—27. The parties stipulated the court should
consider these exhibits along with plaintiffs’ resistance and supporting exhibits in
ruling on Wellmark’s motion to dismiss.
8
The second, third, and fourth factors of the Seeman test
establish that there is no implied right of action under these
statutes. Thus plaintiffs’ request for declaratory ruling
based on alleged violations of these statutes, their request
for injunctive relief based on these statutes, and any
damages claims based thereon must be dismissed, because
there is no private right of action and jurisdiction rests
exclusively with the Commissioner of Insurance.
The district court determined the antitrust claims needed further record
development before a ruling could be made:
At this early stage of the proceedings, the court cannot
find, as a matter of law, that the pricing schedules are
regulated within the meaning of the statutory exemption.
The court has considered the authorities cited by Wellmark,
and the different rationales stated therein for finding an
exemption to the antitrust laws in cases against insurers.
However, many of these cases were decided either at
summary judgment, or on a full record made after an
evidentiary hearing.
The district court also determined plaintiffs sufficiently pleaded an
antitrust injury and conspiracy under Iowa notice pleading standards.
The district court ordered the “claims in Division I of the First Amended
Petition based on violations of Iowa Code Sections 514F.2, 509.3(6),
514.7, 514.23(2), and 514B.1(5) and other statutes enacted in 1986 Iowa
Acts Chapter 1180 are Dismissed” and directed plaintiffs to recast their
petition to allege only the antitrust claims.
Plaintiffs’ second amended petition did not substantially conform
to the district court’s order, prompting Wellmark to file a second motion
to dismiss or strike, which the district court granted in part. Plaintiffs
responded with a third amended petition alleging only the antitrust
violations in Division I. Wellmark answered and counterclaimed.
9
On March 16, 2009, Wellmark moved for summary judgment on
Division I (the class action claims) of the third amended petition. 5
Wellmark argued: (1) “The factual record . . . shows that the alleged
discriminatory actions plead by Plaintiffs as anti-trust claims . . . fall
within the exclusive jurisdiction of the Iowa Insurance Commissioner
pursuant to Iowa Code § 553.6(4)”; and (2) “Several of the allegations
contained in Plaintiffs’ Third Amendment to Petition are contrary to
undisputed fact.” The motion contained fourteen pages of “undisputed
facts” that were supported by 185 pages of affidavits and exhibits,
including affidavits by Michele Druker, associate general counsel; Sheryl
Nuzum, group leader of network economics; and Linda Blake, group
leader for individual and small business underwriting. The affidavits
explain that Wellmark submits all provider forms incidental to preferred
provider arrangements to the insurance commissioner for approval and
that Wellmark bases its provider reimbursement rates on the Resource-
Based Relative Value System (RBRVS) and Relative Value Units (RVUs)
federally mandated for Medicare. 6 The RVUs assigned by Medicare
5On April 6, 2009, shortly after Wellmark’s motion for summary judgment, the
district court severed Division I (the class action claims) from Division II (Dr. Mueller’s
individual claim) pursuant to the parties’ stipulation. Division II remained under the
existing case number. The district court ordered plaintiffs to file a recasted third
amended petition including only Division I, which would be separately docketed. This is
an appeal of the separately docketed case.
6In 1989, President George H.W. Bush enacted legislation mandating the Center
for Medicare and Medicaid Services (CMS), a federal agency within the United States
Department of Human Health and Services, to calculate provider reimbursement rates
under the RBRVS. Omnibus Budget Reconciliation Act of 1989, Pub. L. No. 101–239,
§ 6102, 103 Stat. 2106 (1989) (codified as amended at 42 U.S.C. § 1395w-4 (2006)).
Dr. William Hsiao, a professor of medicine at Harvard, oversaw a research team, which
published the RBRVS in 1988. Ann Marie Marciarille & J. Bradford DeLong, Bending
the Health Cost Curve: The Promise and Peril of the Independent Payment Advisory
Board, 22 Health Matrix 75, 106 n.127 (2012). The system attempts to determine rates
based upon “the time, effort, skill and stress involved in the[] services.” Id. The Relative
Value Scale Updating Committee (RUC), a group of thirty-one private physicians from
different specialties, submits recommendations to the CMS concerning revised values.
10
require different reimbursement rates for spinal manipulation by
chiropractors and by M.D.s and D.O.s, recognizing differences in
overhead, training, and malpractice risks among those professions. The
Nuzum affidavit noted the different reimbursement rates “are common
knowledge in the health care business and would be known by the Iowa
Insurance Commissioner when she approves Wellmark’s preferred
provider arrangements with chiropractors.” The exhibits in the summary
judgment record include Wellmark’s 2001 and 2007 prototype
practitioner agreements, policy forms and manuals incorporated into the
agreements, insurance commissioner notices approving Wellmark’s 2001
and 2007 practitioner agreements, and Wellmark’s standard form to
administer a governmental entity plan.
Plaintiffs resisted all grounds for summary judgment. Plaintiffs
denied forty-five of Wellmark’s forty-eight paragraphs of undisputed fact.
Most denials stated: “Deny. This paragraph contains inadmissible legal
conclusions, opinions without adequate foundation, speculation, and
argument. It also fails to state how the affiant [Druker or Nuzum] has or
could have personal knowledge of the facts asserted. Iowa R. Evid.
1.981(5).” Plaintiffs supported their resistance with two exhibits
containing eighty-nine pages of illustrative Wellmark fee schedules for
chiropractors and other medical providers.
Wellmark filed supplementary affidavits to demonstrate its affiants
had personal knowledge over the facts asserted. Plaintiffs objected that
the supplemental affidavits are hearsay, speculative, and lack adequate
_______________________
American Medical Association, The RVS Update Committee, http://www.ama-
assn.org/ama/pub/physician-resources/solutions-managing-your-practice/coding-
billing-insurance/medicare/the-resource-based-relative-value-scale/the-rvs-update-
committee.page (last visited June 12, 2012). CMS then accepts or rejects the RUC’s
recommendations. Id.
11
foundation. Plaintiffs also filed three additional exhibits, Mueller’s 1994
participating provider agreement, a 2007 letter documenting provider
form amendments, and a letter from Wellmark’s vice president indicating
Wellmark will begin using the RVU system in 2009.
The district court held a reported hearing on July 31, 2009. On
September 18, the district court entered summary judgment dismissing
plaintiffs’ remaining antitrust claims. Both plaintiffs and Wellmark filed
motions to amend the ruling. The district court granted Wellmark’s
motion to add additional findings of undisputed fact and statutory
analysis and denied plaintiffs’ motion.
The district court ruled plaintiffs’ alleged anticompetitive conduct
was exempt from the Iowa Competition Law, under section 553.6(4). The
district court applied the two-prong federal “state action” immunity test,
concluding:
In short, the legislature has expressly regulated the
activities of Wellmark vis-à-vis provider contracts with
chiropractors (and other medical providers). The first prong
of the state action exemption is met in this case as to claims
arising under the provider agreements.
