Gregory N. Pimstone

In a case that could change how managed health care in California is taxed, Pimstone leads the Manatt, Phelps & Phillips team defending Blue Shield against claims that it -- and three other major health plans -- owe the state billions of dollars.

Pimstone works as both a trial and an appellate lawyer. He leads the firm's health care litigation practice.

"If the plaintiff's theory is accepted, it would be a significant change in how health plans have been taxed since their inception," he said of the tax litigation. "Responding to these types of attacks on the current health care system comes with the territory."

The case has twice been to the Court of Appeal and will undoubtedly be there again, whatever the outcome of trials set for next year in Los Angeles County Superior Court. It was filed in 2013 by a Southern California family physician who contended that Blue Shield of California and Anthem Blue Cross should be considered "insurers" who owe years' worth of gross premium tax instead of other taxes they were assessed by the state. The plaintiff later added other defendants.

Pimstone's client and the other defendants retort that they are health care service plans, not insurers, and that they are regulated by the Department of Managed Health Care in addition to paying other taxes. A judge agreed and sustained some of the defendants' demurrers without leave to amend. But in 2015, a 2nd District Court of Appeal panel reversed and returned the matter to the trial court. Myers v. State Board of Equalization, B255445 (2d DCA, filed April 10, 2014).

The defendants then unsuccessfully petitioned the appellate court for relief based on the Legislature's declaration that appeared to side with them. That stalled the case for about a year, Pimstone said.

"If the courts rule the health plans can be taxed as insurers, that could call into question the financing of Medi-Cal," Pimstone said, "because the way the system works now is that the Managed Care Organization Tax that the health plans pay is a major source of Medi-Cal funding."

He is proceeding with discovery and preparing for the upcoming trials.

"This case that also names the Department of Insurance and other state agencies, and seeks to change how HMOs in the state are taxed," he said.

The litigation's importance is clear from its potential impact on the state. Health spending accounts for more than 12 percent of the California economy.

"There has been a lot of uncertainty post-passage of the ACA," Pimstone said, referring to the federal Affordable Care Act. "Uncertainty tends to end up in court. It's an interesting time to be a health care lawyer. The sector isn't as sexy as entertainment or sports law, but you're dealing with really important stuff that hasn't been litigated before."

-- John Roemer