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February 01, 2021

When the Insurance Emperor Has No Common Law Clothes: Provider Recoupment Demands, State Contract Law, and the Voluntary Payment Doctrine

By Greg Heller, Esq., Young Ricchiuti Caldwell & Heller, LLC, Philadelphia, PA

Let’s say I build a new deck on your house. I buy the wood. I do the work. You pay me for the deck. You have a deck, and I have the money (net of whatever I paid for materials). A year later, you come back to me and say I didn’t submit daily progress photographs as I had promised, and as a result you are going to demand a refund for all of the money you paid me for the deck.

Crazy, right? But that’s pretty much what happens every day across this country, as health insurance companies impose recoupment demands on healthcare providers. Insurers generally base these recoupment demands on a contention that payments previously made should not have been paid after all. Recoupment demands are often based on a provider’s alleged failure to comply with the insurer’s documentation rules, and on rules about how claims are to be coded and submitted. These demands come after the providers have already paid for the support and professional staff and materials needed to provide the services, and after the patient already received the services. After the insurance company got its deck.

The frequency and size of recoupment claims by commercial insurers appear to have increased in recent years. Likely drivers of this increase include the proliferation of technology tools that automate large parts of the audit or review process (which allow, for example, the application of unbundling rules across a wide set of claim records) and widespread use of sampling and extrapolation methodologies within the Medicare and Medicaid programs,1 which has built out expertise that can also be carried over to commercial health plans and insurers. Another likely driver is the proliferation of narrow provider networks.2 Narrow networks in the aggregate put more power in the hands of payors because there are more providers than network spots, and providers need to be in-network more than the network needs any particular provider. This dynamic encourages or at least accommodates a more aggressive payor approach to reimbursement. Whatever the reason, recoupment demands are here to stay.

ERISA Is Often the Default Framework for Provider-Payor Disputes

When recoupment demands get litigated (either by providers resisting recoupment demands, or by payors pursuing them), that litigation often centers around the Employee Retirement Income Security Act of 1974 (ERISA),3 a federal law that governs employer-sponsored health coverage and applies to roughly half of all Americans with health insurance coverage. Under ERISA, it is by and large the ERISA plan document (in other words, usually, the insurance policy)4 that ultimately determines what is and is not covered, and therefore it is (with a few exceptions not here relevant) the plan document that determines whether or not a particular payment from the insurer to a provider was appropriate.5

From the insurer’s perspective, litigating provider disputes as ERISA disputes has a lot to recommend it. Plan documents are written by insurers. Those documents generally place considerable discretion in the hands of the insurer, and the insurer’s decisions are reviewed under an abuse of discretion standard.6 Plan documents also often incorporate (at least by reference) the insurer’s own reimbursement policies and the insurer’s standards for provider audits and reviews, and purport to make those standards a condition of payment under the plan.7 Under ERISA the fact that a particular provider or insured never saw or agreed to these policies and standards is irrelevant. This places enormous power in the hands of insurers.

ERISA also offers benefits to providers. While the discretion granted to insurers is considerable, ERISA does impose some outer boundaries on the substantive standards that insurers apply when they make benefit decisions.8 There is an extensive body of well-reasoned caselaw addressing benefit decisions under  ERISA, and ERISA is familiar terrain for lawyers who litigate benefit disputes. ERISA also has a statutory fee-shifting provision.9 The ERISA framework is, as these things go, a comfortable one.

Perhaps for these reasons, perhaps for others, providers that are either defending against a recoupment demand or affirmatively seeking reimbursement have often sought to pursue their claims as ERISA claims in federal court, generally seeking to pursue claims under ERISA section 502(a)(1)(B), which grants every ERISA plan participant and beneficiary a statutory cause of action “to recover benefits due to him under the terms of his plan, [or] to enforce his rights under the terms of the plan.”10

In recent years courts have often dismissed these claims on the ground that providers are not participants or beneficiaries, and therefore lack standing.11 Faced with these rulings, providers seeking to proceed under ERISA often claim standing by virtue of assignments received from patients;12 managed care companies, in turn, rely on provisions in plan documents that ban such assignments;13 and providers, again in turn, often assert that plans are estopped from raising anti-assignment provisions, usually because the provider relied on preauthorization communications from the plan.14 There is an extensive and growing body of caselaw on these issues; for present purposes, it is sufficient to note that there are opportunities for advocacy and significant rewards for careful analysis on both sides of these issues. A provider seeking to litigate a recoupment claim as an ERISA 502(a)(1)(B) case has a shot at doing so.