Turning to the second prong, the court must consider
whether this state policy is actively supervised by the state,
with special attention paid to whether decisions are made by
state authorities or by the private parties themselves. The
Insurance Commissioner has enacted comprehensive rules
for insurers’ agreements with providers under Chapter 514F,
which are contained in Chapter 191 of the Iowa
Administrative Code, Section 27. Of significance, the rules
require approval of prototype preferred provider agreements.
191 I.A.C. 27.5(3). It is undisputed that Wellmark submits
its prototype preferred provider agreements with
chiropractors to the Insurance Commissioner for approval,
and that they have in fact been approved. Many of the
allegations in the petition relate to provisions of the provider
agreements, or to physical medicine guides that are
incorporated into the provider agreements. . . . The court
concludes that the provider agreements challenged in this
case are actively supervised by a state agency, the Iowa
Insurance Commissioner.
12
With respect to the Love v. Blue Cross Blue Shield settlement, the
only alleged anticompetitive conduct not approved by the insurance
commissioner, the district court granted summary judgment in favor of
Wellmark. The district court found the settlement exempt under the
Noerr-Pennington doctrine and, alternatively, found no genuine issue of
material fact as to whether the settlement discriminated against
chiropractors. The district court reasoned:
Under the Noerr-Pennington doctrine, settlement
agreements approved by a court are immune from antitrust
liability, absent a sham. . . . The Love Settlement
Agreement, and the court order approving it, appear genuine
and valid. Plaintiffs have submitted no countervailing
evidence that the settlement is a sham. The court in that
case found that the settlement was an arm’s length
transaction, and that it is reasonable, adequate, and is not
the result of collusion between the parties. As such, it is
shielded from antitrust liability under Noerr.
Secondly, there is no factual basis for an antitrust
claim concerning Section 7 of the Love Settlement
Agreement. Wellmark’s Assistant General Counsel, Michele
Druker, submitted a spreadsheet containing every item
contained in Section 7 of the settlement agreement. This
sets forth a series of procedural requirements, such as
availability of fee schedules, reduced precertification
requirements, greater notice of policy and procedure
changes, etc. Most of the items are being applied to
agreements with chiropractors. Some are not applicable.
Plaintiffs submitted no opposing affidavits controverting
these facts.
Plaintiffs filed an application for interlocutory appeal, which we granted.
II. Standard of Review.
“We review a district court’s ruling on a motion to dismiss for the
correction of errors at law.” Dier v. Peters, 815 N.W.2d 1, 4 (Iowa 2012).
A motion to dismiss may be granted when the petition’s allegations,
taken as true, fail to state a claim upon which relief may be granted.
Geisler v. City Council, 769 N.W.2d 162, 165 (Iowa 2009) (citing Iowa R.
Civ. P. 1.421(1)(f)).
13
We review the district court’s grant of summary judgment for
correction of errors at law. Emp’rs Mut. Cas. Co. v. Van Haaften, 815
N.W.2d 17, 22 (Iowa 2012). “Summary judgment is appropriate if there
are no genuine issues of material fact and the moving party is entitled to
judgment as a matter of law.” Id. The evidence is viewed in the light
most favorable to the nonmoving party. Id. However, “[w]hen a motion
for summary judgment is properly supported, the nonmoving party is
required to respond with specific facts that show a genuine issue for
trial.” Green v. Racing Ass’n of Cent. Iowa, 713 N.W.2d 234, 245 (Iowa
2006); accord Iowa R. Civ. P. 1.981(5).
III. Whether the District Court Properly Dismissed Plaintiffs’
Claims Brought Under the Insurance Statutes for Lack of a Private
Cause of Action.
Plaintiffs’ first amended petition alleged Wellmark’s preferred
provider contracts, administration of the Iowa State University health
plan, and participation in the Love settlement violated Iowa Code
sections 509.3(6), 7 514.7, 8 514.23(2), 9 514B.1(5)(c), 10 and 514F.2.11
7Iowa Code § 509.3(6) (“A policy of group health insurance may limit or make
optional the payment or reimbursement for lawful diagnostic or treatment service by all
licensees under chapters 148 and 151 on any rational basis which is not solely related
to the license under or the practices authorized by chapter 151 . . . . (Emphasis
added.)).
8Iowa Code § 514.7(3) (“A group subscriber contract may limit or make optional
the payment or reimbursement for lawful diagnostic or treatment service by all
licensees under chapters 148 and 151 on any rational basis which is not solely related
to the license under or the practices authorized by chapter 151 or is not dependent
upon a method of classification, categorization, or description based upon differences in
terminology used by different licensees in describing human ailments or their diagnosis
or treatment.” (Emphasis added.)).
9Iowa Code § 514.23(2) (“A corporation organized and governed by this chapter
which becomes a mutual insurer under this section shall continue as a mutual insurer
to be governed by the provisions of section 514.7 and shall also be governed by section
509.3, subsection 6.” (Emphasis added.)).
10Iowa Code § 514B.1(5)(c) (“A prepaid group plan of health care services may
limit or make optional the payment or reimbursement for lawful diagnostic or treatment
14
Section 514F.2 prevents health insurers from utilizing preferred provider
arrangements to limit payments “on a basis solely related” to the
provider’s license—the nub of plaintiffs’ claims. The provisions were
enacted together in H.F. 2219 in 1986. See 1986 Iowa Acts ch. 1180.
Wellmark moved to dismiss these claims, arguing H.F. 2219 does not
create a private cause of action.
Not all statutory violations give rise to a private cause of action. A
private statutory cause of action exists “only when the statute, explicitly
or implicitly, provides for such a cause of action.” Sanford v.
Manternach, 601 N.W.2d 360, 371 (Iowa 1999). Plaintiffs concede H.F.
2219 does not expressly create a private cause of action. The issue is
whether those provisions implicitly created a private right to sue. Marcus
v. Young, 538 N.W.2d 285, 289 (Iowa 1995).
In our seminal case, Seeman v. Liberty Mutual Insurance Co., we
adopted a four-factor test to determine whether a statute provides a
private cause of action:
1. Is the plaintiff a member of the class for whose
benefit the statute was enacted?
2. Is there any indication of legislative intent, explicit
or implicit, to either create or deny such a remedy?
_______________________
service by all licensees under chapters 148 and 151 on any rational basis which is not
solely related to the license under or the practices authorized by chapter 151 or is not
dependent upon a method of classification, categorization, or description based upon
differences in terminology used by different licensees in describing human ailments or
their diagnosis or treatment.” (Emphasis added.)).
