The Ninth Circuit Speaks on Health Care Providers’ ERISA Rights

Health care providers may sue under ERISA’s civil enforcement provisions only when armed with robust assignments of benefits and rights from patients and where the governing Plan documents do not prohibit assignments.

Mirroring the reasoning of other circuits, the Ninth Circuit held that health care providers, in their own right, are not “beneficiaries” who may sue under ERISA’s civil enforcement provisions of § 502(a)(1)(B) or § 502(a)(3). Instead, providers wishing to pursue ERISA rights may rely only on derivative authority through assignments of patients’ rights. In this case, however, the assignments executed by the patients were insufficient to convey derivative authority on the providers because either the governing plans contained anti-assignment provisions that negated the purported assignment or the assignments were limited by their language to impart on the providers only the limited right to payment and no other rights to proceed against the health plan.
 
DB Healthcare stemmed from two separate lawsuits in Arizona and California that shared a number of common facts. The plaintiffs in both cases were health care providers that delivered medical services to participants and beneficiaries of employee health benefit plans insured and administered by defendants Blue Cross and Anthem. In 2010 and 2011, the health care providers performed tests and related services on the patients and submitted claims for payment to the defendants. The claims were processed and paid by defendants. However, following post-payment audits, the defendants determined that the claims were improperly paid—in one case Blue Cross deemed the tests investigational and therefore excluded from coverage, and in the other case Anthem reasoned that the providers used incorrect billing practices and were therefore not entitled to payment. Blue Cross and Anthem then notified the plaintiffs of these erroneously paid claims and requested repayment totaling approximately $530,000.
 
After the health care providers refused to refund the payments, Blue Cross and Anthem used various tactics to pressure repayment. Blue Cross threatened to withhold re-credentialing nurses, warned that it would refuse to credential new nurses, and vowed to terminate the relevant network provider agreements with the health care providers. Anthem forcibly recouped some of its payments by withholding claim payments to the health care providers for unrelated patients’ claims.
 
The providers then filed complaints in federal district court in Arizona and California, asserting various causes of action under ERISA, including violations of § 503 claims procedures, § 510 prohibition against retaliation and interference with protected rights, and ERISA regulations providing procedural protections to claimants under 29 C.F.R. § 2560.503-1. In both cases, the district courts dismissed the claims, holding that both sets of providers lacked statutory or derivative authority to pursue claims under ERISA.[1]
 
The District Court for the District of Arizona held that the employee benefit plans insured and administered by Blue Cross included valid anti-assignment provisions that forbade the assignment of any rights. The plans insured and administered by Anthem, the defendant in the case before the District Court for the Eastern District of California, did not contain anti-assignment provisions. However, patients covered by these plans signed forms authorizing only payment to the health care provider and did not otherwise assign rights or benefits to the provider.
 
In its opinion, the Ninth Circuit preliminarily noted that the question of a provider’s ability to bring suit directly under ERISA § 502(a) is not an issue of standing or subject matter jurisdiction. Instead, the question of whether a provider may bring suit under ERISA’s civil enforcement provision is more appropriately viewed in the context of a Rule 12(b)(6) dismissal for failure to state a claim.
 
Unsurprisingly, the court noted that health care providers are not “beneficiaries” under the meaning used in ERISA’s civil enforcement provisions. As previously held in Spinedex Physical Therapy USA Inc. v. United Healthcare of Ariz., Inc., 770 F.3d 1282 (9th Cir. 2014), health care providers “cannot bring claims for benefits on [their] own behalf. [They] must do so derivatively, relying on [their] patients’ assignment of their benefits claims.” Id. at 1289. The court then reasoned that remuneration for medical services rendered to plan beneficiaries—paid to health care providers pursuant to assignments signed by the patients—is not a “benefit” under ERISA, and therefore does not permit providers to sue in and of itself.
 
Lacking statutory authority to sue as “beneficiaries,” the providers relied on derivative authority to bring their claims. The court held that the providers lacked derivative authority as well, for two different reasons. While ERISA permits patients’ assignment of their rights to reimbursement to health care providers, the nature of the governing Plan documents and purported assignments in this case foreclosed the providers’ claims resulting from assignments. One set of provider-plaintiffs lacked valid assignments because the governing employee benefit plans contained strict anti-assignment provisions that precluded any attempted assignments.[2] The other provider-plaintiff’s claims were precluded for a separate reason. Although the Anthem provider-side agreement permitted the assignment of benefits, the payment authorization forms assigned the provider in this case only very limited rights, and the provider’s claims fell outside the scope of the assigned rights.[3]
 
The court found that the payment authorization forms at issue assigned the provider only the limited right to payment. The forms did not include the terms “assign” or “assignment.” Although those words of art are not required, their presence would indicate an intent to assign additional rights to the providers. Based on the limited language of the payment authorization forms, the court held that the patients intended, at most, to assign the right to payment of benefits along with the associated right to sue for non-payment, but nothing else. Therefore, the plaintiff-provider’s claims for declaratory and injunctive relief relating to the alleged overpayments and the claims for breach of fiduciary duty were outside the scope of the assignments.
 
Importantly for health care providers, however, the Ninth Circuit makes clear that just because ERISA’s statutory civil enforcement remedies precluded the claims in this case, the providers may nonetheless have state law claims for breach of the provider agreements. Because such claims would have an independent legal basis, a claim for breach of the provider agreement is not preempted by ERISA. See Aetna Health Inc. v. Davila, 542 U.S. 200, 210 (2004).
 
While the result of this case is not surprising, it again reaffirms that health care providers must carefully scrutinize underlying employee benefit plans to determine whether potential claims are precluded by an anti-assignment provision. Health care providers must also be certain that assignment forms signed by patients are broad enough to assign all potential benefits and rights that the providers may need to ensure payment and challenge recoupment from payers.
 
For more information on providers’ rights, ERISA benefits, or commercial payer disputes, contact Caroline Turner English or Andrew Solinger.