Health Care Provider Allowed To Sue ERISA Plans For Payment Of Benefits

A health care provider had standing, as assignee of plan beneficiaries, to bring claims for payment of benefits against several ERISA-governed health plans and their claims administrator, the Ninth Circuit U.S. Court of Appeals has ruled. However, the provider did not have standing to bring claims for breach of fiduciary duty. The court also held that a nonprofit association of chiropractors lacked associational standing to bring suit against the claims administrator for its allegedly wrongful withholding of payments because the requested relief would require the participation of the association’s individual members. The case is Spinedex Physical Therapy USA Inc. v. United Healthcare of Arizona, Inc. (No. 12-17604).

Background. United Healthcare is the claims administrator for more than 40 health insurance plans governed by ERISA. United insures the benefits for most, but not all, of the plans. During the period relevant to this suit, Spinedex Physical Therapy USA Inc. was a physical therapy clinic whose patients included beneficiaries under the plans. In connection with their treatment, the patients signed several forms, including one that assigned to Spinedex their “rights and benefits” under their respective plans.

After treating the patients covered by the plans, Spinedex submitted claims to United, which paid some of the claims but denied others. As assignee and “would-be” assignee of the plan beneficiaries, Spinedex filed suit against United and the plans seeking payment of the denied claims. The Arizona Chiropractic Society (ACS) and individual plan beneficiaries Jack Adams and Claude Aragon subsequently joined the suit as plaintiffs in an amended complaint alleging improper denials of benefits as well as breaches of fiduciary duty. The district court ruled that Spinedex lacked Article III standing to bring claims as an assignee.

Spinedex standing. United asserted that, because Spinedex had not sought payment from its patients for the denied claims, the assigning patients did not have the “injury in fact” necessary for Article III standing. According to United, because Spinedex stood in the shoes of—and could have no greater injury pinthan—its assignors, Spinedex had not suffered injury in fact.

According to the federal appellate panel, however, the fact that Spinedex chose not to seek payment from its assignors, despite its contractual right to do so, did not mean that it had no right to recover benefits from United. It meant only that Spinedex had decided not to pursue its legal rights against its assignors.

United treated as determinative the patients’ injury in fact as it existed after they assigned their rights to Spinedex. Although the court agreed with United that Spinedex had not sought to recover from its patients any shortfall in Spinedex’s recovery from the plans and that the patients had not suffered injury in fact after assigning their claims, the patients’ injury in fact after the assignment was irrelevant. As assignee, Spinedex took from its assignors what they had at the time of the assignment. At that time, the plan beneficiaries had the legal right to seek payment directly from the plans for charges by non-network health care providers, and they would have had an unquestioned right to bring suit for benefits.

Under U.S. Supreme Court precedent, an assignee has the same injury as its assignor for purposes of Article III. Because the plan beneficiaries in this case had Article III standing at the time of the assignment, Spinedex—as assignee—had Article III standing as well.

However, the plan beneficiaries did not assign to Spinedex their rights to bring claims for breach of fiduciary duty. The assignment form stated, in part: “This is a direct assignment of my rights and benefits under this policy.” According to Spinedex, the words “rights” and “benefits” had different meanings and, thus, “rights” could not refer to “benefits.” Spinedex contended that “rights” must refer to rights to bring claims for breach of fiduciary duty. However, the entirety of the assignment form indicated that the patients intended to assign to Spinedex only their rights to bring suit for payment of benefits. Therefore, Spinedex had no right to bring claims for breach of fiduciary duty.

ACS standing. ACS, a nonprofit association of chiropractors, contended that United improperly refused to pay for “decompression therapy,” or else paid for the therapy at an improperly low rate. ACS sought declaratory and injunctive relief on behalf of its members against these allegedly improper practices. However, ACS did not have associational standing to bring suit because the relief it sought would require the participation of its individual members. Its complaint alleged variations in: (1) payments wrongfully withheld, (2) the treatments for which payment had been withheld, and (3) the individual situations of ACS members. Because of these multiple variations, specific to members of ACS, the alleged violations were not susceptible to judicial treatment as, in the words of the Third Circuit, “systematic policy violations that … make extensive individual participation unnecessary.”

Individual claims. The Ninth Circuit agreed with the district court that Adams’ claim for breach of fiduciary duty against United was time-barred, but the panel reversed the district court’s dismissal of Aragon’s claim. The lower court determined that Aragon had not exhausted his administrative appeals. As a general rule, however, exhaustion is not required for statutory claims like Aragon’s. Because the district court did not consider whether Aragon had Article III standing, the appellate panel remanded Aragon’s case to that court to consider this question in the first instance.

Remaining issues. In addition, the panel found that the limitations periods in the summary plan descriptions for two of the plans at issue were unenforceable because they were not disclosed in compliance with federal regulations. Accordingly, the claims assigned to Spinedex by beneficiaries of those plans were not time-barred. The court also determined that the anti-assignment provision in the Discount Tire Plan prevented Spinedex’s patients from assigning claims under that plan. Finally, the panel vacated the district court’s holdings that United was not a proper defendant for benefit claims under the American Express Plan, and that some of the claims assigned to Spinedex under several of the plans were not administratively exhausted. Accordingly, the panel remanded the case to the district court.

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