On May 16, 2018, the United States Court of Appeals for the Third Circuit issued a precedential opinion in American Orthopedic & Sports Medicine v. Independence Blue Cross Blue Shield, et al., Case No. 17-1663, upholding the validity of anti-assignment clauses in health plans governed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. (“ERISA”). The case is a setback for healthcare providers seeking to stand in the shoes of certain ERISA health plan participants when seeking compensation from health plans. A copy of the Court’s opinion may be found here.
In October 2015, American Orthopedic and Sports Medicine (“American Orthopedic”) performed shoulder surgery on a patient who was covered by a health insurance plan issued by Independence Blue Cross Blue Shield and/or Horizon Blue Cross Blue Shield (the “Insurers”). After the surgery, American Orthopedic, who was an out-of-network provider, charged the patient for the procedure. It charged the patient $58,400 and submitted a claim in that amount to the Insurers on the patient’s behalf. The claim form identified the various medical services provided to the patient and indicated that he had “authorize[d] payment of medical benefits” to American Orthopedic.
American Orthopedic’s billed charges far exceeded the health plan’s allowed reimbursement. The Insurers processed the claim according to their out-of-network cap of $2,633, applied the patient’s deductible of $2,000 and his 50% coinsurance of $316. The Insurers issued the patient a small reimbursement check for the remaining $316, and advised him that he would still owe American Orthopedic the remaining $58,083.
American Orthopedic appealed the claim through the Insurers’ internal administrative process. At the same time, it arranged for the patient to sign a document entitled “Assignment of Benefits & Ltd. Power of Attorney,” which reflected that the patient was assigning to American Orthopedic his right to pursue claims under his health insurance plan for the surgery. Also, in the alternative, the document granted to American Orthopedic a limited power of attorney to recover the payment on the patient’s behalf through an arbitration or lawsuit. After the Insurers apparently denied the appeal, American Orthopedic filed suit.
The Insurers contended that American Orthopedic’s claim was barred by virtue of the health plan’s anti-assignment provision. That provision states:
The right of a Member to receive benefit payments under this Program is personal to the Member and is not assignable in whole or in part to any person, Hospital, or other entity nor may benefits of this Program be transferred, either before or after Covered Services are rendered. However, a Member can assign benefit payments to the custodial parent of a Dependent covered under this Program, as required by law.
The Third Circuit agreed with the Insurers. It noted that ERISA does not prohibit anti-assignment provisions like the one contained in the plan at issue. Specifically, it stated:
In sum, we perceive no compelling reason to stray from the “black-letter law that the terms of an unambiguous private contract must be enforced.” Travelers Indem. Co. v. Bailey, 557 U.S. 137, 150 (2009); see also In re Kaplan, 143 F.3d 807, 818 (3d Cir. 1998) (“Parties are entitled to enforce the terms of negotiated contracts[.]” (quoting RTC v. Holtzman, 618 N.E.2d 418, 424 (Ill. 1993))). We are left with a gap in the text, reasonable and competing policy arguments that lack grounding in legislative fact finding, and an overwhelming consensus among the Courts of Appeals that “ERISA leaves the assignability or non-assignability of health care benefits under ERISA-regulated welfare plans to the negotiations of the contracting parties.” City of Hope, 156 F.3d at 229. We now join that consensus and hold that anti-assignment clauses in ERISA-governed health insurance plans as a general matter are enforceable.
The Court went on to note that the power of attorney American Orthopedic obtained was not implicated by the plan’s anti-assignment provision. While an assignment transfers ownership of a claim, the power of attorney simply gave American Orthopedic the authority to act on the patient’s behalf with respect to the claim. Thus, it was fundamentally different than the assignment and not affected by the plan’s anti-assignment provision. Unfortunately for American Orthopedic, however, the Third Circuit declined to remand the claim to the District Court because it “waived its arguments concerning the power of attorney by failing to raise them in its opening or reply brief and, indeed, did not address the significance of the power of attorney until we invited it to do so in supplemental briefing.”
If your claim for health benefits has been denied under your employer’s health plan, contact us today for your free consultation. Adam H. Garner, is an experienced ERISA health benefits lawyer. We may be able to help you obtain the health benefits to which you are entitled.
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