Can a Healthcare Plan Dictate Where a Medical Provider May Sue It?

The court in which a provider can file suit, known as the lawsuit’s “venue,” often influences a provider’s choice of counsel, the lawsuit’s costs, and the lawsuit’s burdens on the provider. The venue also dictates whether the court must follow legal precedent that favors or disfavors the provider’s claims or the healthcare plan’s defenses. Until recently, only one federal appeals court had decided the issue of whether a plan can require that all claims against it, including claims seeking unpaid medical costs, be raised in only one venue. But in August, a second federal appeals court, the US Court of Appeals for the Seventh Circuit, decided the same issue. In In re Mathias, it ruled that an ERISA plan can restrict the venue for lawsuits brought against it to a single jurisdiction chosen by the plan.

ERISA expressly limits the venues in which a plaintiff can sue a plan for reimbursement of unpaid benefits. Specifically, a plaintiff may file a lawsuit under Title I of ERISA only in a court (a) where the plan is administered, (b) where a breach of the plan occurred (often where the patient resides and the provider operates), or (c) where the plan resides. Providers suing plans typically do so in their local trial court because that court is usually where the alleged breach of the plan occurred and is most convenient for the provider. But about ten years ago, healthcare plans began adding clauses, known as a forum selection clauses, that specify a single court in which any litigation against the plan must proceed. Clauses can specify a court that is distant from the provider or that is bound by case law that favors plans, thereby discouraging providers from ever pursuing their reimbursement claims against the plans.

Courts across the country have disagreed about whether such forum-selection clauses are enforceable and, therefore, whether a plan can require a provider or other ERISA claimant to file a lawsuit only in a particular court that may be distant or inconvenient for the provider. Courts that have enforced these clauses often reason that doing so ensures that all disputes over a plan’s benefits will be decided by the same court, thereby promoting the uniform administration of the plan’s terms and reducing the costs of administering the plan. They add that nothing in ERISA bars a plan from adopting forum selection clauses. On the other hand, courts that refuse to enforce these clauses often emphasize that Congress intended ERISA to guarantee plan participants or their assignees the right to sue in their preferred court and that a plan cannot “contract around” this right.

But with the Seventh Circuit’s recent ruling and the prior ruling from the US Court of Appeals for the Sixth Circuit, the two highest courts to decide this issue have both ruled in favor of plans by enforcing their forum-selection clauses. (While both of these cases involved forum-selection clauses in ERISA-governed pension plans, the decisions also affect ERISA-governed healthcare plans.) The plaintiff in the Sixth Circuit case brought suit against his ERISA plan near his home in Kentucky, but that court ruled that the plan’s forum-selection clause permitted the plan to transfer the case to a court in Iowa. Similarly, the ERISA plan in the Seventh Circuit case successfully argued that its forum-selection clause enabled it to transfer the case from Pennsylvania to a court in Illinois. In both cases, even though the forum-selection clauses eliminated the plaintiffs’ right under ERISA to litigate their claims in a court where the alleged breach of the plan occurred (which was close to their residences), the courts upheld the clauses because the plaintiffs still had access to a federal court, albeit one in a location that was more inconvenient location for the plaintiffs.

Medical providers suing a healthcare plan for reimbursement can continue to raise their suits in courts that are most convenient to them, but they should recognize that the plans that they sue may contain forum-selection clauses that arguably require the suits to proceed in another court that may be distant and inconvenient. The Seventh Circuit’s recent ruling gives employers and healthcare plans additional support to try to dictate where lawsuits against them may be brought. That said, courts in other parts of the country remain divided as to whether to enforce those clauses. Consequently, providers seeking reimbursement from plans in most parts of the country still have grounds to file their claims in the courts that are most convenient to them and to contest a plan’s attempt to enforce its forum-selection clause that seeks to dictate the sole venue of all claims against it.

*This article was previously published by Becker’s Hospital Review.