But even if providers survive a motion to dismiss on their statutory ERISA claim, they can still face headwinds because the ERISA playing field is often, as a practical matter, tilted in favor of the insurer, as noted above. The insurer’s interpretation of a document written by the insurer will be addressed under a standard that affords substantial deference to the insurer. It is fair to ask whether this is the best place for providers to fight.

For Providers, a State Common-Law Framework is Sometimes a Better Choice

ERISA, for all its charms, is not the only legal route to challenge a demand for recoupment. The common law also merits consideration. Providers may do better pursuing these cases as state contract claims, because in that framework these cases are about a homeowner trying to keep the deck without paying for it. And that presents some opportunities not necessarily available in ERISA cases.

The following are some examples.

Common Law Damages

It is blackletter law that the damages in a contract case are those damages caused by the breach. This means that immaterial, trivial breaches of a contract usually result in immaterial, trivial contract damages, at least in the absence of an express agreement to impose a penalty-style remedy for breaches. For out-of-network providers, such provisions are rarely if ever present in their agreements with health plans. Even for in-network providers, it is the rare contract that would justify a complete forfeiture of payment for a trivial breach of an agreed-upon condition.

This is important, because many recoupment claims are based on documentation and claim submission errors. Managed care plans generally take the position that compliance with documentation and claims-submission standards is a necessary precondition to payment because such compliance is (arguably) a requirement for the payment of benefits under the plan document. But these plan documents have invariably never been seen by the provider, let alone expressly agreed to. It is the rare patient indeed who shows up at the hospital or rehabilitation facility with a copy of his or her insurance policy or plan document. These provisions might be important reference points in a traditional ERISA benefit dispute between an insured and the insurer. But in a straight-up contract case, any payor arguing that a documentation or claim submission shortcoming is a material breach that essentially forfeits any right to payment has an uphill battle.

Common Law Contract Formation

In fact, the requirements that form the basis for a recoupment demand are often not part of the contract between a provider and the insurance company.

Even if the provider is in-network, the precise reimbursement policies and other standards are often available only through the internet, if at all, and even then are often so vague that they cannot possibly be part of any contractual agreement. One national health insurer, for example, purports to make its reimbursement policies available through the internet, but a provider can only see them if the provider clicks on the following disclaimer, which essentially obscures any clarity those reimbursement policies might otherwise provide:

UnitedHealthcare may use reasonable discretion interpreting and applying this policy to services being delivered in a particular case. Further, the policy does not cover all issues related to reimbursement for services rendered to UnitedHealthcare enrollees as legislative mandates, the physician or other provider contract documents, the enrollee’s benefit coverage documents, and the Physician Manual all may supplement or, in some cases, super[s]ede this policy. Finally, this policy may not be implemented in exactly the same way on the different electronic claim processing systems used by UnitedHealthcare due to programming or other constraints . . . .15

This language expressly refers to “provider contract documents” as separate from the reimbursement policies, and the provider is forced to agree that the reimbursement policies are not necessarily part of the contract before the provider can even get permission to see the reimbursement policies. A litigant seeking to find an enforceable contract term in the reimbursement policies has some work to do.

The disclaimer language cited above also refers to “the Ingenix Claims Editing System known as iCES Clearinghouse (v 2.5.1).”16 The problem with this reference, from a contract standpoint, is that the detailed workings of the Ingenix Claims Editing System are not generally available to providers, in-network or otherwise. This means the insurer is attempting to enforce, as a material term of the contract, a set of secret requirements that one party to the contract was not allowed to see. That’s a pretty heavy lift for the insurer.

In other words, the basic rudiments of contract formation present significant opportunities for providers defending against recoupment claims.

The Insurer’s Failure to Involve the Insured

When insurers seek recoupment from providers, they rarely provide notice to the insured patient. The patient obviously has an interest in the dispute, because a provider with an unpaid bill—including a bill that becomes unpaid after the insurer recovers it by recoupment—often has recourse against the patient. Some of these disputes involve amounts that could bankrupt patients and their families in an instant. From the patient’s standpoint, making these decisions without giving the patient notice or an opportunity to be heard runs counter to basic notions of due process and fair play.

