Anti-assignment clauses in ERISA plans are enforceable

Plan provisions that bar insureds from assigning their claims to a third party—even to the healthcare provider that rendered the service—are generally enforceable in health plans governed by the Employee Retirement Income Security Act, the U.S. Court of Appeals for the Third Circuit held. ERISA does not clearly prohibit anti-assignment clauses, and every other federal appeals court to have considered this issue has ruled that ERISA does not foreclose plan administrators from freely negotiating such clauses. Thus, the court here found no reason to depart from the “black-letter law that the terms of an unambiguous private contract must be enforced.”

In the case at bar, an insured who was covered under an ERISA health plan underwent shoulder surgery. His healthcare provider, which was out-of-network, charged the insured a fee of $58,400 for the surgery and submitted a claim for that amount to the plan’s insurers on the insured’s behalf. The claim form indicated that the insured had authorized payment of medical benefits to the provider. Because the charges far exceeded the plan’s allowed reimbursement, the insurers processed the claim according to the plan’s out-of-network cap of $2,633. After applying the appropriate deductible and coinsurance, the insurers informed the insured that he still owed the provider $58,083. While the provider was appealing the claim, the insured signed a form assigning to the provider his right to pursue claims under the health plan. The insurers denied the appeal, and the provider filed suit.

Anti-assignment clause. The insurers argued that the provider lacked standing to sue because the health plan contained an anti-assignment clause stating that “[t]he 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.” The provider asserted that this clause was unenforceable.

ERISA gives employees who are covered by welfare benefit plans the right to sue to recover benefits due under the plan. Although that right is limited to the “participant” or “beneficiary” under the plan, the statute does not clearly prohibit anti-assignment clauses. The absence of such a prohibition may indicate that Congress intended to preserve the rights of beneficiaries to assign their benefits, but it does not necessarily mean that Congress intended to permit plan trustees to extinguish those rights for all beneficiaries through a blanket contractual waiver. In the court’s view, the text of ERISA was inconclusive with respect to the question at issue in this case. The court also found unpersuasive the parties’ respective arguments on ERISA policy considerations.

Turning to out-of-circuit authority, the court found that every federal appellate court to have considered the arguments presented by the provider ultimately concluded that nothing in ERISA forecloses a plan administrator from freely negotiating anti-assignment clauses. This overwhelming consensus, together with the gap in the text of ERISA and the competing policy arguments that lacked grounding in legislative fact finding, the Third Circuit joined its sister circuits and held that anti-assignment clauses in ERISA-governed health plans are generally enforceable. As such, the provider in this case lacked standing to proceed to federal court, and the case was dismissed.

SOURCE: American Orthopedic & Sports Medicine v. Independence Blue Cross Blue Shield, (CA-3), No. 17-1663, May 16, 2018.
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