Blue Cross Wins Appeal Over ERISA Standing

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

Medical providers that sued Blue Cross-connected health insurers over more than $500,000 in reimbursements lost their appeal when a federal court found they weren’t authorized to bring suit ( DB Healthcare, LLC v. Blue Cross Blue Shield of Ariz., Inc. , 9th Cir., No. 14-16518, 3/22/17 ).

The U.S. Court of Appeals for the Ninth Circuit March 22 offered a narrow view of standing under the Employee Retirement Income Security Act by holding that medical providers aren’t ERISA plan beneficiaries and thus can bring ERISA lawsuits only in a derivative capacity. The providers in this case also lacked derivative standing, the Ninth Circuit said, because the assignment forms they received from ERISA plan beneficiaries weren’t legally valid.

Every federal appeals court to have considered this issue has ruled that medical providers don’t qualify as ERISA plan beneficiaries, the Ninth Circuit said. The court noted that its decision was in line with earlier rulings of the Third, Sixth, Seventh and Eleventh circuits.

Consolidated Cases

The Ninth Circuit’s decision resolves two separate cases brought by medical providers against Blue Cross-connected insurers. Both provider groups lost at the district court level in 2014, when federal judges in Arizona and California denied them standing under ERISA.

After first concluding that the providers lacked standing as beneficiaries of ERISA plans, the Ninth Circuit considered whether the assignment forms they received from their patients would grant them derivative standing under the statute.

In the Arizona case, the providers lacked valid assignments—and thus had no standing—because the relevant health plans contained anti-assignment clauses preventing patients from assigning rights to medical providers, the Ninth Circuit said.

The providers in the California case suffered from a different problem, the Ninth Circuit said. Specifically, the claims they asserted against the insurers fell outside the scope of the assignment forms they received from ERISA-insured patients, the court said.

Those assignment forms only authorized the providers to receive payments from the ERISA-governed plans, according to the Ninth Circuit. They provided no authorization for the providers to seek injunctive relief preventing the insurer from recouping overpaid benefit amounts, the court said.

Despite denying the providers standing to assert ERISA claims, the court noted that ERISA likely wouldn’t prevent the providers from using state law to accuse the insurers of breaching their provider agreements.

Judge Marsha S. Berzon wrote the decision, which was joined by Judge N. Randy Smith and Chief District Judge Dana L. Christensen, sitting by designation from the U.S. District Court for the District of Montana.

The providers were variously represented by Quadrino Law Group PC, Schleier Law Offices PC and Newmeyer & Dillion LLP. The insurers were variously represented by Miller & Chevalier, Lewis Roca Rothgerber Christie LLP and Foley & Lardner LLP.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

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