In a traditional ERISA dispute about health insurance benefits, ERISA grants significant procedural protections to insureds. Section 503 of ERISA requires insurers to provide notice and “a reasonable opportunity to any participant whose claim has been denied for a full and fair review . . . .”17 Regulations clarify that these standards apply to any “adverse benefit determination,” a term that includes any “denial, reduction, termination, or failure to provide or make payment.”18 The regulations mandate that insurers making an adverse benefit determination set forth or make available the bases for their decisions; require insurers to make an appeal available; establish timelines for appeals and decisions on appeal; and establish other procedural requirements.

Federal courts have uniformly held that these procedural requirements do not apply to disputes between providers and insurers because the providers are not participants or beneficiaries under ERISA.19 Thus, if an insurer’s obligations are defined as consisting only of what is required under ERISA, it is entirely permissible for an insurer to raise and pursue recoupment demands without providing the insured patient an opportunity to be heard, and without affording the provider the procedural protections that otherwise apply to benefit disputes under ERISA.

The common law, however, is a somewhat broader canvas. The insured might or might not be an indispensable party to any recoupment dispute; this is a fact-specific issue that is beyond the scope of this article.20 Whatever the mandatory procedural requirements, however, the procedural unfairness of an insurer’s intentional decision to disenfranchise the insured and its intentional decision to simply ignore the superstructure already in place for benefit disputes are both issues that can fairly be brought to the attention of the court. These arguments are more likely to find traction in a court deciding a common law contract dispute than a court whose task is limited to interpreting ERISA and its regulations.

The Voluntary Payment Doctrine

A common law doctrine known as the volunteer doctrine or voluntary payment doctrine can also play an important part in these cases when they are presented as simple contract disputes. “The voluntary payment doctrine is a long-standing doctrine of law, which clearly provides that one who makes a payment voluntarily cannot recover it on the ground that he was under no legal obligation to make the payment.”21

“[A] voluntary payment within the meaning of this rule is a payment made without compulsion, fraud, mistake of fact or agreement to repay a demand which the payor does not owe, and which is not enforceable against him, instead of invoking the remedy or defense which the law affords against such demand.”22 This latter component is crucial: the voluntary payment doctrine applies even if a payment should not have been made, provided there is some mechanism to determine whether or not the payment is proper, and the payor decided not to invoke or pursue it. This precisely describes the insurer that has available an ERISA mechanism for raising and resolving benefit determinations with its insureds but has decided not to use it.

Under the voluntary payment doctrine, if an insurer or health plan makes a payment to a provider, it cannot later seek repayment on the grounds that the payment was improper. The insurer is pinioned on the horns of a dilemma of its own making, because the payment was either proper under the applicable policy, or it was not. The common law can recognize that the pay-the-provider decision is the same as the cover-the-benefit-for-the-member decision, even if ERISA’s precise statutory scheme does not treat the two decisions identically. If the payment sought to be recouped was a proper payment in the first place, the recoupment demand vanishes. If the payment was not a proper payment, that means its payment was not required under the applicable policy or plan document. And the insurer runs squarely into the voluntary payment doctrine, because the insurer was under no obligation to make the payment, which makes the insurer a volunteer precluded from seeking repayment.

An insurer that has been deceived can demand repayment, but such deception is rarely present, at least in any material sense that would be recognized under common law or equitable principles. The provider promised to provide services, and the insurer promised to pay for them. If a retrospective audit of hundreds of thousands of claims identifies some documentation discrepancies when measured against the exacting, often inscrutable standards of a multi-state insurer’s computer auditing tool, that is not evidence that the provider misled the insurer unless the provider had expressly agreed to comply with those standards, and that is, as noted, very often not the case.

It is also helpful to consider the slightly broader context of restitution claims. There is a robust body of caselaw around an insurer’s right to recover claims paid by mistake. There is some variability in how different states have addressed the issue;23 for present purposes, it is sufficient to note that the common law of restitution leaves considerable space for equitable and quasi-equitable considerations, which would include the provider’s reliance on payments, and the fact that health insurers have vastly greater access to information about whether or not a particular claim should be paid under any particular insurance policy.24 One might fairly add to this list the presence, in ERISA, of an express, mandatory scheme for raising and resolving coverage disputes directly with insureds. When an insurer decides to pursue a recoupment claim against a provider instead of a direct restitution claim against its insured, it is choosing to not use this mechanism. Indeed, as noted above, insurers very often oppose any efforts by providers to pursue recoupment claims as ERISA benefit disputes. If a health plan or insurer got the claims-payment decision wrong, that can hardly be the fault of the provider.25       

There is not a lot about the voluntary payment doctrine in this context in the generally reported caselaw. The doctrine is mentioned in a Southern District of Texas Trial Court case, Connecticut Gen. Life Ins. Co. v. Elite Ctr. for Minimally Invasive Surgery LLC.26 That was a recoupment case filed by the insurer; the provider asserted the voluntary payment doctrine as a defense; and the Court held, at the motion to dismiss stage, that the availability of the defense was a factual question to be resolved at a later stage of the proceedings. Research to date has uncovered no other recent generally reported decision discussing the defense in the context of the claims discussed in this article.

