Managed care litigation is generally described as the tug of war among payors (insurers and self-funded plans), providers (physicians, hospitals, and other medical service providers), and patients (members or beneficiaries of health plans). Payors strive to adhere to their committed risk under their health plans, providers demand fair payment for services rendered, and patients simply want coverage for their medical expenses.
Put another way, a provider’s successful claim for reimbursement could find precedent-setting coverage for a pool of claims never intended by the actuaries, with significant economic impact on whether the payor sustains an underwriting profit or loss. At the same time, a payor’s successful claim against coverage validates policy language or claim review procedures, ensuring use of the decision in subsequent claims.
The first portion of this article will explore some of the empirical data attendant to managed care cases filed since January 2014. The case data is derived from cases filed in U.S. District Courts, whether filed as original proceedings or removed from state court. Insofar as the health plans at issue are invariably provided as employer group health benefits, the predicate for removal is usually the Employee Retirement Income Security Act of 1974 (ERISA).1 The discussed cases are against the five major health insurers: Aetna, United Healthcare, Humana, CIGNA, and Blue Cross Blue Shield Plans.2
The second half of this article will discuss noteworthy cases concerning the applicability of anti-assignment clauses affecting out-of-network providers.3
In 2014, there were 463 cases involving managed care disputes against Blue Cross Blue Shield Plans (165 cases), Aetna (110 cases), United Healthcare (81 cases), Humana (49 cases), and CIGNA (58 cases). Of all of those cases, 145 were filed on behalf of members, 81 were filed on behalf of physicians, 135 were filed on behalf of other service providers, and 64 were filed on behalf of facilities. There were 21 cases on behalf of plan sponsors, 11 cases involving a plan’s subrogation rights, and six cases filed by health insurers seeking repayment from provider(s).
During this period, the greatest concentration of cases was filed in the U.S. Eleventh Circuit (134), followed by the U.S. Ninth Circuit (68), and the U.S. Fifth Circuit (64).
In 2015, there were 498 cases involving managed care disputes against Blue Cross Blue Shield Plans (234 cases), Aetna (112 cases), United Healthcare (70 cases), Humana (21 cases), and CIGNA (61 cases). Of all of those cases, 97 were filed on behalf of members, 12 were filed on behalf of physicians, 13 were filed on behalf of other service providers, and 26 were filed on behalf of facilities. There were 78 cases on behalf of plan sponsors, six cases involving a plan’s subrogation rights, and two cases filed by health insurers seeking repayment from provider(s).
During this period, the greatest concentration of cases was filed in the U.S. Sixth Circuit (113), followed by the U.S. Ninth Circuit (84), and the U.S. Fifth Circuit (59).
In 2016, there were 499 cases involving managed care disputes against Blue Cross Blue Shield Plans (216 cases), Aetna (94 cases), United Healthcare (108 cases), Humana (28 cases), and CIGNA (53 cases). Of all of those cases, 218 were filed on behalf of members, 61 were filed on behalf of physicians, 24 were filed on behalf of other service providers, and 91 were filed on behalf of facilities. There were 35 cases on behalf of plan sponsors, nine cases involving a plan’s subrogation rights, and two cases filed by health insurers seeking repayment from provider(s).
During this period, the greatest concentration of cases was filed in the U.S. Ninth Circuit (108), followed by the U.S. Tenth Circuit (65), and the U.S. Fifth and Sixth Circuits (58 each).
In 2017, there were 646 cases involving managed care disputes against Blue Cross Blue Shield Plans (348 cases), Aetna (104 cases), United Healthcare (103 cases), Humana (18 cases), and CIGNA (73 cases). Of those cases, 228 were filed on behalf of members, 196 were filed on behalf of physicians, 50 were filed on behalf of other service providers, and 99 were filed on behalf of facilities. There were 41 cases on behalf of plan sponsors, 19 cases involving a plan’s subrogation rights, and 13 cases filed by health insurers seeking repayment from provider(s).
During this period, the greatest concentration of cases was filed in the U.S. Third Circuit (197), followed by the U.S. Tenth Circuit (98), and the U.S. Ninth Circuit (88).
