Health Maintenance Network v. Blue Cross of Southern California

Good Law
1988 Cal. App. LEXIS 630·202 Cal. App. 3d 1043·249 Cal. Rptr. 220
Court of Appeal of CaliforniaJuly 13, 1988B017620California8,114 words

Opinion

Opinion

Boren, J.

Blue Cross of Southern California and other related defendants (collectively referred to as Blue Cross) appeal from the issuance of a permanent injunction prohibiting them from interfering with the operation of plaintiff, Health Maintenance Network of Southern California (Health Net).

Overview

The instant action in equity traces its genesis to an attempt by a health insurance organization, Blue Cross, to assert control over an autonomous health maintenance organization (HMO) it helped establish, Health Net.

In 1977, Blue Cross set up Health Net under California nonprofit corporation laws to benefit from various marketing advantages of a federally qualified HMO. At the same time, Health Net was also structured as a nonprofit hospital service plan under the Insurance Code. Both Health Net and Blue Cross were separate legal entities, yet Blue Cross sought to make Health Net a subsidiary company, “operating under the Blue Cross umbrella.” Essentially, Blue Cross received additional exposure by which to attract new subscribers, while Health Net benefited from Blue Cross’s established subscriber roster, business experience and capital.

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