Powers of Attorney: The Anti-Anti-Assignment

The practice of health care providers suing health insurers to reverse denied reimbursements has long been a pain point for the insurance industry. While individual insureds with small-dollar claims are unlikely to sue at all, providers have the resources to fund litigation, and can aggregate numerous claims in order to put together law suits large enough that they are worth pursuing. These larger lawsuits are also worth defending, however, and insurers of ERISA-regulated health plans have, in recent decades, exploited one of the most powerful arrows in their quiver to defeat such suits: the so called “anti-assignment clause”—language in a plan document that prohibits plan participants and beneficiaries from assigning their benefits. This article discusses some of the minutiae and pitfalls of litigation that implicates anti-assignments clauses, and some of the ways that providers can vindicate their rights to payment in the face of such clauses.

Courts have long recognized both that ERISA allows for the assignment of welfare benefits such as healthcare reimbursements, and that anti-assignment clauses in ERISA plans are valid and enforceable.¹ Because it would be virtually impossible to state a claim for insured health and welfare benefits under ERISA without alleging the existence of a plan, the ERISA plan document at issue, even if not appended to the complaint, can normally be considered by the court under the incorporation-by-reference doctrine even on a motion to dismiss under Federal Rule of Civil Procedure 12.² Some courts treat insurers’ anti-assignment arguments as contractual affirmative defenses apparent on the face of the pleadings, while others treat it as a question of statutory standing under ERISA.³

There are avenues to avoid a defendant insurer’s invocation of an anti-assignment defense. For example, if the anti-assignment clause is ambiguous, it may not support dismissal of a healthcare provider assignee’s suit at the Rule 12 stage.⁴ Likewise, the provision must appear in the plan document, and cannot be added by way of a summary plan description without an actual amendment to the plan document itself.⁵ On the same note, while an anti-assignment clause is only operative to the extent of its clear terms, an assignment itself assigns no more than its own clear terms.⁶

And even if there is a clear and unambiguous anti-assignment clause in the plan, the plan’s fiduciaries with appropriate authority can waive the imposition of anti-assignment clauses on a case-by-case basis.⁷ Waivers can occur when a plan or its insurers actually pay benefits to healthcare provider assignees, pursuant to their assignments, or when they fail to invoke the anti-assignment provision in the course of the so-called “full and fair review” afforded by a plan’s administrative appeal process.⁸

Let us assume that you have digested all of this, that you are representing a health care provider assignee with valid claims for reimbursement, and the plan at issue has an unambiguous anti-assignment clause that the plan has preserved (i.e., not waived). There is at least one remaining avenue that would allow your clients to spearhead litigation on behalf of their patients: the limited durable power of attorney.

Using a power of attorney, any competent person can confer on any other person or legal entity the legal right to act in their stead, for all purposes, or a limited purpose or set of purposes. A health care provider with a valid power of attorney from a patient can sue the plan and its insurers in its own name (“Splendid Surgery, in its capacity as attorney-in-fact for Patty Patient, Plaintiff”), or in the name of the patients themselves (“Patty Patient, by and through their attorney-in-fact, Splendid Surgery”). This tactic completely avoids any litigation about the applicability of a plan’s anti-assignment provision, because nobody is suing as an assignee; rather the participant or beneficiary is suing directly, with their attorney-in-fact doing all the heavy lifting.

This tactic is not without additional concerns, however. As already discussed, any document creating a power of attorney must strictly comport with applicable state laws. The power of attorney has a defined scope and does not confer upon the provider any rights not clearly specified in the document.⁹ Thus a power-of-attorney that does not clearly authorize the attorney-in-fact to pursue ERISA breach of fiduciary duty claims would likely face the same limitations as an assignment that lacked such language.¹⁰

The law respecting the creation of a valid power of attorney varies from state to state, and you must make sure that the form and process you use to establish the power of attorney comports precisely with the requirements of the state in which it is created, as to mandatory terms, provisions, limitations, and even execution requirements which can include mandatory dual witnesses and/or notarization.

Finally, in most states an attorney-in-fact is a fiduciary, at least within the scope of their power of attorney.¹¹ Thus, health care providers seeking to pursue health care reimbursements in litigation against ERISA-regulated plans and insurers, pursuant to a power of attorney, have a heightened duty to act solely in the best interest of their patients and not to prejudice their patients in the pursuit of the claims. While in most cases this would not raise any issues, one can certainly imagine cases in which conflicting interests could implicate a health care provider attorney-in-fact’s fiduciary obligations to its patients.

In conclusion, anti-assignment clauses have been used as a cudgel by ERISA plans and their insurers to thwart organized effective litigation to recover reimbursement of claims for medical services. Anti-assignment clauses create a defined and relatively well understood set of opportunities and issues for participants, beneficiaries, health care providers, insurers, and plans. Powers of attorney offer a mechanism for healthcare providers to pursue their patients’ claims for benefits even where a valid anti-assignment clause in a plan document would otherwise thwart the effort.

