The opinion of the court was delivered by: KIMBA M. WOOD
Defendant moves to dismiss Plaintiffs' amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons stated below, the Court denies Defendant's motion.
The Medicare program subsidizes the medical costs of persons 65 years of age or older, and those who are disabled. Medicare Part A generally covers inpatient hospital expenses and Part B covers particular medical expenses not covered by Part A, such as certain physicians' services. 42 U.S.C. §§ 1395 et seq. Under Part B of Medicare, the federal government generally covers "8O% of the reasonable charges for services" after satisfaction of any deductible. 42 U.S.C. § 13951. The subscriber is responsible for the remaining 2O% of the Medicare approved charges (the "coinsurance amount"). Defendant offers various Medicare supplemental insurance policies to cover the deductible as well as the coinsurance amount that Medicare does not cover.
In 1985, Congress enacted the Gramm-Rudman-Hollings Act ("Gramm-Rudman") which was designed to reduce the federal deficit to zero by Fiscal Year 1991. Under the Act, payments made by the federal government under Medicare Parts A and B were to be reduced. Since 1986, the federal government has implemented the Act so as to reduce its Part B payments to Medicare beneficiaries by several percentage points. As a result, the coinsurance amount for which beneficiaries are responsible has been increased several percentage points over the original 2O% figure for beneficiaries who visit doctors who do not accept assignment of Medicare payments. Beneficiaries with doctors who accept assignment of claims have not been affected by this change in government payments because their doctors absorb the loss by accepting lower reimbursement.
Plaintiffs' purported class consists of all claimants enrolled in Defendant's supplemental Medicare insurance contracts who submitted to Defendant their unassigned claims between January 1, 1988 and the present and who were denied full reimbursement of their coinsurance payments. Amended Complaint P7. By its amended complaint, Plaintiffs' purported class alleges that Defendant breached its supplemental Medicare insurance contracts, that Defendant violated New York Insurance Department Regulations, and that Defendant made statements in the course of marketing and selling its policies that constituted misrepresentation and fraud under New York law.
Based on language in the insurance contracts such as the provision that the policies cover the "coinsurance amounts that . . . the Federal Medicare Program do [sic] not pay for," Plaintiffs allege that they "contracted with and paid premiums to [Defendant] in anticipation of receiving 100% reimbursement of the Medicare Approved Charge promised by [Defendant] for covered services." Amended Complaint PP14 & 28. In light of Plaintiffs' expectations and the plain terms of the insurance contract, Plaintiffs further allege that Defendant failed to reimburse Plaintiffs adequately when it refused to cover the decrease in Medicare payments made toward their unassigned claims as a result of the government's efforts at deficit reduction pursuant to the Gramm-Rudman. Amended Complaint PP1 & 18-21.
Those members of the Plaintiffs' purported class who held group insurance policies seek recovery of the benefits allegedly due to them under the terms of their insurance plans with Defendant pursuant to Section 502 of the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1132(a)(1)(B) & 1132(c) ("ERISA"). Amended Complaint PP30-33. Other members of the Plaintiffs' purported class, who obtained insurance policies directly from Defendant through individual contracts, seek recovery for the alleged breach of contract by Defendant pursuant to New York common law and pursuant to the New York State Insurance Department Regulations, 11 N.Y.C.R.R. §§ 52.11(a)(6) & 52.22(f). Amended Complaint PP34-37. Finally, all members of the Plaintiffs' purported class seek recovery under New York common law for Defendant's alleged misrepresentation in the marketing and sale of its supplemental Medicare insurance policies. Amended Complaint PP38-41. Pursuant to these claims, Plaintiffs' purported class seeks damages estimated to exceed $ 5 million, reasonable attorneys fees and other costs and disbursements of this action, and other relief as the Court deems just and proper.
On May 2, 1991, Defendant moved to dismiss Plaintiffs' amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief can be granted. Defendant argues that Plaintiffs have failed to state of cause of action upon which relief can be granted because Gramm-Rudman does not require supplemental Medicare insurance policies to cover the decrease in the government's payments under Part B of Medicare. Defendant also argues that the relevant contract language clearly and unambiguously requires no off-setting increase in the insurance copayments. For the reasons stated below, the Court denies Defendant's motion to dismiss.
On a motion to dismiss, a district court must construe the complaint in favor of the pleader, see Scheuer v. Rhodes, 416 U.S. 232, 236, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974), and it must accept as true the factual allegations made in the complaint. See LaBounty v. Adler, 933 F.2d 121, 123 (2d Cir. 1991) (citations omitted). The function of a district court in considering a motion to dismiss is "not to weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient." Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985), citing Ryder Energy Distribution Corp. v. Merrill Lynch Commodities Inc., 748 F.2d 774, 779 (2d Cir. 1984). A district court will not dismiss a complaint for failure to state a claim "'unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Scheuer, 416 U.S. at 236 (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957)).
Defendant argues that Congress did not intend Gramm-Rudman to affect the coinsurance payments of Medicare beneficiaries. (Def.'s Mem. at 8; Def.'s Reply Mem. at 3). Pointing to language in the House and Senate legislative histories with respect to Gramm-Rudman, Defendant states that Congress planned for the reductions in the government payments to be covered by doctors in the form of lower reimbursement rather than by beneficiaries in the form of higher coinsurance payments. (Def's Mem. at 8-9; Def.'s Reply Mem. at 3). Defendant goes on to claim that, if the Court holds that Defendant must cover the reduction in government Medicare payments under Gramm-Rudman, Defendant will pass the new ...