Smith v. PacifiCare Behavioral Health of California, Inc.,
Nos. B142321, B145004 (Cal. App. 2d Dist. Oct. 25, 2001)
Two
members of PacifiCare Health Plan alleged that the plan failed to provide promised
plan benefits and failed to timely authorize or extend needed treatment by health
providers. PacifiCare moved to compel arbitration, based on language in its
Subscriber Agreement mandating arbitration. The plaintiffs argued that the arbitration
provisions did not comply with statutory disclosure requirements. PacifiCare
conceded that the arbitration provisions did not comply with the disclosure
requirements, but argued that such failure was irrelevant because the California
law was preempted by the Federal Arbitration Act ("FAA"). The California
Court of Appeal held that health care service plans such as PacifiCare are engaged
in the "business of insurance" as defined in the McCarran-Ferguson
Act and thus are not covered by the FAA.