11Iowa Code § 514F.2 (permitting provider agreements “provided these systems
do not limit or make optional payment or reimbursement for health care services on a
basis solely related to the license under or the practices authorized by chapter 151 or on
a basis that is dependent upon a method of classification, categorization, or description
based upon differences in terminology used by different licensees under the chapters of
Title IV, subtitle 3, of the Code in describing human ailments or their diagnosis or
treatment” (emphasis added)).
15
3. Would allowing such a cause of action be
consistent with the underlying purpose of the legislation?
4. Would the private cause of action intrude into an
area over which the federal government or a state
administrative agency holds exclusive jurisdiction?
Marcus, 538 N.W.2d at 288 (citing Seeman, 322 N.W.2d at 38). The
Seeman court modified the four-factor federal test articulated in Cort v.
Ash, 422 U.S. 66, 78, 95 S. Ct. 2080, 2088, 45 L. Ed. 2d 26, 36–37
(1975). Seeman, 322 N.W.2d at 40. “If any one of these factors is not
satisfied, there is no implied cause of action.” Kolbe v. State, 625 N.W.2d
721, 727 (Iowa 2001); see also Touche Ross & Co. v. Redington, 442 U.S.
560, 575, 99 S. Ct. 2479, 2489, 61 L. Ed. 2d 82, 96 (1979) (“The central
inquiry remains whether Congress intended to create, either expressly or
by implication, a private cause of action.”).
Seeman is particularly analogous because it analyzed whether
insurance provisions in the same subtitle of the Code as those contained
in H.F. 2219 created a private cause of action. 322 N.W.2d at 36. In
that case, David Seeman sued Liberty Mutual Insurance Co., claiming
the insurance company unreasonably delayed payment on the settlement
of his workers’ compensation claim. Id. Seeman brought his lawsuit
under section 507B.4 of the Insurance Trade Practices Act, which
prohibits unfair methods of competition and deceptive acts by insurance
companies. Id. at 40. Although we found individual claimants were
within the class of persons the Act was intended to benefit, we declined
to find a private cause of action because we determined the legislature
intended the Insurance Trade Practices Act to be “regulatory in nature.”
Id. at 42. We reasoned there was no existing remedy prior to the
legislation for an insurer’s bad-faith failure to settle an insurance claim,
and the legislative history stated the “ ‘purpose of the chapter is to
16
regulate trade practices.’ ” Id. at 41–42 (quoting Iowa Code section
507B.1 (emphasis added)). Moreover, the chapter provided the insurance
commissioner with specified administrative powers to investigate,
adjudicate, remedy, and sanction prohibited acts of unfair practices. Id.
at 42; see also Scotts v. Eveleth, 688 N.W.2d 803, 808–09 (Iowa 2004)
(holding no private cause of action exists when “Iowa Code section 272.2
gives the board the exclusive authority to ‘[e]nforce rules adopted by the
board through revocation or suspension of a license, or by other
disciplinary action against’ a teacher”); Young, 538 N.W.2d at 289
(relying on the existence of administrative remedies in Iowa Code chapter
22, the Open Records Act, to find no private cause of action). Plaintiffs’
statutory insurance claims fail here for the same reasons as those under
Seeman.
The legislature enacted H.F. 2219 to benefit chiropractors as well
as consumers. But, in light of Seeman, the history of H.F. 2219, and the
available administrative remedies, we conclude the remaining factors do
not support recognition of a private cause of action. Accordingly, the
district court properly dismissed plaintiffs’ statutory insurance claims.
Prior to H.F. 2219, chiropractors were excluded from Iowa statutes
regulating health insurance coverage. Judge Stuart, a former Iowa
Supreme Court Justice, summarized the state of Iowa law on this issue
in 1980:
Chapter 514 of the Iowa Code clearly expresses a
policy excluding chiropractic services from coverage by
health care service corporations. Throughout that chapter,
the state legislature repeatedly stated precisely the particular
services covered. No mention is ever made of chiropractors,
the practice of chiropractic or Chapter 151 of the Iowa Code
which governs aspects of the practice of chiropractic,
including licensing. The Court believes that the omission of
any mention of chiropractic coverage in Chapter 514 directly
17
suggests that the legislature intended to prohibit coverage of
their activities by health care service corporations.
Health Care Equalization Comm. of the Iowa Chiropractic Soc’y v. Iowa
Med. Soc’y, 501 F. Supp. 970, 989–90 (S.D. Iowa 1980), aff’d, 851 F.2d
1020 (8th Cir. 1988). The subsequent 1986 amendments expressly
sought to “provid[e] for optional payment by corporations subject to
chapters 509, 514, and 514B for services performed by chiropractors.”
1986 Iowa Acts ch. 1180. Plaintiffs contend this history indicates the
legislature intended to provide chiropractors private rights of
enforcement. We disagree.
Before H.F. 2219 was enacted, chiropractors had no statutory or
common law remedy if health care insurers declined to cover their
services. In Seeman, we found chapter 507B did not create a private
cause of action, in part because, before that chapter’s enactment,
individuals had no private common law or statutory remedy against
insurers for the conduct proscribed by that chapter. 322 N.W.2d at 41–
42. We reasoned that, if the legislature wanted to create a private cause
of action when none previously existed, presumably it would have done
so expressly. See id. The same logic applies here with even greater force.
H.F. 2219 was enacted four years after our decision in Seeman. We
presume the legislature was aware of our holding in Seeman refusing to
recognize a private cause of action in related insurance provisions.
Welch v. Iowa Dep’t of Transp., 801 N.W.2d 590, 600 (Iowa 2011) (“ ‘The
legislature is presumed to know the state of the law, including case law,
at the time it enacts a statute.’ ” (quoting State v. Jones, 298 N.W.2d 296,
298 (Iowa 1980))). Given that timing, we decline to infer from legislative
silence in the 1986 amendments the intent to provide chiropractors or
18
other licensed health care professionals a private right of action for
violation of the insurance statutes.
Plaintiffs in this case are suing under insurance statutes regarded
under Seeman as “essentially regulatory in nature.” 322 N.W.2d at 42.
We reach the same conclusion here as in Seeman: The legislature
“intended only to invest the insurance commissioner with administrative
enforcement power . . . . Accordingly, we hold that the legislature
implicitly intended the insurance commissioner’s powers to be the
exclusive means of enforcing” the statute. Id. at 43. The legislature
provided the insurance commissioner with extensive administrative
powers over health insurance practices. Iowa Code section 514F.3
directs the insurance commissioner to “adopt rules for preferred provider
contracts and organizations” concerning “but not . . . limited to . . .
preferred provider arrangements and participation requirements, health
benefit plans, and civil penalties.” The legislature explained its
reasoning:
Presently, preferred provider organizations, i.e.,
arrangements wherein a health benefit plan provides for
treatment by select providers, are unregulated. This bill
would authorize the division of insurance to adopt rules
regulating those entities, in particular, to adopt the national
association of insurance commissioners’ model provision.