The common law is of course not the entire recoupment story; many states also have statutes that govern and limit recoupment demands.27 Those also need to be considered. But even in a case where the common law doctrines discussed in this article are limited or altered by statute, the broader simple truth remains untouched—namely, the insurer got its deck, and can’t fairly keep both the deck and the money.

Procedural Considerations

For a provider who decides to proceed under this common-law approach, the most efficient way might be through a simple declaratory judgment complaint, assuming that option is available under applicable state law. As to adding additional claims and causes of action, note that the theoretical availability of a claim is never the only consideration. When litigating, attorneys endeavor to distill sometimes complicated factual and legal scenarios down to simple, unshakable verities. It’s never too early to begin that work, and sometimes the complaint or answer is the best place to start. It can be hard to convince the court that a case is a simple contract dispute if the complaint includes ERISA, Racketeer Influenced and Corrupt Organizations (RICO) Act, and antitrust claims.

There are also jurisdictional implications. In the absence of diversity jurisdiction, a declaratory judgment action can be filed in, and should remain in, state court, particularly if the applicable plan document has an anti-assignment provision (which would make assignment-based provider standing unavailable). That may well be a more hospitable forum for the provider.


When insurers pursue recoupment claims without engaging the patients they insure through the ERISA process and without following the procedural rules that usually apply to ERISA benefit disputes, they are making an affirmative choice to proceed outside of ERISA. Having made that bed, it is hardly unfair to make them lie in it. Fundamentally it boils down to this: if the insurer refuses to dispute the benefit payment in a benefit dispute, then it can’t dispute the benefit payment in a recoupment dispute. By embracing longstanding common law and contract principles, providers can also reframe the conversation in a way that leaves the greatest room possible for substantial justice and common sense, two terms that sometimes do not figure prominently in the stated rationales for ERISA decisions. This approach can also serve the common interest, shared by all, in a functioning healthcare system that provides fair and predictable payment for honest work.


