Over the past two months, the United States Court of Appeals for both the Ninth Circuit and the Third Circuit have upheld “anti-assignment” clauses in ERISA-governed health plan documents. These holdings – which adopt the same position previously taken by the First, Second, Fifth, Tenth, and Eleventh circuits – are a blow to healthcare providers that attempt to bring suits against employer-sponsored health plans (or the insurance companies funding benefits under those plans) as “assignees” of individual plan participants.
Over the past several years, health care providers (and in particular, non-network providers) have become increasingly aggressive in attempting to collect for services rendered to participants in ERISA-covered group health plans when the plan refuses to pay some or all of the cost of the services provided (and the participant does not pay, or is not asked to pay, the fees not paid by the plan). Those providers have taken the position (and the courts have largely agreed) that, if a participant assigns his or her rights to plan benefits to the provider, that assignment includes all of the participant’s rights under the plan, including the right to sue for benefits not paid.
In response to those claims, many plan sponsors have now included “anti-assignment” language in their plan documents. Such language either completely prohibits, or substantially limits, the participants’ ability to assign their rights under the plan to a healthcare provider. The goal is to keep healthcare providers from bringing lawsuits against the plan or the insurer.
When asked to consider the validity of such anti-assignment provisions, the courts listed above have generally concluded that nothing in ERISA forecloses insurers and/or plan sponsors from freely negotiating the right to assign benefits. As a result, the courts have generally (but not universally) upheld such anti-assignment provisions. Therefore, if a plan participant knowingly or unknowingly signs a form assigning all rights to a healthcare provider, that assignment will be null and void if the plan expressly prohibits such assignments.
The Ninth Circuit case, Eden Surgical Center v. Cognizant Technology Solutions Corp. No.16-56422 (9th Cir., Apr. 12, 2018), is noteworthy in that the plan’s anti-assignment clause was upheld despite the fact that (i) the plan’s representative mistakenly told the healthcare provider that the plan did not contain an anti-assignment provision, and (ii) the plan did not raise the “anti-assignment” issue during the administrative claims review process. The court held that (i) the healthcare provider had an “affirmative duty” to obtain the plan documents and verify whether the plan contained an anti-assignment provision, and (ii) the anti-assignment clause is a litigation defense that need not be raised until a purported assignee actually files suit against the plan.
In the Third Circuit case, American Orthopedic & Sports Medicine v. Independence Blue Cross Blue Shield, No. 17-1663 (3rd Cir., May 16, 2018), the court appeared to leave an “open window” for situations where the insured participant signs a valid power of attorney (suggesting that this might be another way that a healthcare provider could bring a claim against the plan on behalf of the participant). However, the court refused the provider’s request to remand the case so that it could resubmit a power of attorney that was deficient under state law (because the plaintiff failed to raise that argument in its briefs). So, this leaves open the question of whether a valid power of attorney would allow a healthcare provider to make a claim against the plan as the participant’s “attorney in fact,” rather than as the “assignee” of the participant’s rights under the plan.
If you are unsure whether your group health plan allows or prohibits participants to assign their rights under the plan (including the right to request copies of documents and the right to sue), please contact any of the attorneys in Spencer Fane’s Employee Benefits Practice Group.