H.F. 2307, 72d G.A., Reg. Sess. § 604 Explanation (Iowa 1988) (emphasis
added). This history confirms the legislature intended H.F. 2219 to be
regulatory in nature.
Pursuant to the legislature’s authorization, the insurance
commissioner has adopted administrative rules regulating preferred
provider arrangements and detailing administrative enforcement powers.
See Iowa Admin. Code r. 191—27 (governing preferred provider
arrangements). The insurance commissioner determined civil penalties
19
for violating preferred provider arrangements regulations “shall be
imposed in the amount, and pursuant to the procedure, set forth in Iowa
Code sections 507B.6, 507B.7, and 507B.8.” Id. r. 191—27.7. The
operative statutes and rules authorize the insurance commissioner to
issue charges, hold hearings, and levy civil penalties up to $50,000 for
improper preferred provider arrangements, all subject to judicial review.
See Iowa Code §§ 507B.6–8. Seeman relied on such administrative
procedures in holding the Insurance Trade Practices Act did not create
an implied private cause of action. 322 N.W.2d at 42 (citing Iowa Code
sections 507B.6, 507B.7, 507B.8, the enforcement powers in the
Insurance Trade Practices Act).
Section 514F.3 specifically commands the insurance commissioner
to adopt rules and procedures to regulate preferred provider
arrangements. Plaintiffs attempt to distinguish Seeman by arguing in
that case the legislature enacted the administrative remedies, while here
the insurance commissioner promulgated the regulations and
administrative remedies. This is a distinction without a difference for
determining whether an implied private right of action exists. We
rejected this distinction in Eveleth, which held “[s]ection 272.2 clearly
suggests that this provision was intended to be a regulatory measure
designed to provide the board with authority to suspend or revoke a
teacher’s license in those situations when violations of its provisions
occur.” 688 N.W.2d at 809; see also Rowen v. LeMars Mut. Ins. Co. of
Iowa, 230 N.W.2d 905, 909 (Iowa 1975) (“When the legislature has given
an administrative agency jurisdiction to entertain the particular
controversy, we have held the jurisdiction is exclusive and must be
exhausted before resort to the courts . . . .”).
20
Plaintiffs are not left without a remedy absent an implied cause of
action. Plaintiffs may use chapter 17A administrative remedies to
enforce H.F. 2219—they must simply turn to the insurance
commissioner first. Plaintiffs may petition the commissioner for a
declaratory order as to the legality of Wellmark’s allegedly discriminatory
activities. See Iowa Code § 17A.9. Plaintiffs could then seek judicial
review of the ruling. Id. Wellmark’s exhibits show H.F. 2219 has been
the subject of at least two administrative proceedings resulting in
declaratory rulings.
Plaintiffs under certain circumstances also may initiate “contested
case” proceedings under chapter 17A to obtain an evidentiary hearing for
their alleged grievances. Id. § 17A.2(5) (defining “contested case” as a
“proceeding including but not restricted to ratemaking, price fixing, and
licensing in which the legal rights, duties or privileges of a party are
required by Constitution or statute to be determined by an agency after
an opportunity for an evidentiary hearing”); see, e.g., Lifeline Ambulance,
Inc. v. Iowa Ins. Div., 505 N.W.2d 186, 187 (Iowa 1993) (reviewing
insurance commissioner contested-case ruling to uphold an HMO’s
decision to terminate a group health insurance plan under section
514B.17).
Finally, plaintiffs can petition for “other agency action” pursuant to
section 17A.2(2), which also is subject to judicial review. Iowa Code
§ 17A.19(10); see also Travelers Indem. Co. v. Comm’r of Ins., 767 N.W.2d
646, 650 (Iowa 2009) (insurance commissioner’s adjudication of a
workers’ compensation premium dispute reviewed as “other agency
action”).
The insurance commissioner oversees a uniform, statewide scheme
to regulate preferred provider arrangements and other health insurer
21
activities. 12 The insurance commissioner is permitted to utilize his
expertise and specialization to make an administrative record to resolve
disputes within his jurisdiction. On judicial review of the commissioner’s
ruling, the commissioner will be a party and the reviewing court’s
adjudication will apply statewide to the health insurance industry. We
do not believe the legislature intended to create a private cause of action
to allow civil juries to second-guess conduct approved by the insurance
commissioner and subject to judicial review from administrative
proceedings.
We conclude our legislature chose to provide the Iowa Insurance
Commissioner with exclusive powers to regulate health insurance
practices under these statutes. For these reasons, we hold Iowa Code
sections 509.3(6), 514.7, 514.23(2), 514B.1(5)(c), and 514F.2, enacted as
part of H.F. 2219, do not create a private cause of action.
IV. Whether the District Court Erred by Applying the State
Action Exemption, Iowa Code Section 553.6(4), to Grant Summary
Judgment Against Plaintiffs on Their State Antitrust Claims.
Plaintiffs’ third amended petition alleges that discriminatory
provisions in Wellmark’s preferred provider arrangements constitute a
12New legislation, effective July 1, 2012, prohibits health insurers from imposing
larger copayments for chiropractic services than for services by medical doctors or
osteopaths. 2012 Iowa Legis. Serv. H.F. 2465, § 36 (West 2012) (to be codified at Iowa
Code § 514C.29) (“[A] policy, contract, or plan providing for third-party payment or
prepayment of health or medical expenses shall not impose a copayment or coinsurance
amount on an insured for services provided by a doctor of chiropractic licensed
pursuant to chapter 151 that is greater than the copayment or coinsurance amount
imposed on the insured for services provided by a person engaged in the practice of
medicine and surgery or osteopathic medicine and surgery under chapter 148 for the
same or a similar diagnosed condition even if a different nomenclature is used to
describe the condition for which the services are provided.”). Legislation and
regulations administered by the Iowa Insurance Division have uniform applicability
statewide. By contrast, plaintiffs’ allegations in this litigation target the conduct of a
single health insurer.
22
conspiracy to restrain trade against chiropractors in violation of section
553.4 and an abuse of monopoly power in violation of section 553.5.
Plaintiffs’ alleged anticompetitive conduct can be grouped into three
categories: (1) procedural requirements and conditions of treatment,
(2) fee payment schedules, and (3) administration of state self-funded
group plans that typically have identical preferred provider panels.
Wellmark moved for summary judgment, asserting its preferred
provider arrangements are exempt from plaintiffs’ antitrust claims
pursuant to section 553.6(4). This section provides that the Iowa
Competition Law “shall not be construed to prohibit . . . activities or
arrangements expressly approved or regulated by any regulatory body or
officer acting under authority of this state.” Iowa Code § 553.6(4). The
district court granted Wellmark’s motion, and we now are called upon to
review the correctness of this ruling.
