ERISA-Second Circuit Holds That ERISA Does Not Completely Preempt A Health Care Provider’s Promissory-Estoppel Claim Against The Insurer For Payment

In McCulloch Orthopaedic Surgical Services, PLLC v. Aetna Inc., No. 15-2150 (2nd Cir. 2017), the Second Circuit Court of Appeals (the “Court”) was asked to decide whether ERISA  completely preempts an “out-of-network” health care provider’s promissory-estoppel claim against a health insurer, where the provider: (1) did not receive a valid assignment for payment under a health insurance plan and (2) received an independent promise from the insurer that he would be paid for certain medical services provided to the insured.  The Court held that ERISA does not completely preempt such a claim.

In this case, the plaintiff, treated as being a doctor named McCulloch, filed this action against defendant, Aetna Inc. and several of its wholly-owned subsidiaries (“Aetna”).  In New York State Supreme Court, McCulloch, an orthopedic surgeon, seeks reimbursement from Aetna for performing two knee surgeries on a patient who is a member of an Aetna administered health care plan that is governed by ERISA (the “Plan”).  McCulloch is an “out-of-network” provider under this Plan, that is, he has no arrangement with Aetna setting his fee.  The insured attempted to assign his benefits to McCulloch.  However, the Plan did not permit an assignment of benefits to out-of-network providers.  However, an Aetna representative, found at a phone number on the patient’s insurance card, informed McCulloch’s staff that the Plan provided for payment to out-of-network physicians, and that the Plan covered the intended surgical procedures.

Aetna paid McCulloch some, but not all, of the amount McCulloch billed for the surgeries.  McCulloch brought suit in New York State Supreme Court for the difference, based on a claim of promissory-estoppel.  Aetna removed the suit to United States District Court for the Southern District of New York, based on federal-question jurisdiction.  McCulloch filed a motion to remand back to state court.  Ultimately, the district court denied McCulloch’s motion, and dismissed McCulloch’s complaint.  McCulloch appeals.

One issue for the Court to decide was the matter of complete preemption by ERISA.  If McCulloch’s claim is completely preempted, then it was properly removed to the district court.  The Court noted that, in Aetna Health Inc. v. Davila, the U.S. Supreme Court established a two-pronged test to determine whether a state-law claim is completely preempted by ERISA § 502(a)(1)(B) (that section allowing a claimant to assert a claim for benefits).  Under the first prong, the claim must be brought by an individual who, at some point in time, could have brought his claim under ERISA § 502(a)(1)(B).  Under the second prong, the claim must involve no independent legal duty, other than rights and obligations stemming from a plan, that is implicated by a defendant’s actions.  In this case, however, those two prongs are not met, since: (1) McCulloch did not receive a valid assignment, as the Plan did not permit them, and thus is not the type of party that can bring a claim pursuant to § 502(a)(1)(B) and (2) Aetna’s oral statements gave rise to a duty-the duty of reimbursement- that was distinct and independent from its obligations under the patient’s health care plan.  Thus, ruled the Court, there is no complete preemption, and the case must be sent back to state court.

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