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Federal Appeals Court Case Highlights Employer Actions for Defending Against Legal Claims Brought by Healthcare Providers

A recent decision by the U.S. Court of Appeals for the Ninth Circuit in two consolidated cases, one of which was Advanced Women’s Health Center, Inc. v. Anthem Blue Cross Life and Health Insurance Company, highlights several important points for employer-sponsors of group health plans when defending against legal claims brought by healthcare providers under ERISA. Advanced Women’s Health Center (“AWHC“) was an in-network provider of health services to participants under various group health plans subject to ERISA (collectively, the “Plans“), and Anthem served as the Plans’ third-party benefit claims administrator. In the course of a post-payment claims review, Anthem determined that certain claims for AWHC’s services had been overpaid and then pursued recoupment by offsetting such overpayments against other reimbursements payable to AWHC. AWHC brought suit against Anthem, based on its purported status as an ERISA “beneficiary,” seeking (i) a declaratory judgment that Anthem’s offsetting process violated ERISA’s claims regulations, (ii) monetary damages under ERISA for past recoupments by Anthem, and (iii) declaratory and injunctive relief under ERISA regarding Anthem’s alleged breach of fiduciary duty to the Plans’ participants. AWHC patients who were covered by the Plans had signed forms (which, notably, the court construed as “assignments”) authorizing Anthem to pay AWHC directly for services rendered (collectively, the “Assignment Forms“), and the Plans did not contain any provisions prohibiting the use of the Assignment Forms. Nevertheless, the court reiterated its previous holding that healthcare providers, such as AWHC, are not ERISA “beneficiaries” for purposes of the types of claims asserted by AWHC and thus such claims must be brought by AWHC derivatively, relying on the terms of the Assignment Forms. The court determined, however, that AWHC also lacked derivative authority for its claims seeking declaratory and injunctive relief and for breach of fiduciary duty because those claims were outside the scope of the Assignment Forms’ specific language. Finally, the court held that AWHC could not rely on the Assignment Forms to assert its claim for monetary damages because, as an in-network provider, its dispute over recoupment depended on the terms of its network provider agreement with Anthem (likely determined under state law), and not on the Assignment Forms.

As we have discussed in previous postings, in order to bolster a defense against legal claims by out-of-network providers, employer-sponsors of group health plans should ensure that properly drafted anti-assignment provisions are contained in their governing health plan documents. However, the terms of many network provider agreements require the assignment of benefits to the provider and, consequently, in-network provider assignments must be permitted under the plan. In such a case, Advanced Women’s Health Center clarifies that an employer may be able to repudiate legal claims asserted by an in-network provider under ERISA by performing a thorough review of the language of any assignment form on which the provider is relying on under ERISA. Note: The Advanced Women’s Health Center decision is controlling precedent only in the jurisdiction of the Ninth Circuit (which includes Washington, Oregon, Montana, Idaho, California, Nevada, Arizona, Alaska, Hawaii, Guam, and the Northern Mariana Islands), but this opinion provides helpful guidance to employers in other jurisdictions.

Advanced Women’s Health Center, Inc. v. Anthem Blue Cross Life and Health Insurance Company, D.C. No. 2:13-cv-01558-NVW (9th Cir. Mar. 22, 2017)

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