We have applied the so-called “state action” exemption of section
553.6(4) in two prior cases. Nw. Bell Tel. Co. v. Iowa Utils. Bd., 477
N.W.2d 678, 685–86 (Iowa 1991); Neyens v. Roth, 326 N.W.2d 294, 298–
99 (Iowa 1982). As we noted in those two cases, private anticompetitive
conduct is exempt from federal antitrust laws if (1) the conduct is
undertaken pursuant to a “ ‘clearly articulated and affirmatively
expressed’ ” state policy and (2) the policy is “ ‘actively supervised’ ” by
the state itself. See Nw. Bell, 477 N.W.2d at 685 (quoting Cal. Retail
Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97, 105, 100
S. Ct. 937, 943, 63 L. Ed. 2d 233, 243 (1980)); Neyens, 326 N.W.2d at
298 (same). We also observed in Neyens that the Iowa Competition Law
has a uniformity clause. See Iowa Code § 553.2 (stating that the Iowa
Competition Law “shall be construed to complement and be harmonized
with the applied laws of the United States which have the same or
23
similar purpose”); Neyens, 326 N.W.2d at 298; see also Comes v.
Microsoft Corp., 646 N.W.2d 440, 452 (Iowa 2002) (Cady, J., dissenting)
(noting that in section 553.2, the legislature provided “a specific rule of
construction” for interpreting the Iowa Competition Law); Nw. Bell, 477
N.W.2d at 686.
“The general rule is that exemptions from coverage of competition
laws are to be narrowly applied.” Neyens, 326 N.W.2d at 298. The state
action exemption is an affirmative defense as to which the defendant
bears the burden of proof. See Nw. Bell, 477 N.W.2d at 685 (“The first
prong of the state action exemption requires a showing . . . .”) (Emphasis
added.); see also F.T.C. v. Ticor Title Ins. Co., 504 U.S. 621, 638, 112
S. Ct. 2169, 2179, 119 L. Ed. 2d 410, 425 (1992) (“[T]he party claiming
the immunity must show that state officials have undertaken the
necessary steps to determine the specifics of the price-fixing or
ratesetting scheme.”); Yeager’s Fuel, Inc. v. Penn. Power & Light Co., 22
F.3d 1260, 1266 (3d Cir. 1994) (“[S]tate action immunity is an affirmative
defense as to which [party asserting immunity] bears the burden of
proof.”); 1 Louis Altman & Malla Pollack, Callmann on Unfair Competition,
Trademarks and Monopolies § 4:4, at 4-62 (4th ed. Supp. 2012) (“State
action immunity is an affirmative defense, and the defendant has the
burden of establishing its eligibility for that defense.”). Whether the state
action exemption is established is a question of law for the court. Trigen
Okla. City Energy Corp. v. Okla. Gas & Elec. Co., 244 F.3d 1220, 1225
(10th Cir. 2001); TEC Cogeneration, Inc. v. Fla. Power & Light Co., 76 F.3d
1560, 1567 (11th Cir.), modified, 86 F.3d 1028 (1996).
Plaintiffs argue that we should apply the state action exemption to
this case as it is currently interpreted by the federal courts. See Ticor
Title Ins. Co., 504 U.S. at 634, 638, 112 S. Ct. at 2177, 2179, 119
24
L. Ed. 2d at 423, 425 (holding that, for the exemption to apply, “the
potential for state supervision [must be] realized in fact” and “the State
[must] exercise[] sufficient independent judgment and control so that the
details of the rates or prices [are] established as a product of deliberate
state intervention, not simply by agreement among private parties”).13
Wellmark counters that we should apply the “plain language” of the Iowa
version of the exemption. Both sides argue that they would prevail even
under the other side’s legal interpretation of the exemption.
We agree with plaintiffs that, even accepting Wellmark’s view of the
state action exemption, it does not apply here. Different governmental
reviews are for different purposes. When a library checks in a book, it is
verifying that the book was returned, not approving the contents of the
book. When the county grants a marriage license, it is indicating that
the couple may be lawfully married, not that they are necessarily a good
match. So too here, the present record indicates that, when the
insurance division approves Wellmark’s preferred provider forms, it is
indicating those forms comply with the legal requirements of chapter
514F and its implementing regulations. It is not comparing specific
chiropractor rates to physician rates, which are not even actually
disclosed in those forms. Although Wellmark uses the RBRVS system
created for Medicare to reimburse chiropractors, Wellmark retains
discretion to apply a “Wellmark determined adjustment factor” to alter
the rates. Wellmark did not disclose this adjustment factor to the
insurance commissioner.
13We note the United States Supreme Court recently granted certiorari in a
hospital state action immunity case, F.T.C. v. Phoebe Putney Health Sys., Inc., 663 F.3d
1369 (11th Cir. 2011), cert. granted, 80 U.S.L.W. 3707 (U.S., June 25, 2012) (No. 11–
1160, 11A811).
25
It is true that the State of Iowa encourages health insurers to enter
into preferred provider arrangements and requires a prototype of any
such arrangement to be submitted for prior review by the insurance
division. See Iowa Admin. Code r. 191—27.5(3). It is also true that
Wellmark submitted its preferred provider forms to the division and that
those forms were approved.
Nonetheless, for the “activity or arrangement” to be exempt from
the antitrust laws, Wellmark must establish that it was “expressly
approved or regulated” by a regulatory body or an officer acting under
state authority. Iowa Code § 553.6(4). To put it another way, the alleged
anticompetitive practice must be “ ‘expressed as state policy’ ” and
“ ‘actively supervised by the state.’ ” Nw. Bell, 477 N.W.2d at 685
(citation omitted); Neyens, 326 N.W.2d at 298–99; see also Cal. Retail
Liquor Dealers, 445 U.S. at 105, 100 S. Ct. at 943, 63 L. Ed. 2d at 243;
A.D. Bedell Wholesale Co. v. Philip Morris Inc., 263 F.3d 239, 260 (3d Cir.
2001) (“It is the conduct that violates the antitrust laws that states must
‘actively supervise’ in order for Parker immunity to attach.”). “Rubber
stamp approval of private action does not constitute state action.” A.D.
Bedell, 263 F.3d at 260.
Wellmark has not established the insurance division reviews
preferred provider agreements in order to regulate the rates paid to
different classes of health care providers such as doctors and
chiropractors. Rather, it appears the review is designed to assure fair
and equitable access to the preferred provider network and to protect
nonparticipants in the network. See, e.g., Iowa Admin. Code rs. 191—
27.4 (allowing but limiting incentives for use of preferred providers), 27.5
(listing participation requirements). In short, the purpose of the
insurance division’s review is to regulate the overall relationship between
26
preferred provider participants and nonparticipants, not to monitor rates
paid to or conditions imposed upon different categories of preferred
provider panelists. This is consistent with the authority conferred by the
underlying statute, which provides:
The commissioner of insurance shall adopt rules for
preferred provider contracts and organizations, both those
that limit choice of specific provider and those that do not.
