ERISA-Ninth Circuit Rules That A Health Care Provider, To Whom Benefits Are Assigned By A Plan Participant, May Not Bring Suit Against The Plan For Payment of The Benefits In Federal Court Under ERISA

DB Healthcare, LLC v. Blue Cross Blue Shield of Ariz., Inc., No. 14-16518, No. 14-16612 (9th Cir. 2017) is actually two cases, which involve reimbursement disputes between health care providers and employee health benefit plan administrators.  The Ninth Circuit Court of Appeals (the “Court”) decided the cases together, because they raise a common central issue: whether a health care provider designated to receive direct payment from a health plan administrator for medical services is authorized to bring suit in federal court under ERISA.  The Court considered two separate potential bases for such authority under ERISA’s civil enforcement provisions: direct statutory authority and derivative authority through assignment.  Although the contractual relationships between the health care providers and the plan administrators, and between the providers and the patients, under these two bases differ in relevant ways, the Court concluded that the providers cannot-under either base- enforce ERISA’s protections in federal court on either basis.

Why this conclusion?

Agreeing with other circuits, the Court reaffirmed that health care providers are not health plan beneficiaries who have direct statutory authority to sue for declaratory relief and money damages under ERISA section 502(a)(1)(B) or injunctive relief under ERISA section 502(a)(3).  Rather, a health care provider must bring claims derivatively, relying on its patients’ assignments of their benefit claims.  The Court held that the health care providers here, however, lacked derivative authority to sue, given the nature of the governing agreements and of the purported assignments.  In one case, the governing employee benefit plans contained non-assignment clauses that overrode any purported assignments.  In the other case, although the provider agreement permitted assignment, and payment authorization forms could be construed as assigning the provider limited rights, the provider’s claims fell outside the scope of the assigned rights.