About the Author

Joseph Creitz is a founding partner of San Francisco’s Creitz & Serebin LLP and has spent the last twenty-six years representing plaintiffs in ERISA litigation involving benefits and breaches of fiduciary duty.

1. Davidowitz v. Delta Dental Plan of California, Inc., 946 F.2d 1476, 1481 (9th Cir. 1991) (Congress intended to allow for assignment of benefits and let the free market sort out the details); Misic v. Bldg. Serv. Emps. Health & Welfare Tr., 789 F.2d 1374, 1376 (9th Cir. 1986) (“The absence of any reference in the statute to assignment of the right to reimbursement for welfare benefits is in striking contrast to the complex and extensive provision prohibiting assignment of pension benefits, obviously the product of careful consideration.”); see also, Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 837, 108 S. Ct. 2182, 100 L. Ed. 2d 836 (1988) (“[Congress] had before it a provision to bar the alienation or garnishment of ERISA plan benefits, and chose to impose that limitation only with respect to ERISA pension benefit plans, and not ERISA welfare benefit plans. In a comprehensive regulator scheme like ERISA, such omissions are significant ones.” (Emphasis in the original)).
2.  Courts routinely consider plan documents at the motion to dismiss stage in In re Syncor ERISA Litig., 351 F. Supp. 2d 970 (C.D. Cal. 2004) cases. See, e.g., In re Syncor ERISA Litigation, 351 F. Supp. 2d at 977–83; Groves v. Kaiser Found. Health Plan Inc., 32 F. Supp. 3d 1074, 1079 n.4 (N.D. Cal. 2014); Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998), as amended (July 28, 1998).
3.  Only participants and beneficiaries of ERISA plans are authorized to sue, and therefore have statutory standing under ERISA, to pursue claims for benefits in court. 29 U.S.C.A. § 1132(a)(1)(B) (West). Courts recognize that a valid assignment to a healthcare provider can confer derivative standing on the provider to litigate the claims. See, e.g., Misic, 789 F.2d at 1377. Nonetheless, such derivative standing is negated by a valid anti-assignment clause in the plan. See Davidowitz, 946 F.2d at 1481.
4.  See, e.g., Alexander Mfg., Inc. Emp. Stock Ownership Plan & Tr. v. Illinois Union Ins. Co., 560 F.3d 984, 988 (9th Cir. 2009) (an ambiguous anti-assignment provision in an errors and omissions insurance policy precluded its enforcement against an ERISA plan insured).
5.  See CIGNA Corp. v. Amara, 563 U.S. 421, 437, 131 S. Ct. 1866, 179 L. Ed. 2d 843 (2011) (holding that provisions of a summary plan description cannot be enforced as if they were provisions of the plan itself); Prichard v. Metro. Life Ins. Co., 783 F.3d 1166, 1169–70 (9th Cir. 2015) (recognizing that in the health care context a summary plan description sometimes is the plan document, but declining to enforce discretionary language in a MetLife SPD when it appeared that there was also an actual plan document that had never been produced).
6.  Spinedex Physical Therapy USA Inc. v. United Healthcare of Arizona, Inc., 770 F.3d 1282, 1292 (9th Cir. 2014) (holding that an assignment of the right to payment of benefits did not also represent an assignment of any attendant ERISA breach of fiduciary duty claims, which could only have permissibly been assigned by clear and unambiguous language that was not present).
7.  Spinedex, 770 F.3d at 1296 (holding that an ERISA plan administrator can waive its right to rely on an anti-assignment provision, and explaining that “an administrator may not hold in reserve a known or reasonably knowable reason for denying a claim, and give that reason for the first time when the claimant challenges a benefits denial in court.”); see also Brand Tarzana Surgical Inst., Inc. v. Aetna Life Ins. Co., No. CV189434DSFAGRX, 2021 WL 2431676 (C.D. Cal. May 25, 2021) (finding that insurer waived the application of the plan’s anti-assignment clause where the health care provider clearly notified the insurer that it was pursuing payment under an assignment of benefits, and the insurer failed to raise the provision until litigation).
8.  Id.; see also 29 U.S.C.A. § 1133 (West) (ERISA’s full and fair review requirement); 29 C.F.R. § 2560.503-1 (ERISA’s claims regulation promulgated under 29 U.S.C.A. § 1133).
9.  See, e.g., King v. Bankerd, 303 Md. 98, 492 A.2d 608 (1985) (“powers of attorney are strictly construed as a general rule and are held to grant only those powers which are clearly delineated.”
10.  See n.5, supra.
11.  Rothman v. Wilson, 121 F.2d 1000, 1006 (9th Cir. 1941); Tran v. Farmers Grp., Inc., 104 Cal. App. 4th 1202, 1210–11, 128 Cal. Rptr. 2d 728 (2002), as modified on denial of reh'g (Jan. 27, 2003) (“an attorney-in-fact is an agent owing a fiduciary duty to the principal”).