The rules adopted shall include, but not be limited to, the
following subjects: preferred provider arrangements and
participation requirements, health benefit plans, and civil
penalties.
Iowa Code § 514F.3.
Thus, the initial section of the relevant regulations explains:
The purpose of this chapter is to encourage health
care cost containment while preserving quality of care by
allowing health care insurers to enter into preferred provider
arrangements and by establishing minimum standards for
preferred arrangements and the health benefit plans
associated with those arrangements.
Iowa Admin. Code r. 191—27.1. As this section reveals, the underlying
purpose of the chapter is to set minimum standards, not to regulate rate
differentials. The next section of the regulations sets forth a series of
definitions. Id. r. 191—27.2. The third section then states what a
preferred provider arrangement shall contain “at minimum”:
a. Establish the amount and manner of payment to
the preferred provider. The amount and manner of payment
may include capitation payments for preferred providers.
b. Include mechanisms which are designed to
minimize the cost of the health benefit plan. These
mechanisms may include among others:
(1) The review or control of utilization of health care
costs.
(2) A procedure for determining whether health care
services rendered are medically necessary.
c. Ensure reasonable access to covered services
available under the preferred provider arrangement.
27
Id. r. 191—27.3(1). Hence, a preferred provider arrangement must
establish an amount and manner of payment, and a procedure for
determining medical necessity, and presumably would be rejected by the
insurance division if it lacked these items. But, there is no indication
that the insurance division reviews and approves the actual rates of
payment or regulates the specific terms of access to chiropractors as
compared with physicians. 14 By way of analogy, our appellate rule
6.903(2) requires the appellant to file a brief containing a table of
contents, a table of authorities, a statement of the issues, a routing
statement, a statement of the case, a statement of the facts, an argument
section, and a conclusion. Our clerk’s office typically rejects briefs that
do not meet these minimum standards, but this does not mean that by
filing the brief the clerk approves of the appellant’s argument.
The remaining regulations generally are intended to protect
nonparticipants and participants who use noncovered services from
unfair discrimination. Thus, rule 27.3(2) provides, “A preferred provider
arrangement shall not unfairly deny health benefits for medically
necessary covered services.” Rule 27.3(3) provides that the regulations
will cover preferred provider arrangements even when not sponsored by
licensed insurers. Rule 27.4 enshrines additional nondiscrimination
protections:
27.4(1) A health care insurer may issue a health
benefit plan which provides for incentives for covered
persons to use the health care services of a preferred
provider. The policies or subscriber agreements shall
contain at least all of the following provisions:
14The fee schedules that Wellmark submitted were merely “Illustrative,”
according to the charts, comparing “Facility” and “Non-Facility” and “PPO/Indemnity”
and “HMO.”
28
a. A provision that if a covered person receives
emergency services specified in the preferred provider
arrangement and cannot reasonably reach a preferred
provider, emergency services rendered during the course of
the emergency will be reimbursed as though the covered
person had been treated by a preferred provider, subject to
any restriction which may govern payment by a preferred
provider for emergency services.
b. A provision which clearly identifies the differentials
in benefit levels for health care services of preferred
providers and benefit levels for health care services of
nonpreferred providers.
27.4(2) If a health benefit plan provides differences in
benefit levels payable to preferred providers compared to
other providers, such differences shall not unfairly deny
payment for covered services and shall be no greater than
necessary to provide a reasonable incentive for covered
persons to use the preferred provider.
So does rule 27.5:
27.5(1) A health care insurer may place reasonable
limits on the number or classes of preferred providers which
satisfy the standards set forth by the health care insurer,
provided that there is no discrimination against providers on
the basis of religion, race, color, national origin, age, sex or
marital status.
27.5(2) Notwithstanding any other provision of this
chapter, a health care insurer may issue policies or
subscriber agreements which provide benefits for health care
services only if the services have been rendered by a
preferred provider, provided the program has met all
standards imposed by the commissioner for availability and
adequacy of covered services.
27.5(3) A health care insurer shall file with the
commissioner for the commissioner’s prior review a
prototype of any preferred provider arrangement and of the
health care plan’s policy, contract, or subscriber agreement
associated with the arrangement, together with any changes
in the prototype. Use of the prototypical preferred provider
arrangement and health care plan’s policy, contract, or
subscriber agreement is conditioned upon approval of these
documents by the commissioner.
Rule 27.6 states that “[a] health insurer subject to this chapter shall be
subject to and is required to comply with all other applicable laws and
rules and regulations of this state.” Rule 27.7 indicates that civil
29
penalties for violation of this chapter “shall be imposed in the amount,
and pursuant to the procedure, set forth in Iowa Code sections 507B.6,
507B.7, and 507B.8.” Lastly, rule 27.8 contains certain whistleblower-
type protections:
27.8(1) A health care insurer shall not prohibit a
participating provider from or penalize a participating
provider for discussing treatment options with covered
persons, irrespective of the health care insurer’s position on
the treatment options, or from advocating on behalf of
covered persons within the utilization review or grievance
processes established by the health care insurer or a person
contracting with the health care insurer.
27.8(2) A health care insurer shall not penalize a
provider because the provider, in good faith, reports to state
or federal authorities any act or practice by the health care
insurer that, in the opinion of the provider, jeopardizes
patient health or welfare.
These regulations are not directed to the regulation of rate
differentials for particular services. Their purpose, rather, is to insure
that health insurers do not abuse their overall relationship with patients
and providers through the use of preferred provider plans. Thus, if a
clinic decided to sue Wellmark under the Iowa Competition Law alleging
that Wellmark had engaged in prohibited section 553.5 monopolization
by excluding it from a preferred provider arrangement, the section
553.6(4) state action exemption might well apply. 15 But, it does not
15This point is illustrated by Health Care Equalization Committee of the Iowa
Chiropractic Society v. Iowa Medical Society, 851 F.2d 1020 (8th Cir. 1988). In that
case, chiropractors sued Wellmark’s predecessor for antitrust violations, challenging its
refusal to include chiropractic services in health care service plans. Health Care
Equalization Comm., 851 F.2d at 1022. The court found the state action exemption
available, noting that under state law at that time, “the exclusion of chiropractors from
health care service plans was not merely contemplated by the State of Iowa, but
compelled.” Id. at 1026. The Eighth Circuit thus found the state action exemption
applied, not because some state regulation existed in the general area, but because the
decisions being challenged as anticompetitive were directly covered by regulation.
Nowadays state law mandates the inclusion rather than the exclusion of chiropractic
30
appear that the legislature has decided generally to remove the setting of
reimbursement rates by health insurance companies from the operations
of the marketplace or from claims under the Iowa Competition Law.
A United States Supreme Court decision is on point. In Patrick v.
Burget, an Oregon physician who had lost privileges at a hospital for
allegedly anticompetitive reasons brought suit under the antitrust laws.
