A version of this article was published in The Daily Record on Feburary 11, 2016.
Health care providers have continued to file lawsuits challenging the adverse decisions of health plans. In the cases discussed below, the providers had mixed success in pursuing two different, novel theories of alleged health plan wrongdoing.
In Rojas v. Cigna, Cigna determined that a physician practice had been overcharging Cigna for certain services that had been provided to Cigna insured. Cigna demanded repayment from the practice, and then terminated the practice from Cigna's network after the practice refused to repay the overcharges. The practice responded by filing suit to stop Cigna from removing the practice as an in-network provider.
One of the claims that the practice made was that Cigna's decision to remove the practice from the network violated the anti-retaliation provisions in ERISA. (ERISA prohibits any discrimination against an ERISA participant or beneficiary who exercises any right he or she may have under an ERISA plan.)
The practice alleged that it was entitled to the ERISA protection because it met the definition of "beneficiary" in ERISA. ERISA regards as a beneficiary any person who "may become entitled to a benefit" under an ERISA plan. The practice claimed that it was entitled to a benefit under an ERISA plan because its patients had assigned to the practice their rights to payment from the group health plan and/or Cigna for medical services that had been provided by the practice.
The court ruled that the physician practice did not have standing as a beneficiary under ERISA. According to the court, to be a "beneficiary" under ERISA, one must be owed a benefit. The court ruled that "benefit" under ERISA means the actual medical services that patients receive from medical service providers, but it does not include the payment for such services.
It did not help the practice's case that it failed to produce copies of any written assignment-of-benefits forms that it alleged its patients had signed. Nevertheless, the court assumed for argument's sake that there had been a proper assignment to the medical practice, but then ruled that such an assignment would transfer only the patients' rights to be paid by Cigna, and no other ERISA rights. The court also expressed skepticism that patients could somehow prevent the insurer from exercising its rights to select the members of the insurer's physician network.
Service providers that wish to pursue ERISA rights on the basis of assignments from their patients also face another challenge - the changing language of ERISA health care plans. An increasing number of plan sponsors have added language to their plans to prohibit plan participants from assigning their benefits and benefit-related claims.
In any case, court decisions have come down on both sides of this issue. In addition to the Rojas decision, federal appellate courts in Ohio and Georgia have ruled that health care providers generally cannot gain beneficiary status under ERISA from assignments of their patients' claims. However, federal trial courts in New Jersey and Illinois have ruled that providers can enforce such assignments and file suit as beneficiaries. The courts in Maryland have not published any rulings on this issue.
B. Michigan Spine
In Michigan Spine v. State Farm, a medical practice sued under the Medicare Secondary Payer Act (MSP) because State Farm refused to pay for the medical services of its insured patient.
In general, the MSP provides a private cause of action against the primary payer (that is, the insurance company) for damages if the primary payer fails to provide payment or reimbursement for payments made by Medicare. The MSP statute was enacted to make Medicare coverage secondary to any coverage provided by private insurance programs, and the MSP private right of action was added to enforce Medicare's status as secondary.
In this case, the insured patient had been injured in an automobile accident, and the medical practice filed a claim for approximately $26,000 for treatment that it provided to the insured. The insured was also covered by Medicare, and the medical practice also submitted its claims to Medicare. State Farm denied coverage on the ground that the injuries resulted from the insured's preexisting condition. Notably, the basis for State Farm's denial had nothing to do with whether the insured was eligible for Medicare. Medicare made a conditional payment of $5,000 to the practice.
In an earlier, separate case, the federal appellate court with jurisdiction for Michigan had ruled that medical providers cannot maintain a private right of action under the MSP against group health plans that deny coverage for any reason other than Medicare eligibility. Curiously, when that same appellate court three years later considered the arguments in Michigan Spine, it found that MSP regulations warranted limiting the earlier ruling to lawsuits against group health plans. Therefore, it ruled that a private cause of action under the MSP may proceed against a non-group health plan, such as State Farm, that denies coverage on a basis other than Medicare eligibility.
Consequently, the Michigan Spine case arguably opens two doors, albeit that one door is open wider than the other. First, medical practices can sue primary insurers under the MSP and cite Michigan Spine if they are not paid for providing treatment to Medicare-eligible patients that are covered under non-group health plans. Second, medical practices can also now at least argue that the Michigan Spine decision should be expanded to cover denials of payment by group health plans, because allowing different outcomes under the MSP for group health plan and non-group health plan denials is non-sensical.