Medical Providers: How NOT to State an ERISA Claim

On October 1, 2015, the Court of Appeals for the Seventh Circuit issued a decision holding that in-network chiropractors were limited to the remedies available under their network contract with Blue Cross and could not invoke rights under the Employee Retirement Income Security Act (ERISA). Pennsylvania Chiropractic Association et al v. Independence Hospital Indemnity Plan Inc., Nos. 14-2322, 14-3174, and 15-1274 (7th Cir. 2015).

Chiropractors’ ERISA Claims Unsuccessful

The case involved chiropractors who were participating providers in Blue Cross’s network, which was governed by a network contract signed by Blue Cross and the chiropractors. The chiropractors were paid pursuant to the contract for medical services that were rendered to Blue Cross members. However, at some point, Blue Cross discovered that it had mistakenly overpaid the chiropractors and proceeded to recoup payments by offsetting future payments for other services. The chiropractors sued, arguing that Blue Cross could not recoup payments without providing administrative review and remedies required by ERISA. Blue Cross argued that the proper procedures to follow were contained in the network contract. 

The Seventh Circuit held for Blue Cross on the grounds that, under ERISA, only a “participant” or “beneficiary” can maintain an ERISA cause of action under 29 U.S.C. § 1132(a)(1)(B), and the chiropractors were neither. Therefore, they were not within the zone of interests regulated by ERISA, which protects employee benefits and regulates plan duties. The court emphasized that “no employee’s benefits are at issue and none had to pay an extra penny as a result” of the conduct at issue, and that “plans’ duties to their participants are unaffected by this litigation.” Pennsylvania Chiropractic, Nos. 13-2322, 14-3174, and 15-1274 at 5.

Decision Unsurprising, But Different Circumstances Might Produce Different Results

This decision is hardly shocking. ERISA primarily regulates rights and remedies as between employer-sponsored group health plans, the fiduciaries and administrators of those plans, and the participants and beneficiaries of those plans. Medical providers are listed nowhere in the ERISA statute and have never been considered covered “ERISA entities.” But it is not true that medical providers can never assert claims under ERISA – as one reading this recent Seventh Circuit decision might be inclined to conclude. Instead, what happened here is that the chiropractors simply lacked the circumstances necessary to produce a viable cause of action under ERISA.

First, for a medical provider to state a claim under ERISA, it must have a valid assignment of benefits from the patient. Here, the chiropractors argued that they were “beneficiaries” under ERISA, meaning they were “designated by a participant” of an ERISA plan. But the court found they were not relying on an assignment from any patient. This is a death knell for an ERISA claim. A provider must have an assignment of benefits from a patient in order for it to “stand in the shoes” of the patient and pursue the patient’s ERISA rights. ERISA allows for assignments of health benefits, so long as the ERISA plan document does not preclude assignments.

Second, to assert a claim for benefits under ERISA, that claim must be lodged against an ERISA plan. Here, the chiropractors sued Blue Cross – an entity with which they were directly contracted. Blue Cross’s policies and its network contract with the chiropractors are not “ERISA plans” (although some of the underlying benefit plans that Blue Cross administers for its employer clients may well have been). Stated simply, if the chiropractors had wanted to invoke ERISA rights, they had the wrong party named as a defendant. The chiropractors were in litigation with Blue Cross, and the only document that the chiropractors pointed to that gave them rights against Blue Cross was the network contract – so, unsurprisingly, the court ruled that they were limited to the recourse permitted by that contract and the state insurance laws that regulate such contracts.

Third, to file an ERISA claim for benefits in court, a provider with a valid assignment of benefits must first have exhausted its administrative remedies under the ERISA plan. Since there were no ERISA plans that were even parties to this suit, there was no discussion of this requirement in the case. But medical providers wishing to take advantage of ERISA’s protections in the future should be mindful that they must first file and complete the administrative appeals process pursuant to the ERISA plan document before they have the right to file a lawsuit.

Providers Can Successfully Sue Under ERISA, With the Right Facts and Parties

There are potential avenues for relief for medical providers under ERISA. Many other cases, such as Kennedy v. Connecticut General Life Insurance Co., 924 F.2d 698 (7th Cir. 1991), and more recently, OSF Healthcare Sys. v. Contech Constr. Products Inc. Group Comprehensive Health Care, No. 1:13-CV-01554-SLDJEH, 2014 WL 4724394, at *3 (C.D. Ill. Sept. 23, 2014), have held that providers stated viable ERISA claims as beneficiaries based on valid assignments. Unfortunately for the chiropractors in Pennsylvania Chiropractic Association, this case simply had none of the right facts or right parties.