486 U.S. 94, 96–98, 108 S. Ct. 1658, 1660–61, 100 L. Ed. 2d 83, 89–90
(1988). Oregon, like other states, had a state-mandated and state-
regulated peer-review process, which the hospital had followed in
attempting to terminate the physician’s privileges. Id. at 97, 101–02, 108
S. Ct. at 1661, 1663–64, 100 L. Ed. 2d at 89–90, 92–93. Nonetheless,
the Supreme Court rejected the state action defense in a unanimous
decision because the record showed that the various state agencies did
not review the merits of individual peer-review decisions, as opposed to
overall peer-review procedures. As the Supreme Court put it, “The
Health Division’s statutory authority over peer review relates only to a
hospital’s procedures; that authority does not encompass the actual
decisions made by hospital peer-review committees.” Id. at 102, 108
S. Ct. at 1664, 100 L. Ed. 2d at 93. Here, likewise, the regulatory
scheme does not address the fairness of specific rates paid to
chiropractors vis-à-vis doctors.
As noted by the parties, Wellmark filed a lengthy submission on
Friday, July 27, 2001, which the division stamped “approved” on the very
next business day, Monday, July 30. This did not occur because the
division’s employees took shortcuts in their work. It happened because
_______________________
services, see, e.g., Iowa Code section 514.7(3), but the conceptual point remains the
same.
31
the scope of review called for by the law and the regulations was limited.
Wellmark offered no affidavit or depostion testimony of the insurance
commissioner or any employee of the insurance division involved in
approving Wellmark’s submissions. The insurance division conducted
no hearing. There is no evidence in this record the insurance division
has ever rejected or required revisions to the reimbursement rates or
terms of access in a health insurer’s preferred provider arrangement.
Nor does the record reflect the insurance division has ever requested
additional information concerning rate differentials. We conclude
Wellmark failed to establish a regulatory review sufficient to exempt
Wellmark under section 553.6(4) from an antitrust lawsuit alleging that
it conspired with physicians to underpay chiropractors or impose unfair
terms on them.
To a large extent, the affidavits submitted by Wellmark are an
effort to defend the merits of its pricing decisions rather than an attempt
to show that the state reviews and regulates those prices. For example,
the Nuzum affidavit explains for fifteen paragraphs how Wellmark uses
the RBRVS system and why it is fair to chiropractors. In the last
paragraph, the affiant attempts to tie everything together by stating:
The total amounts available for provider reimbursement by
Wellmark are ultimately determined by state regulations
requiring that provider fees be high enough to provide
reasonable access for members to each provider type,
including chiropractors.
Thus, Wellmark’s theory of implicit rate approval asserts that the
company has to pay chiropractors enough because if chiropractor fees
were too low, chiropractors would not join the preferred provider
arrangement, and there would not be “reasonable access to covered
services,” as required by rule 191—27.3(1). In this indirect way,
32
according to Wellmark, the insurance division regulates rates. We do not
believe this satisfies section 553.6(4). Demonstrating that regulations
provide, in some indirect way, an incentive for Wellmark to compensate
chiropractors adequately is different from demonstrating the insurance
commissioner in fact regulated and approved the specific rate
differentials at issue here.
Under Wellmark’s reasoning, even if all the health insurance
companies doing business in Iowa had engaged in a blatant horizontal
conspiracy to cap the rates they paid for chiropractic care, no one could
seek redress under the antitrust laws because of the state action
exemption. Thus, health insurance companies in Iowa would be free to
engage in the kind of conduct for which ordinary citizens go to jail. For
the foregoing reasons, we reverse the district court’s summary judgment
granting Wellmark a blanket exemption under section 553.6(4) from
charges that it engaged in anticompetitive price-fixing or term-fixing
schemes.
V. Whether the District Court Correctly Granted Summary
Judgment on Claims Relating to the Love v. Blue Cross Blue Shield
Settlement.
Plaintiffs’ third amended petition alleges Wellmark conspired to
restrain trade against chiropractors by entering into an agreement with
over ninety-five percent of Iowa medical and osteopathic doctors to
“numerous items of preferential treatment, discriminatory to plaintiff, as
found in Section 7 of a Settlement Agreement dated April 27, 2007.” The
Love v. Blue Cross Blue Shield settlement resulted from a national class
action by all medical and osteopathic doctors against the state Blue
Plans, including Wellmark. See Love, No. 03–21296–CIV (S.D. Fla.
Apr. 19, 2008). The settlement was not reviewed or approved by the Iowa
33
Insurance Commissioner and thus is not subject to immunity under
section 553.6(4). The district court granted summary judgment in favor
of Wellmark, finding no genuine issue of material fact as to whether
Wellmark discriminated against chiropractors when implementing the
Love settlement. We agree with the district court’s ruling.
The order approving the Love settlement agreement states in part:
E. The Court has held a hearing to consider the
fairness, reasonableness, and adequacy of the Settlement,
has been advised of all objections to the Settlement and has
given fair consideration to such objections.
F. The Settlement is the product of good faith, arm’s
length negotiations between the Representative Plaintiffs and
the Signatory Medical Societies and their counsel, on one
hand, and the Blue Parties and their counsel, on the other
hand.
G. The Settlement, as provided for in the Settlement
Agreement, is in all respects fair, reasonable, adequate, is
not the product of collusion between the Parties, and is
otherwise proper and in the best interests of the Class.
Druker’s affidavit in support of Wellmark’s motion states:
No term of the Love Settlement Agreement binds
Wellmark not to extend to chiropractors the same or similar
terms, or to deny chiropractors the benefit of any perceived
advantageous changes in business practices, as are provided
to M.D.’s and D.O.’s under that agreement.
As the district court accurately described, Druker also
submitted a spreadsheet containing every item contained in
Section 7 of the settlement agreement. This sets forth a
series of procedural requirements, such as availability of fee
schedules, reduced precertification requirements, greater
notice of policy and procedure changes, etc. Most of the
items are being applied to agreements with chiropractors.
Some are not applicable.
Accordingly, Wellmark’s record evidence presents facts demonstrating
Wellmark does not provide preferential treatment to medical and
osteopathic doctors as a result of the Love settlement.
34
Plaintiffs’ resistance fails to set forth facts that show Wellmark has
implemented the Love settlement in a manner discriminatory to
chiropractors. See Green, 713 N.W.2d at 245. In response to Druker’s
affidavit, which was incorporated into Wellmark’s statement of
undisputed facts, plaintiffs stated:
Denied. This is legal argument in Exhibit 7 the class
is defined as “any and all Physicians, Physician Groups and
Physician Organizations . . . .” According to the Settlement
Agreement, U 1.85, “ ‘Physician’ means an individual duly
licensed by a state licensing board as a Medical Doctor or
Doctor of Osteopathy and shall include both Participating
Physicians and Non-Participating Physicians.” The State of
Iowa recognizes that a Doctor of Chiropractic is a
“Physician.” Iowa Code § 135.1(4) (2007): “ ‘Physician’ means
a person licensed to practice medicine and surgery,
osteopathic medicine and surgery, osteopathy, chiropractic,
podiatry or optometry under the laws of this state.”
