## Facts

- Andrew Arce, a four-year-old enrolled in a Kaiser health plan, had autism spectrum disorder.
- The plan covered “health care services” but excluded “custodial care.”
- Plaintiffs alleged Kaiser had a uniform practice of categorically denying coverage for applied behavior analysis (ABA) therapy and speech therapy for members with autism, labeling the therapies as noncovered or “custodial care.”
- Plaintiffs sued under the Unfair Competition Law (UCL), alleging Kaiser’s categorical denials violated the California Mental Health Parity Act and the Knox-Keene statutory framework and breached plan obligations.
- The trial court sustained Kaiser’s demurrer to the UCL claim without leave to amend, citing judicial abstention and lack of class commonality due to asserted individualized medical-necessity questions.

## Issues

1. Whether a court may abstain from adjudicating a UCL claim alleging a health plan’s categorical denial of autism-related therapies violates the Mental Health Parity Act and Knox-Keene Act.
2. Whether, at the demurrer stage, it was proper to conclude plaintiffs could not establish class “community of interest” because individualized medical-necessity determinations would predominate.

## Decision

- The Court of Appeal reversed and remanded.
- The trial court erred by abstaining because the claim presented statutory and contract interpretation questions suitable for judicial resolution and did not require complex policy choices or agency functions.
- The trial court erred by determining class infeasibility on demurrer; there was a reasonable possibility plaintiffs could show a community of interest based on a uniform, categorical denial policy.
- Adjudication of the pleaded UCL theory would not require individualized determinations of medical necessity at the threshold.

## Legal Principles

- Judicial abstention in UCL actions is improper where the Legislature has made the relevant policy determinations and the court is asked to apply statutes and interpret plan terms.
- Whether a treatment constitutes a covered “health care service” under the Mental Health Parity Act/Knox-Keene framework and the plan is a judicial question of statutory and contract interpretation.
- A challenge to a health plan’s alleged systematic, categorical coverage denial may present common issues appropriate for class treatment, and class viability generally should not be rejected at the pleading stage based on speculative individualized issues.

## Conclusion

The court held that a UCL class claim alleging Kaiser categorically denied coverage for ABA and speech therapy for autism could proceed because the dispute primarily required judicial interpretation of statutes and plan terms, not abstention or premature rejection of class commonality.


Arce v. Kaiser Found. Health Plan, Inc., 181 Cal. App. 4th 471 (Ct. App. 2010)