In the first half of 2018, there were 318 reported cases involving managed care disputes against Blue Cross Blue Shield Plans (142 cases), Aetna (65 cases), United Healthcare (63 cases), Humana (15 cases), and CIGNA (33 cases). Of those cases, 114 were filed on behalf of members, 111 were filed on behalf of physicians, 39 were filed on behalf of other service providers, and 35 were filed on behalf of facilities. There was one case filed on behalf of a plan sponsor, eight cases involving a plan’s subrogation rights, and 10 cases filed by health insurers seeking repayment from provider(s).
During this period, the greatest concentration of cases was filed in the U.S. Third Circuit (111), followed by the U.S. Ninth Circuit (51) and the U.S. Tenth Circuit (47).
While the case volume as to each insurer is fairly constant, the mix of cases tends to change. Past articles have discussed increasing numbers of cases asserting claims for mental health benefits and claims involving emergent care.4 Mental health benefit cases are most frequently filed in the U.S. Tenth Circuit, which encompasses the State of Utah where many residential treatment centers and wilderness programs are located. The U.S. Third Circuit, encompassing the State of New Jersey, saw a large increase in filings in the third quarter of 2017, largely comprised of out-of-network physicians seeking payment for orthopedic claims. The U.S. Sixth Circuit, encompassing the State of Michigan, saw a large number of plan sponsor claims in 2016 against a major insurer in that state, but those claims have diminished.
Out-of-network providers typically rely on an Assignment of Benefits from the patient, whereupon the provider submits the claim to the payor citing that assignment. In contrast, an Assignment of Benefits is largely unnecessary for the in-network provider, who is contractually bound to treat the health plan’s member and directly bill the health benefit plan.
Perhaps to encourage members to seek treatment from an in-network provider, many health benefit plans have anti-assignment clauses, which prohibit the member from assigning benefits which may be due the member to the out-of-network provider. The general rule is that anti-assignment clauses are valid and enforceable against the assignee.5
Recently, providers have challenged those anti-assignment clauses on the grounds that certain conduct by the payor, such as paying other claims directly to the out-of-network provider, not raising the anti-assignment clause as a defense to payment during the verification of benefits call, or otherwise communicating with the out-of-network provider operates as the payor’s waiver of the clause. The recent cases discussed below address the provider’s arguments, albeit unfavorably, insofar as the cases bolster the payor’s defense to payment.
In American Orthopedic & Sports Medicine v. Independence Blue Cross Blue Shield; Horizon Blue Cross Blue Shield of New Jersey,6 the U.S. Third Circuit considered two prior U.S. Fifth Circuit decisions7 and held that anti-assignment clauses in ERISA health plans are enforceable and not waived by routine processing of a claim form, issuing payment at an out-of-network rate, or summarily denying informal appeals.8 In so holding, the Third Circuit identified a gap in ERISA’s statutory text9 and a growing consensus among appellate courts upholding contractual anti-assignment clauses.10 The Third Circuit’s opinion was recently followed by an underlying district court in University Spine Center v. Aetna, Inc.11
In Eden Surgical Ctr. v. Cognizant Tech. Solutions Corp.,12 the U.S. Ninth Circuit specifically held that the provider had an affirmative duty to inquire as to the existence of an anti-assignment clauses before filing suit, and that an insurer does not waive the operative provisions of those clauses by failing to assert them before suit is filed. See also Richard Henry Weiner v. Blue Cross and Blue Shield of Louisiana,13 holding that the provider’s suit challenging the payor’s recoupment is barred by anti-assignment clause.
These cases have given payors a formidable defense to provider claims that attempt to rely upon assignments as the predicate to a claim for payment.
As reflected by the empirical data above, litigation over health plan benefits, usually filed by out-of-network providers,14 continues at a steady pace. However, as the anti-assignment clause cases discussed above suggest, such out-of-network providers are facing litigation in a landscape that is becoming increasingly hostile to their claims.
