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Siopes v. Kaiser Foundation Health Plan, Inc.

Supreme Court of Hawaii

September 26, 2013

MICHAEL SIOPES and LACEY SIOPES, Petitioners/Plaintiffs-Appellants,
v.
KAISER FOUNDATION HEALTH PLAN, INC.; HAWAI'I PERMANENTE MEDICAL GROUP, INC.; KAISER FOUNDATION HOSPITALS, INC., Respondents/Defendants-Appellees.

APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CAAP-12-0000361; CIV. NO. 11-1-2732-11)

Mark Davis Michael K. Livingston Matthew C. Winter Clare E. Connors for petitioners

William S. Hunt Dianne Winter Brookins Jan M. Vernon David A. Abadir for respondents

RECKTENWALD, C.J., NAKAYAMA, ACOBA, AND POLLACK, JJ.,

OPINION

POLLACK, J.

Petitioners Michael Siopes and Lacey Siopes (collectively, "Siopeses") appeal from the Circuit Court of the First Circuit's (circuit court) March 5, 2012 orders granting the Motion to Compel Arbitration (Motion to Compel Arbitration) and the Motion to Stay Discovery and Other Pretrial Proceedings Pending a Ruling on the Motion to Compel Arbitration (Motion to Stay Discovery), filed by Respondents Kaiser Foundation Health Plan, Inc., Hawai'i Permanente Medical Group, Inc., and Kaiser Foundation Hospitals, Inc. (collectively, "Kaiser").

For the reasons set forth herein, we hold that the arbitration provision contained in the relevant contract is unenforceable based on the lack of an underlying agreement between Kaiser and Michael to arbitrate. Accordingly, Lacey is also not bound to arbitrate her claims in this case. The circuit court's orders are vacated and the case is remanded for further proceedings consistent with this opinion.

I.

A.

In 1998, Michael began working as a full-time teacher at a public school on Maui. Michael was presented with options for health insurance coverage through the Department of Education and the Hawai'i State Teachers Association. The Hawai'i Employer-Union Health Benefits Trust Fund (EUTF) "was established to provide a single health benefits delivery system for State and county employees, retirees, and their dependents."[1] Awakuni v. Awana, 115 Hawai'i 126, 129, 165 P.3d 1027, 1030 (2007). See Hawai'i Revised Statutes (HRS) Chapter 87A.

On May 26, 2003, Michael signed a one-page enrollment form entitled "EUTF Enrollment/Change Form for Active Employees" (Enrollment Form), enrolling in a Kaiser health plan offered through the EUTF.

In a section entitled "Premium Conversion Plan Elections, " Michael selected a box providing:

ENROLL me in the Premium Conversion Plan (PCP) so that my monthly contribution for my health insurance benefit plans premiums will be paid using pre-tax payroll deducted monies, to the extent permitted. I have read and understand the PCP information provided in the instruction sheet.

(Emphasis added). The record does not include an instruction sheet or any evidence that an instruction sheet was provided to Michael.

Michael indicated that he was "Single" on the Enrollment Form and did not provide any information in the dependent coverage section of the form with respect to dependents to include in his selected plan. Lacey, who is presently married to Michael, has never been a Kaiser member. She did not sign the Enrollment Form.

At the bottom of the Enrollment Form, a signature box provides that the enrollee, by signing the Enrollment Form, makes the following certifications and affirmations[2]:

Certification: I certify that the information provided in this application is true and complete. I agree to abide by the terms and conditions of the benefit plans I selected. I authorize my employer or finance officer to set my effective dates of coverage and to make the pre-tax or after-tax deductions, adjustments or cancellations from my salary, wages, pension or other compensation for my monthly employee contribution in accordance with applicable laws, rules or regulations.
I affirm that any listed dependent child, aged 19 through 23, is attending a college, university or technical school as a full-time student.
I affirm that I have non-EUTF plan benefits for each Dual Coverage Plan I selected.

The Enrollment Form does not provide any other description or identification of what is referred to as the "terms and conditions of the benefit plans I selected"; nor does the Enrollment Form provide that the "terms and conditions" are stated in a separate document.

According to Kaiser, a 2003 Group Medical and Hospital Service Agreement (Group Agreement) entered into between Kaiser and the EUTF was applicable to Michael when he signed the Enrollment Form. However, the 2003 Group Agreement was not attached to the Enrollment Form or given to Michael prior to his signing the Enrollment Form. There is also no indication in the record that the agreement was subsequently provided to Michael. Additionally, the Enrollment Form itself contains no reference by name to a "Group Medical and Hospital Service Agreement" or to any agreement between Kaiser and the EUTF. The form also does not provide a space for the enrollee to acknowledge whether he or she has read and understood the Group Agreement, including the "terms and conditions" of the applicable benefit plan.

