Sidibe v. Sutter Health

Background

Four individuals who paid for health insurance and two small companies that paid for employee health insurance sued Sutter Health. They alleged that Sutter used market power in seven Northern California hospital markets to require five health plans—Blue Shield, Anthem Blue Cross, Aetna, Health Net, and UnitedHealthcare—to include Sutter hospitals in other markets at Sutter’s allegedly above-competitive prices. The plaintiffs alleged that the health plans passed those costs to consumers through higher premiums, violating the federal Sherman Antitrust Act, the California Cartwright Act, and the California Unfair Competition Law.

The court had previously certified a class seeking injunctive relief but denied certification of a damages class because the plaintiffs had not shown that antitrust injury and damages could be established with common evidence. The plaintiffs renewed their request to certify a damages class under Federal Rule of Civil Procedure 23(b)(3). That rule requires common legal or factual questions to predominate over individualized questions and requires a class action to be superior to other ways of resolving the dispute.

Damages methodology

The plaintiffs’ revised analysis was prepared by Dr. Tasneem Chipty. It used Medical Loss Ratio, or MLR, data: statewide information on health-plan premiums and medical costs reported to the federal government under the Affordable Care Act. Dr. Chipty used regression analysis to estimate how much of the health plans’ increased medical costs was passed through to premiums. Her estimated overall pass-through rate was 98.86 percent; after capping estimates at 100 percent, the weighted average was 97.16 percent. She estimated damages of approximately $465 million to $489.04 million for September 2008 through December 2017.

The court found that the revised analysis did not simply assume a uniform pass-through rate. It calculated rates for different health plans and lines of business, accounted for competition from Kaiser, considered regulatory differences and geographic areas, and used other quantitative and qualitative evidence to support the analysis. The court concluded that the method was sufficiently reliable to show that damages could be calculated on a class-wide basis.

The court rejected Sutter’s argument that differences among rating areas, health plans, business lines, time periods, and employer-employee premium contributions prevented certification. It said that allocating premium increases between employers and employees concerned allocation of damages rather than whether class members were injured, and that the allocation could be based on the actual percentage of premium payments.

The court reached a different conclusion for 2008 through 2010. MLR reporting requirements began in 2011, so the plaintiffs used later data to estimate pass-through rates for the earlier period. The court held that the plaintiffs had not shown that damages for 2008 through 2010 could be calculated reliably on a class-wide basis.

Other motions and disposition

The court denied Sutter’s request to strike the MLR data and denied Sutter’s motion for sanctions based on the timing of the data disclosure. The court found that the plaintiffs used the new data in response to the court’s earlier rejection of their methodology and that Sutter had been able to respond through its own expert.

The court granted the plaintiffs’ motion to certify a Rule 23(b)(3) damages class, except for the period from 2008 to 2010, for which it denied certification. It denied Sutter Health’s motion for sanctions. The order did not decide whether Sutter ultimately violated the antitrust laws or whether the plaintiffs were entitled to damages.