There are no easy answers to these conflicts which, in the case of out-of-network providers, often leave the patient with a high cost share responsibility. But remembering that the patient is also the “customer,” parting with hard-earned money to contribute toward the cost of care, should be an impetus for both the payor and the provider to be equally compassionate to the patient’s non-medical needs. Litigation over benefits coverage, whether initiated by the patient or the provider, is never pleasant and should only be considered as a last resort.
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| 1 | 29 U.S.C. § 1001, et seq. The ERISA provisions relating to a participant or beneficiary’s enforcement of rights may be found at 29 U.S.C. § 1132 et seq. |
| 2 | The terms “Aetna,” “United Healthcare,” “Humana,” and “CIGNA” are intended to be generic terms which identify with the four major health insurers. The term “Blue Cross Blue Shield Plans” is intended to be a generic term that collectively represents the 36 independently operated Blue Cross and Blue Shield member companies. While these are not the only health insurers, these entities collectively comprise the largest percentage of the health insurance plans (self-funded, fully funded, or administrated plans) and, concomitantly, represent the greatest collective percentage of disputes. |
| 3 | See also Trends and Developments in Managed Care Litigation, published in the American Bar Association Health Law Section’s ABA Health eSource, Vol. 12, No. 2, October 29, 2015 (https://www.americanbar.org/publications/aba_health_esource/2015-2016/october/litigation.html); Trends and Developments in Coverage Disputes Over Mental Health Benefits, published in the American Bar Association Health Law Section’s ABA Health eSource, Vol. 13, No. 2, October 26, 2016 (https://www.americanbar.org/publications/aba_health_esource/2016-2017/October2016/mentalhealth.html); and Trends and Developments in Health Plan Coverage Disputes, Emerging Litigation in Payment over Urgent Care, published in the American Bar Association Health Law Section’s ABA Health eSource, Vol. 14, No. 2, October, 2017 (https://www.americanbar.org/groups/health_law/publications/aba_health_esource/2016-2017/october2017/coveragedispute.html). This article builds on the statistics covered in those prior articles and specifically examines recent, notable cases on anti-assignment clauses as a defense to out-of-network provider claims predicated on an Assignment of Benefits form. |
| 4 | See n. 3, supra. |
| 5 | LeTourneau Lifelike Orthotics & Prosthetics, Inc. v. Wal-Mart Stores, Inc., 298 F.3d 348 (5th Cir.2002). |
| 6 | American Orthopedic & Sports Medicine v. Independence Blue Cross Blue Shield; Horizon Blue Cross Blue Shield of New Jersey, No. 2-16-cv-08988, 2018 U.S. App. LEXIS 12637 (3rd Cir. May 16, 2018). |
| 7 | Hermann Hospital v. MEBA Medical & Benefits Plan, 959 F.2d 569 (5th Cir. 1992); LeTourneau Lifelike Orthotics & Prosthetics, Inc. v. Wal-Mart Stores, 298 F.3d 348 (5th Cir. 2002). |
| 8 | Id. at *15. |
| 9 | Id. at *10 (“[b]ecause ERISA does not clearly prohibit anti-assignment clauses, we confront a statutory gap yet to be filled.”) |
| 10 | Id. at *14–15 (“[w]e now join that consensus and hold that anti-assignment clauses in ERISA-governed health insurance plans as a general matter are enforceable.”) |
| 11 | University Spine Center v. Aetna, Inc., U.S.D.C. D. NJ, Doc. No. 2:18-cv-02823-WJM-CLW, Doc. No. 18, Aug. 15, 2018, appeal filed. |
| 12 | Eden Surgical Ctr. v. Cognizant Tech. Solutions Corp., No. 16-56422, 2018 U.S. App. LEXIS 10597 (9th Cir. Apr. 12, 2018). |
| 13 | Richard Henry Weiner v. Blue Cross and Blue Shield of Louisiana, U.S.D.C. N.D. TX, No. 3:17-cv-00949-BN, Doc. 60, Aug. 17, 2018. |
| 14 | In-network providers typically have their disputes governed by mandatory arbitrary or mediation clauses within the provider agreements. |