Providers Ask High Court To Set ERISA Pleading Standard In Benefits Recovery Claims

Citing a split of authority among the circuits over the issue, a group of physician and facilities providers have asked the U.S. Supreme Court to determine the standard of pleading required to state a claim under Sec. 502(a) of ERISA, in the wake of the court’s rulings in Bell Atl. Corp. v. Twombly (550 U.S. 544 (2007)) and Ashcroft v. Iqbal (556 U.S. 663 (2009)). The split in authority arose out of the underlying decision in this action by the U.S. Court of Appeals for the Eleventh Circuit and a 2009 decision by the Eighth Circuit in Braden v. Wal-Mart Stores (588 F.3d 585). The case is Sanctuary Surgical Centre v. Aetna, Inc. (No. 13-932).

Background. The petition arose out of the consolidation of four underlying claims involving Sanctuary Surgical Centre and a number of other facilities providers and physician providers who performed manipulations under anesthesia (MUAs) on patients covered by employer health benefits plans insured and administered by UnitedHealthcare Inc., Aetna, Inc., and CIGNA Healthcare, Inc., among others. The insurance companies initially had issued preapprovals for the procedures, but began to deny coverage, categorizing the MUAs as not medically necessary, experimental, investigational, unproven, or not covered services. The providers brought claims under the Employee Retirement Income Security Act of 1974 (ERISA), alleging wrongful denial of benefits, breach of fiduciary duties, failure to provide plan documents, and equitable estoppel. A Florida district court had determined that by including patient and group ID numbers for eight different plans, the providers had supplied enough information to plead the existence of all of the plans and to provide the insurance companies with information about the plans. After initially affirming the district court decision, the Eleventh Circuit reversed itself sua sponte, after finding that, based on the U.S. Supreme Court’s rulings in Bell Atl. Corp. v. Twombly (550 U.S. 544 (2007)) and Ashcroft v. Iqbal (556 U.S. 663 (2009)), each complaint failed to state a claim under ERISA Sec. 502(a)(1)(B).

Eleventh Circuit’s decision. In dismissing the providers’ complaint for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Eleventh Circuit stated that the providers must “at least identify the specific plan provisions under which coverage is conferred with respect to each of the 996 derivative ERISA claims identified in their complaint, and [must] allege sufficient facts to plausibly show the services rendered to each patient were indeed covered by that particular plan.

Eighth Circuit’s decision. In contrast, the Eighth Circuit in Braden determined that in order to state a claim under ERISA, a plaintiff need not allege facts that are solely in the defendant’s possession. According to the Eighth Circuit, the district court had misapplied the pleading standards of the federal rule by failing to draw reasonable inferences in favor of the nonmoving party. The Eighth Circuit also emphasized that in considering the pleading requirements applicable to causes of action under ERISA, courts “must be attendant to ERISA’s remedial purpose.”

Reasons for granting the petition. The petitioners argued that under the pleading standards set in Twombly and Iqbal, and as applied by the Eighth Circuit, the information included in the underlying complaints and the attachments thereto—(1) patient identification numbers; (2) group plan identification numbers; (3) medical conditions giving ruse to MUA treatment for each patient; and (4) dates when the MUAs were performed—was more than sufficient to state ERISA claims. From this information, the petitioners explained, the insurance companies could ascertain from information in their own possession, but not in the possession of the providers, which plans were at issue for each of the insurance claims. Thus, the requirements of Rule 12(b)(6), which call for only a short and plain statement of the claim showing that the pleader was entitled to relief, were met. The petitioners further pointed out that there was no heightened pleading requirement for ERISA claims.

In addition to arguing that the Eleventh Circuit’s decision essentially required the providers to prove their entire case on the face of the complaint, the petitioners claimed that there were significant policy reasons why the High Court should grant the petition. According to the petitioners, the standard set by the Eleventh Circuit threatened “to fundamentally alter the way business is done in the health care industry in America,” where it is very common for patients to rely on their health care providers to interact with insurance companies on their behalf. The Eleventh Circuit’s decision would turn this system “on its head” in that health care providers would no longer be able to assert claims against insurance companies on behalf of their patients. The petitioners further argued that the pleading standard put forth by the Eleventh Circuit imposed an insurmountable burden on health care providers being able to sue insurance companies that did not make payments, leaving the providers with no recourse to collect from the companies. Instead, the providers would be forced to sue their own patients for payment.

Question presented. Given the conflict between the Eleventh and Eighth circuit decisions, the petitioners have asked the Supreme Court to determine the standard of pleading required to state a claim under ERISA Sec. 502(a), in the wake of the court’s rulings in Bell and Twombly.

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