Chiropractors were deliberately excluded from the
Agreement, Exhibit 7.
Plaintiffs’ response merely acknowledges the Love settlement did not
include chiropractors; it does not controvert Wellmark’s record evidence.
Plaintiffs offered no affidavit testimony or other evidence to controvert
Wellmark’s evidence showing it implemented the Love settlement in a
nondiscriminatory manner.
Accordingly, we conclude the plaintiffs failed to generate a genuine
issue of material fact precluding summary judgment on their claims
based on the Love settlement.
VI. Other Defenses to State Antitrust Claims.
Wellmark raised several other defenses to plaintiffs’ Iowa
Competition Law claims in the dispositive motions it filed below.
Generally, the district court did not reach those defenses because it
disposed of the claims on the grounds already discussed. With three
35
exceptions, we believe those defenses should be addressed further on
remand.
First, we believe the district court properly rejected Wellmark’s
argument that the plaintiffs did not suffer an actionable “antitrust
injury.” 16 Wellmark takes the position that, because the plaintiffs are
suing as disadvantaged sellers rather than disadvantaged buyers, they
have not suffered an injury “of the type sought to be compensated by
antitrust laws.” Southard v. Visa U.S.A., Inc., 734 N.W.2d 192, 199 (Iowa
2007 (citing Associated Gen. Contractors of Cal., Inc. v. Cal. State Council
of Carpenters, 459 U.S. 519, 538, 103 S. Ct. 897, 908–09, 74 L. Ed. 2d
723, 738 (1983)). The antitrust laws are as concerned about abuse of
monopsony power to pay prices below a competitive level as they are
about abuse of monopoly power to charge prices above a competitive
level. The seller to the monopsony has been harmed as much as the
buyer from the monopoly. See W. Penn Allegheny Health Sys., Inc. v.
UPMC, 627 F.3d 85, 104–05 (3d Cir. 2010) (holding that a hospital had
alleged antitrust injury based on its receipt of artificially depressed
reimbursement rates from a dominant insurer and noting that “the
defendants’ argument reflects a basic misunderstanding of the antitrust
laws”); see also Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber
Co., 549 U.S. 312, 322, 127 S. Ct. 1069, 1076, 166 L. Ed. 2d 911, 920
(2007) (“The kinship between monopoly and monopsony suggests that
similar legal standards should apply to claims of monopolization and
claims of monopsonization.”). Hence, we reject Wellmark’s “antitrust
injury” defense.
16Wellmark reurges this argument on appeal as an alternative ground for
affirming dismissal of the antitrust claims.
36
Second, by contrast, plaintiffs’ counsel conceded at oral argument
before us that his clients cannot pursue a claim against Wellmark for
unilaterally deciding to pay chiropractors less. We agree. See W. Penn
Allegheny Health Sys., Inc., 627 F.3d at 103 (concluding that, if the
insurer had been “acting alone, [the health care provider] would have
little basis for challenging the reimbursement rates[, and a] firm that has
substantial power on the buy side of the market (i.e., monopsony power)
is generally free to bargain aggressively when negotiating the prices it will
pay for goods and services”). Merely paying less (because one is a
monopsonist) or charging more (because one is a monopolist) does not
violate the antitrust laws. There must be some prohibited conspiracy or
exclusionary conduct as well. See Verizon Commc’ns Inc. v. Law Offices
of Curtis V. Trinko, LLP., 540 U.S. 398, 407, 124 S. Ct. 872, 879, 157
L. Ed. 2d 823, 836 (2004) (stating that “[t]he mere possession of
monopoly power, and the concomitant charging of monopoly prices, is
. . . not unlawful” and “the possession of monopoly power will not be
found unlawful unless it is accompanied by an element of an
anticompetitive conduct”). Accordingly, we affirm the summary judgment
in favor of Wellmark on any claim that Wellmark’s pricing decisions
violated section 553.5 of the Iowa Code.
Third, Wellmark urges us to separately uphold the dismissal of
certain claims related to treatment conditions contained in the preferred
provider agreements. Wellmark contends those claims are “waived”
because plaintiffs failed either here or below to rebut Wellmark’s evidence
demonstrating that the conditions were nondiscriminatory. In its
summary judgment order, the district court found Wellmark’s facts were
undisputed, although it did not specifically grant summary judgment on
37
that basis because it decided that all the antitrust claims were barred by
section 553.6(4).
We agree with Wellmark that it is entitled to dismissal of these
claims. We therefore affirm the summary judgment as to plaintiffs’
allegations that (1) Wellmark “arbitrarily imposed riders on the policies of
patients” seeking spinal treatment when the patient had prior
chiropractic care, (2) promulgated “standards and rules of practice for
‘Chiropractic Assistants,’ ” and (3) imposed a definition of “chiropractic”
to restrict covered chiropractic treatments.
Blake’s affidavit in support of Wellmark’s motion states:
With regard to “riders” that limit coverage when a
member discloses preexisting joint or bone conditions,
whether such an exclusion or policy amendment will be
sought is determined by written underwriting guidelines.
These guidelines make no distinction between prior
conditions that were treated by a chiropractor as opposed to
those that were treated by other medical professionals.
Druker’s affidavit states:
Wellmark does not and has not ever implemented
standards and rules of practice for “Chiropractic Assistants”
or created a limitation that certain modes of physiotherapy
must be applied by “Chiropractic Assistants”.
Wellmark also showed that its definition “chiropractic” was based
on Iowa law.
Plaintiffs’ resistance challenged only the admissibility and
competency of Wellmark’s affidavits. Plaintiffs conceded Wellmark uses
the statutory definition of “chiropractic” in its provider forms. Plaintiffs
identified no evidence to avoid summary judgment on these claims. We
therefore affirm summary judgment here.
Apart from the three areas we have just discussed, we conclude
that any other defenses that Wellmark may have to the Iowa Competition
Law claims would be better addressed on remand.
38
VII. Disposition.
For the reasons stated, we affirm the district court’s ruling
granting Wellmark’s motion to dismiss plaintiffs’ statutory insurance
claims. We reverse the summary judgment granted to Wellmark that
was based upon the state action exemption. We affirm the district
court’s summary judgment dismissing claims that Wellmark violated
section 553.5 of the Iowa Competition Law with respect to any unilateral
payment decisions regarding chiropractors. We also affirm the district
court’s summary judgment dismissing claims based on the Love
settlement, medical spine riders, and definitions of “chiropractic
assistant” and “chiropractic.” We remand the case for further
proceedings consistent with this opinion.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.