  1. See generally Palm Valley Health Care, Inc. v. Azar, 947 F.3d 321, 330 (5th Cir. 2020), cert. denied, 141 S.Ct. 262 (2020) (discussing statutory foundation for use of extrapolation methodologies within the Medicare program).
  2. Gray, L.S.,  An Elegant Solution to Network Inadequacy: How to Better Protect Patients from Inadequate Health Networks and Surprise Balance Billing, 70 Hastings L.J. 1639, 1646 (2019).
  3. The provisions of ERISA relating to health insurance benefits are codified at 29 U.S.C. Part 5, which is 29 U.S.C. § 1131 et seq.
  4. This article uses the terms health insurance policy and health plan interchangeably, and uses the terms insurance company and plan administrator interchangeably. These are distinctions that sometimes matter a great deal, but not for the purposes of this article. The differences figure particularly prominently with respect to preemption; any discussion of preemption issues is beyond the scope of this article.
  5. See, e.g., Connecticut Gen. Life Ins. Co. v. Humble Surgical Hosp., L.L.C., 878 F.3d 478, 482 (5th Cir. 2017) (holding that the terms of the applicable ERISA plans, and not any particular contractual agreement between CIGNA and the provider, determined CIGNA’s payment obligations), cert. denied, 138 S.Ct. 2000 (2018).
  6. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948 (1989).
  7. Humble Surgical, supra n. 5, 878 F.3d at 483.
  8. See, e.g., Wit v. United Behavioral Health, 2020 WL 6469764 (N.D. Cal. Nov. 3, 2020), appeal filed December 3, 2020 (class action alleging that United Behavioral Health’s level of care and coverage determination guidelines violated ERISA because they were arbitrary and capricious and constituted a breach of fiduciary duty).
  9. ERISA § 502(g), 29 U.S.C. § 1132(g).
  10. ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B).
  11. See generally Pennsylvania Chiropractic Ass'n v. Indep. Hosp. Indem. Plan, Inc., 802 F.3d 926, 930 (7th Cir. 2015) (in-network providers cannot pursue statutory ERISA claims even when those claims are for benefits due ERISA plan members; collecting cases); see also DB Healthcare, LLC v. Blue Cross Blue Shield of Arizona, Inc., 852 F.3d 868, 874 (9th Cir. 2017) (denying statutory standing to a provider: “[w]e have held before, and reiterate now, that health care providers are not “beneficiaries” within the meaning of ERISA's enforcement provisions”).
  12. See, e.g., Merrick v. UnitedHealth Grp. Inc., 175 F. Supp. 3d 110, 118 (S.D.N.Y. 2016) (chiropractors claiming ERISA standing by virtue of, inter alia, assignments received from patients).
  13. Id., 175 F. Supp.3d at 118 (rejecting assignment-based standing: “where an ERISA-governed plan contains an unambiguous anti-assignment provision, assignments under that plan are invalid.”) (citations omitted; collecting cases).
  14. See, e.g., California Spine & Neurosurgery Inst. v. Blue Cross of California, No. 18-CV-04777-PJH, 2020 WL 5748726, at *7 (N.D. Cal. Sept. 25, 2020) (denying Blue Cross’s motion to dismiss provider’s assignment-based ERISA claim because estoppel had been adequately pled, but expressly noting that the provider would need to prove estoppel at a later stage of the litigation).
  15. United Healthcare Commercial Reimbursement Policies Terms and Conditions, available at (last accessed Jan. 17, 2021).
  16. Id.
  17. 29 U.S.C.A. § 1133(1), (2).
  18. See generally 29 C.F.R. § 2560.503-1.
  19. See, e.g., Pennsylvania Chiropractic Ass'n, supra n. 11, 802 F.3d at 930 (“Plaintiffs are not ‘beneficiaries’ as ERISA uses that term, so they are not entitled to the procedures established by § 1133 and the implementing regulations.”).
  20. See generally Fed. R. Civ. P. 19 and its state law analogues.
  21. Best Buy Stores, L.P. v. Benderson-Wainberg Assocs., L.P., 668 F.3d 1019, 1030 (8th Cir. 2012) (Minnesota law) (citation, and a footnote collecting cases, omitted); see generally Flora, C.E., Practitioner's Guide to the Voluntary Payment Doctrine, 37 S. Ill. U. L.J. 91, 95 (2012).
  22. Genesis Ins. Co. v. Wausau Ins. Companies, 343 F.3d 733, 736 (5th Cir. 2003).
  23. See generally Restatement (Third) of Restitution § 6 cmt. f.
  24. See, e.g., Lincoln Nat. Life Ins. Co. v. Brown Sch., Inc., 757 S.W.2d 411, 415 (Tex. App. 1988) (Insurer demanding restitution from a healthcare provider; “[Insurer], possessing the policy and the knowledge of its terms, made the mistake and, as between it and the appellee hospital, it must bear the loss.”); Federated Mut. Ins. Co. v. Good Samaritan Hosp., 191 Neb. 212, 216, 214 N.W.2d 493, 495–96 (1974) (“[W]e place the burden for determining the limits of policy liability squarely upon the only party (as between the insurer and the assignee hospital) in a position to know the policy provisions and its liability under that contract of insurance.”).
  25. Even if an insurer has not taken this position in a particular recoupment dispute, a little time on Westlaw or PACER will usually be sufficient to uncover instances of that insurer insisting that ERISA’s statutory benefit-denial procedural rules do not apply to disputes with providers.
  26. No. 4:16-CV-00571, 2017 WL 607130, at *10 (S.D. Tex. Feb. 15, 2017), opinion amended and superseded in part (but not in relevant part), No. 4:16-CV-00571, 2017 WL 1807681 (S.D. Tex. May 5, 2017).
  27. See generally  Hamilton, S. &  Greenberg, D., Overpayment Recoveries by Health Insurers: Determining the scope of the recovery, 2 Health L. Prac. Guide § 19A:4 (2020) (collecting statutes).
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Greg Heller


Greg Heller is a trial lawyer based in Philadelphia, Pennsylvania. He represents providers around the country who are involved in payment disputes with managed care companies. He is also involved in a variety of other litigation and policy efforts surrounding access to healthcare, particularly behavioral healthcare. He can be reached at [email protected] and by phone at (267) 546-1004.