United States: California Supreme Court Issues Landmark Opinion On Express Preemption

We do not often see state court opinions strongly endorsing federal preemption, or even weakly endorsing federal preemption. That is why we took notice last week when the California Supreme Court ruled unanimously that the Medicare Act expressly preempted state common-law and statutory claims against a health maintenance organization and a healthcare plan administrator. Most notably, the California Supreme Court held that all state law claims were preempted, without regard to whether state law created duties identical to federal law. In other words, there was none of the "parallel claim" gymnastics in which so many other courts engage. The California Supreme Court also, for the first time, rejected a presumption against preemption.

The case is Quishenberry v. UnitedHealthcare, Inc., No. S271501, 2023 WL 4511572 (Cal. July 13, 2023) (to be published), and it is as solid an opinion on express preemption as we have seen from a state court. In Quishenberry, the plaintiff's elderly parent was enrolled in a Medicare Advantage plan offered by an HMO and administered by the HMO's contract administrator. After receiving treatment under the plan, the plaintiff's parent passed away, leading the plaintiff to bring multiple state-law claims against the HMO and the administrator, including common-law claims for negligence and wrongful death and a statutory claim for Elder Abuse. Id. at *2. The core allegation was that the patient did not receive the care to which he was entitled under his Medicare Advantage Plan. Id. at *7.

The California Supreme Court held in a seven-to-zero opinion that the Medicare Act expressly preempted all of the plaintiff's claims. The Medicare Act includes a particularly strong preemption provision that preempts any state law affecting Medicare Act plans. Here it is verbatim:

Id. at *3 (citing 42 U.S.C. § 1395w-26(b)(3)). Note that this part of the Medicare Act supersedes "any State law or regulation" with respect to Medicare Advantage plans, with only two specific carve outs. This is different from the express preemption provision that we are most accustomed to seeing—the Medical Device Amendments' provision preempting state-law requirements that are "different from, or in addition to" federal requirements. It is even different from the relatively more blunt preemption provision that applies to over-the-counter drugs, under which states cannot enforce laws that are "different from or in addition to, or that [are] otherwise not identical with, a requirement under" federal law.

No, the Medicare Act preempts "any State law or regulation" with respect to Medicare Advantage plans, and that language made all the difference for the California Supreme Court. First, there is no exception for "duplicative state-law duties," which we know better as so-called "parallel claims." That ill-conceived and poorly understood "exception" to express preemption can allow some plaintiffs to pursue state-law claims so long as the alleged state-law duty is the same as federal requirements. But not under the Medicare Act:

Id. at *4 (emphasis added). This is especially apparent when compared to the "different from or in addition to" language of the Medical Device Amendments, a comparison that the California Supreme Court expressly drew. As the Court observed, the Medical Device Amendments preempt only those state-law standards that are inconsistent with federal requirement. Not so under the Medicare Act. Id.

Second, the Medicare Act's preemption provision is not limited to claims under state statutes and regulations, excepting common-law claims. The statute says "any," and it includes only two exceptions—"state licensing laws" and "state laws related to plan insolvency." The statutory language does not support creating a new exception for common-law claims. Id. at *5. As the California Supreme Court held, "The Medicare Act contains no equivalent savings clause or any other affirmative indication that Congress intended to preserve common-law duties." Id. at 6.

Third, the Act's preemption provision is likewise not limited to state-law regulations that specifically refer to and target Medicare Advantage plans. Again, despite the plaintiff's urging, the California Supreme Court did not find an exception for laws of general applicability. The provision preempts any state-law standard "with respect to" Medicare Advantage plans. Which means that the Act's standards preempt "even those duties set out in generally applicable statutes, but only as they apply to" Medicare Advantage plans. Id. at *6.

The California Supreme Court summed it up better than we could, so here it is:

Id. If you skipped the block quote, go back and read it, because this is why we said at the outset that this is as solid an opinion on express preemption as we have seen from a state court. The California Supreme Court's rejection of a presumption against express preemption is a pretty big deal, too. Id. at *3 n.3. The Ninth Circuit has done that on several occasions, but this is a first for the California Supreme Court.

From there it was a short step to hold that federal law preempted the plaintiff's claims. Despite efforts to recast his claims, the plaintiff's lawsuit alleged that his late parent did not receive all the treatment to which he was entitled under his Medicare Advantage plan. Those allegations invoked standards under the Medicare Act Part C, and therefore were preempted. Id. at *7-*8.