The 2003 Group Agreement that Kaiser states was applicable does not contain a section specifically titled "Terms and Conditions." In addition, the Group Agreement does not contain a signature line for a prospective or current Kaiser member to acknowledge that it was read or received prior to or after enrollment in the Kaiser plan.

Under a section entitled "Relations Among Parties Affected by Service Agreement, " the Group Agreement provides that Kaiser members "authorize" the EUTF "for purposes of entering into this Service Agreement and for all other purposes in regards to this Service Agreement, " although the provision does not explain what is meant by "all other purposes." Additionally, this section provides that "[a]ny notice to Group by Health Plan is deemed notice to the Members."[3]

A section entitled "Miscellaneous Provisions" includes a subsection titled "Service Agreement Binding on Members." The subsection provides: "By electing medical and hospital coverage pursuant to this Service Agreement, or accepting benefits hereunder, all Members legally capable of contracting, and the legal representatives of all Members incapable of contracting, agree to all terms, conditions and provisions of this Service Agreement."

Section 8 of the 2003 Group Agreement is entitled "Appeal and Arbitration Procedures" and begins on page 10 of the agreement. The arbitration section is titled and set forth in the same font as all other provisions in the agreement and is not otherwise distinguished from the other provisions. The arbitration provision states that it governs all claims "arising from an alleged violation of a legal duty incident to this Service Agreement" that are brought by a Kaiser member or representative against a Kaiser entity.[4]

This section on the scope of the arbitration clause also provides that "[b]enefit-related claims subject to Chapter 502(a)(1)(B) of the Employee Retirement Income Security Act (ERISA) are covered by this binding arbitration requirement, " unless exempted by satisfying two conditions.[5]

The arbitration provision limits the scope of civil discovery to "relevant" documents, "brief depositions, " and "independent medical evaluations, " with the arbitrator designated to resolve any disputes:

Limited civil discovery shall be permitted for (1) production of relevant documents, (2) taking of brief depositions of parties and expert witnesses, and (3) independent medical evaluations. The arbitrator(s) shall resolve any discovery dispute submitted by any party.

In regard to arbitration fees, the arbitration provision requires that "fees and expenses of the arbitration service and the arbitrator(s) shall be borne equally by the two parties." Each party is required to "bear their own attorney fees."

In regard to confidentiality, the arbitration provision prohibits the disclosure of the terms or substance of the arbitration award except in limited circumstances:

F. Confidentiality. Neither party nor the arbitrator(s) may disclose the terms or substance of the arbitration award, except as required by law or as necessary to file a motion to confirm the award, and in that event, the parties shall take all appropriate action to request that the records of the arbitration be submitted to the court under seal.

The arbitration provision also states that the arbitration decision is "final and binding, " that Kaiser members "waive their rights to jury or court trial, " and that "[w]ith respect to any matter not expressly provided for herein, the arbitration shall be governed by [HRS] Chapter 658."

According to Kaiser, it "provides copies of the current Group Service Agreement to employers annually and they are responsible for making it available to their Kaiser member- employees for review. In addition, Kaiser employee-members may request a copy of the Group Service Agreement that is applicable to them by contacting Kaiser's Customer Service Department."

Kaiser also states that its Group Agreements are "reviewed and renegotiated with employers on an annual basis, as necessary." Kaiser attached a copy of its 2009 Group Agreement with its Motion to Compel Arbitration and argues that the 2009 Agreement governed the "rights and responsibilities" of Kaiser and Michael in 2009, "when the events at issue in this case occurred." As with the 2003 Group Agreement, there is no evidence in the record that the 2009 agreement was provided to Michael, other than Kaiser's assertion that it provides copies of the Group Agreement to employers.

The 2009 Group Agreement reflects several changes to the arbitration provisions as compared to the 2003 Group Agreement.[6] The general provision providing that all claims are subject to binding arbitration[7] and the confidentiality provision remained substantively unchanged.

However, the provision on ERISA was changed to provide that claims for benefits brought by members of private employer groups under ERISA § 502(a)(1)(B) are not subject to mandatory binding arbitration. The discovery provision was also changed to further limit discovery, permitting brief depositions of only three "critical witnesses" in addition to medical personnel.[8]

The parties' responsibility for arbitration expenses was altered as well, to lessen the member's share to a third of the costs for the arbitration service and the arbitrator, while responsibility for other fees remained unchanged, so that each party bears their own attorney's fees, witness fees, and discovery costs. In addition, the provision on the applicable law for "any matter not expressly provided for herein" was changed to provide that such matters would be governed by the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq., rather than HRS Chapter 658.

