Out-of-Network, Out of Luck? A Growing Body of Caselaw Addressing Claims by Out-of-Network Providers Seeking Full Reimbursement from Health Insurers Says 'No'

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By Lauren Garraux

K&L Gates, Pittsburgh, PA

It's become a common scenario for medical providers: a provider treats a patient covered by employer-provided health insurance for which the provider is out-of-network, receives an assignment of benefits from the patient and is reimbursed by the benefits plan administrator (whether an insurance company or otherwise) at a rate much lower than the amount charged, if at all. The provider then embarks upon the often Sisyphean journey of navigating the plan's lengthy and nebulous appeals process.

Should the appeals process not provide meaningful relief, providers may consider pursuing reimbursement claims under the Employee Retirement Income Security Act of 1974, as amended (ERISA).  This Insight discusses three common issues facing providers in asserting reimbursement claims under ERISA and why they do not defeat a provider's entitlement to full and fair reimbursement.

ERISA Preemption

An initial issue facing providers is under which body of law—state, federal or a combination of both—they may pursue reimbursement claims against plan administrators. In the past, for example, some providers elected to assert state law claims (both common law and statutory). In response, health insurers argued that state law reimbursement claims were preempted by ERISA. Many courts agreed, holding that these reimbursement claims fall exclusively within the scope of and must be brought under ERISA—and not under state law—a concept referred to as "ERISA preemption." See 29 U.S.C. §1144(a) (providing that ERISA's provisions "shall supersede any and all State laws insofar as they many now or hereafter relate to any employee benefit plan…."); Aetna Health Inc. v. Davila , 542 U.S. 200, 210 (2004) ("[I]f an individual, at some point in time, could have brought his claim under ERISA…, and where there is no other independent legal duty that is implicated by a defendant's action, then the individual's cause of action is completely pre-empted by ERISA…."); New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656 (1995) (explaining that ERISA's preemption clause "indicates Congress's intent to establish the regulation of employee welfare benefit plans `as exclusively a federal concern.'") (citation omitted).

ERISA preemption thus may determine where the provider may bring its claims (federal court) and which claims it may bring (those provided for under ERISA, as opposed to those rooted in state common law and statutes). While ERISA preemption in some cases may allow insurers to delay reimbursement, it is not an impediment to a provider's ability to obtain full and fair reimbursement because of the breadth and expansiveness of ERISA's remedial provisions, which provide for monetary damages for services provided, among other relief.


A second defense raised by insurers is whether they even have the right (or standing) to bring an ERISA claim against a plan administrator at all. While providers are not included in the classes of persons enumerated in ERISA who may bring claims under its terms, many courts have allowed providers to bring ERISA claims where the provider has obtained an assignment of benefits from the patient (the plan subscriber) and the plan's terms do not prohibit such assignments.  See, e.g.,North Cypress Med. Center Operating Co., Ltd. v. Cigna Healthcare, 781 F.3d 182, 191-92 (5th Cir. 2015) (explaining that providers may not assert ERISA claims in their own right, but may bring ERISA suits standing in the shoes of their patients through an assignment of benefits); Borrero v. United Healthcare of N.Y., Inc., 610 F.3d 1296, 1301 (11th Cir. 2010) (same).

Indeed, many courts have allowed providers to assert ERISA claims even where the plan purports to prohibit such assignments, through an "anti-assignment clause," on a number of grounds, including estoppel and the plan administrator's course of dealing. See, e.g.,Atlantic Spinal Care v. Highmark Blue Shield, No. 13-3159 (JLL) (D.N.J. July 2, 2013) (recognizing that an anti-assignment clause may be waived by, inter alia, a course of dealing); Glen Ridge Surgicenter, LLC v. Horizon Blue Cross Blue Shield of New Jersey, Inc., No. 08-6160 (D.N.J. Sept. 30, 2009) (noting that a course of dealing between a provider and insurer may constitute a waiver of an anti-assignment provision and estop the insurer from disavowing the provider's standing under ERISA). Thus, while the language of the specific plan at issue (namely, whether the plan permits or purports to prohibit assignments) is relevant to whether a provider has standing to bring an ERISA claim, even the presence of an anti-assignment clause is not, in and of itself, dispositive of the standing issue.  Instead, in certain circumstances, a provider may still bring an ERISA claim even where the plan contains an anti-assignment clause.

Exhaustion of Plan Remedies

A third defense raised by insurers relates to whether the provider has "exhausted" the appeals process or other remedies for a payment denial available under the specific benefits plan. While ERISA itself does not require exhaustion of plan remedies, courts have imposed this requirement as a prerequisite to a provider seeking judicial relief under ERISA and insurers frequently assert a provider's alleged failure to exhaust plan remedies as an affirmative defense to an ERISA claim. SeeJ.W. Counts v. Am. Gen. Life & Accident Ins. Co., 111 F.3d 105, 108 (11th Cir. 1997) (explaining that "plaintiffs in ERISA actions must exhaust available administrative remedies before suing in federal court."); Denton v. First Nat'l Bank of Waco, 765 F.2d 1295, 1300-01 (5th Cir. 1985) (explaining that exhaustion "is necessary to keep from turning every ERISA action, literally, into a federal case" and prevents "premature judicial intervention in [the plan's] decision-making process.") (citation omitted).

Insurers who press the exhaustion of remedies defense often attempt to create a Catch-22 for providers. Specifically, providers who have attempted to navigate a plan's appeals process will appreciate how difficult and frustrating a task that can be for a number of reasons, including because the process (namely, the requirements and timeline for an appeal) may not be specifically defined or only vaguely defined, because of delays caused by the plan administrator, or because of an administrator's failure to provide the provider with plan documents and other information addressing the appeals process and its requirements.

As a result, and seemingly in recognition of these insurer-created difficulties, courts have recognized a number of exceptions to the exhaustion requirement, including that pursuing the available plan appeals process would be futile, lack of meaningful access to the claims process, and unreasonable procedures imposed by the plan administrator. There are certain practical steps a provider may be able to take at the outset of an appeal to strengthen or streamline the argument in favor of applying one of these exceptions once litigation has been commenced. Therefore, the more aware of these exceptions a provider is prior to embarking on the plan's appeals process, the better.


In brief, being an "out-of-network" provider does not necessarily mean that he or she is "out of luck" when it comes to seeking reimbursement for services provided.  Notwithstanding insurer-created defenses, ERISA may afford the provider with a means to reimbursement. The insurer defenses discussed in this Insight are more likely to arise early on in the litigation and, as evidenced by the growing body of caselaw in this area of the law, are not insurmountable.

For more information, in the Tax Management Portfolios, see Wagner, 374 T.M., ERISA — Litigation, Procedure, Preemption and Other Title I Issues, Cowart, 389 T.M., Medical Plans — COBRA, HIPAA, HRAs, HSAs and Disability and in Tax Practice Series, see ¶5920, Health & Disability Plans .

© 2015 K&L Gates LLP.

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