By Jon Braunstein and Kathleen Cahill Slaught
A US District Court in New Jersey recently held that an ERISA Plan’s anti-assignment provision trumped the plan participant’s assignment of benefits to a health care provider and thus the provider lacked standing to sue under ERISA. Neurological Surgery Associates, P.A. v. Aetna Life Insurance Company, et. al., 2014 BL 154982, D.N.J., No. 2:12-cv-05600-SRC-CLW, (unpublished 6/4/14).
The case presented a dispute between the provider and Aetna, as the Plan administrator, over payment for services provided to a Plan participant. The Complaint alleged that the Plan participant executed an assignment of benefits which conferred the provider beneficiary status. The Complaint asserted five claims under ERISA and state law.
Aetna moved for summary judgment arguing that the ERISA plan contained an anti-assignment provision requiring that coverage may be assigned only with its consent, which it did not give. Aetna argued that because the provider sues as an assignee under the plan, and because that assignment is invalid as against the anti-assignment provision, the provider lacked standing to sue. In opposition, the provider contended that it had standing to sue as an ERISA beneficiary under ERISA 502(a)(a)(b), 29 U.S.C. § 1132(a)(1)(B), regardless of the presence of the anti-assignment provision.
In the absence of Third Circuit precedent, the district court chose to follow the majority view which holds that anti-assignment clauses trump provider assignments, citing Physicians Multispecialty Group v. Health Care Plan of Horton Homes, Inc., 371 F.3d 1291, 1295 (11th Cir. 2004), St. Francis Reg’l Med. Ctr. v. Blue Cross & Blue Shield of Kan., Inc., 49 F.3d 1460, 1464-65 (10th Cir. 1995) and Davidowitz v. Delta Dental Plan of Cal., Inc., 946 F.2d 1476, 1478 (9th Cir. 1991).
Citing these authorities, the district court further explained that Congress carefully considered assignment of both pension and welfare plan benefits, and consciously decided to prohibit pension plan assignments but remain silent on welfare benefits. The district court said that, having chosen to remain silent, Congress intended not to mandate assignability, but intended instead to allow the free marketplace to work out such competitive, cost effective, medical expense reducing structures as might evolve.
The district court granted the Aetna’s motion holding that the ERISA Plan’s anti-assignment provision was valid and enforceable, the assignment of rights or benefits was void, and that the provider lacked standing to sue under ERISA. The district court also summarily concluded that the provider’s supplemental state law claims were duplicative of the ERISA claims and thus preempted by ERISA.
The case is significant because claims by out of network providers under ERISA are now percolating in courts throughout the country. These cases present questions of standing, participant assignments, plan anti-assignment provisions, and challenges to enforcement of anti-assignment provisions (e.g., contractual ambiguity, waiver and/or estoppel).
To borrow a poker analogy, in most jurisdictions a flush (the anti-assignment provision) trumps a straight (the provider assignment). The next question to be determined in litigation is whether the provider can trump the straight with a full house (i.e., a successful challenge to the anti-assignment provision rendering it unenforceable). We expect to see many more of these types of cases and claims in the near future.