Although the first page of the 2009 Group Agreement provides a "2009 Summary of Important Changes for Kaiser Permanente Group HMO Plans Contract Renewals, " none of the changes detailed above are listed in the summary.

B.

The facts alleged in the Siopeses' Complaint were as follows. In October 2009, Michael contacted his Kaiser primary care physician on Maui regarding a persistent upper abdominal pain. He was prescribed medication, and blood tests were ordered for him.

On January 11, 2010, Michael again contacted his physician because he continued to experience persistent abdominal pains. After several tests were conducted over the next month, an upper endoscopy and biopsy conducted on February 16, 2010 revealed an ulcerated cancer tumor at the junction of Michael's esophagus and stomach.

The following day, Michael requested an outside referral from Kaiser for the purpose of seeking a second medical opinion, but was advised to wait until after he had consulted a Kaiser surgeon. An appointment was scheduled for February 19, 2010, with a general surgeon at Kaiser's Moanalua facility on O'ahu.

The Siopeses flew to O'ahu to meet with the general surgeon, who informed them that Michael had been diagnosed with "small cell" neuroendocrine carcinoma of the gastroesophageal junction, a very rare, aggressive and fatal form of cancer. The general surgeon explained that Kaiser would develop a course of treatment based on this diagnosis. He informed the Siopeses that he had never seen or treated this form of cancer at the juncture of the esophagus and stomach and did not know of anyone within the Kaiser Hawai'i network with expertise in this area. He indicated that he would need to do "internet research" in order to formulate a proper treatment plan. Nevertheless, the surgeon informed the Siopeses that the cancer could become fatal within a month and required urgent treatment. He therefore wanted to immediately perform a complete surgical resection of Michael's stomach and esophagus.

Two days later, the general surgeon informed Michael that the surgery was scheduled to take place in nine days. The surgeon acknowledged that he was still completing his research.

The Siopeses decided to seek a second opinion at Duke University Medical Center (Duke) in North Carolina, a high volume cancer center specializing in treating esophageal and stomach cancers. Upon learning that Duke was willing to immediately evaluate him, Michael contacted the Kaiser general surgeon in order to have his pathology slides sent to Duke. When Michael spoke to the surgeon later that day, the surgeon stated that after conducting additional internet research and speaking with an oncologist, he had concluded that his initial treatment plan may have been inappropriate. The surgeon suggested that Michael have additional imaging studies done and possibly undergo some radiation and chemotherapy before the surgery. The surgeon further stated that he had emailed a Kaiser oncologist to request a consultation but that no appointment had yet been scheduled.

The next day, February 23, 2010, the Siopeses flew to North Carolina so that Michael could be examined by the medical team at Duke. On February 24, the Kaiser oncologist contacted Michael and scheduled an appointment for March 8, 2010.

On February 25, 2010, Michael arrived at Duke. A multidisciplinary cancer treatment team determined that Kaiser's diagnosis of "small cell" neuroendocrine carcinoma was erroneous, and Michael actually had a "high grade" neuroendocrine tumor. The Duke team explained that this was a serious error, as these types of cancer require different treatment courses. The Duke team recommended a treatment plan that combined measured chemotherapy and targeted radiation to shrink the cancer tumor, followed by surgical removal of the tumor.

The Siopeses elected to remain at Duke so that Michael could immediately begin the recommended course of treatment. On March 3, 2010, a Kaiser physician agreed to provide a referral for Michael's evaluation and treatment at Duke and routed the request to Michael's primary care physician, the Kaiser oncologist, and the Kaiser general surgeon. On March 22, 2010, Michael's primary care physician, after reviewing the Duke medical records, made a referral to Duke for treatment and requested that the treatment be covered by the Kaiser Group Plan.

Michael underwent radiation and chemotherapy treatment at Duke between March 8 and April 20, 2010. On March 29, Michael received a letter from Kaiser denying his request for Kaiser to cover the costs of his treatment at Duke. Kaiser's reasoning was that Kaiser had the capacity to perform radiation and chemotherapy treatment, although Kaiser had not ordered or prescribed either treatment for Michael.

On June 3, 2010, Michael's primary care physician made another referral request for Kaiser to cover the cost of Michael's surgery at Duke. On June 4, Michael underwent thoracic surgery at Duke. On June 9, he received a letter from Kaiser again denying his request for coverage.

Duke's treatment was successful and resulted in eliminating the cancer while preserving intact the majority of Michael's stomach and esophagus. On July 1, 2010, Michael was cleared by Duke to return to Maui.

Between July and December 2010, Michael filed two appeals with the Kaiser Permanente Appeals Coordinator, requesting that Kaiser provide coverage for the testing and treatment at Duke. Kaiser denied both appeals based on its assertion that the Duke treatment constituted "elective, ...


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