Third Circuit Holds Anti-Assignment Clauses in ERISA Plans Are Enforceable

The Third Circuit, in a decision that may limit the remedies available to medical providers in the event of non-payment, recently clarified that “anti-assignment clauses in ERISA-governed health insurance plans as a general matter are enforceable.” In so holding, the Third Circuit joins all other circuit courts that have addressed the issue. On the basis of that clause, the Court held that the plaintiff out-of-network health care provider seeking reimbursement for a participant’s medical claims lacked standing to pursue the claim against the insurers on the participant’s behalf.

In October 2015, the plaintiff provider performed shoulder surgery on a patient who was covered by an ERISA-governed health-insurance plan. In billing the individual for the procedure, the provider – because it was not part of the plan’s provider network – charged amounts that far exceeded the plan’s reimbursement limits for the surgery. The plan’s insurers applied its out-of-network limit in processing the claim and reimbursed only a fraction of the total amount charged. The provider appealed the claim on the patient’s behalf. At the same time, the provider had the patient sign an assignment-of-benefits form which assigned to the provider the patient’s right to pursue claims under his health-insurance plan for the surgery. The insurers denied the appeal, and the provider sued alleging ERISA violations. The insurers moved to dismiss, arguing that the provider lacked standing due to an anti-assignment clause in the plan documents. The anti-assignment clause read, “[t]he right of a Member to receive benefit payments under this Program is personal to the Member and is not assignable in whole or in part to any person, Hospital, or other entity[.]” (emphasis added). The District Court agreed, and the provider appealed.

On appeal, the Third Circuit noted that neither ERISA’s text nor policy was determinative and instead relied on persuasive authority from the First, Second, Fifth, Tenth, and Eleventh Circuits (i.e., every circuit to consider the question). The panel further emphasized the general rule that courts will enforce the terms of an agreement that was freely negotiated between contracting parties. The Third Circuit thus joined the “overwhelming consensus among the Courts of Appeals that ERISA leaves the assignability or non-assignability of health care benefits under ERISA-regulated welfare plans to the negotiations of the contracting parties” and held that nothing in ERISA forecloses plan administrators from freely negotiating anti-assignment clauses.

The panel also rejected the provider’s contention that, even if the anti-assignment clause is enforceable, the insurers waived their right to enforce it by accepting and processing the patient’s claim form. “Under [Pennsylvania] state law, a waiver requires a ‘clear, unequivocal and decisive act of the party with knowledge of such right and an evident purpose to surrender it,’ and routine processing of a claim form, issuing payment at the out-of-network rate, and summarily denying the informal appeal do not demonstrate ‘an evident purpose to surrender’ an objection to a provider’s standing in a federal lawsuit,” the Third Circuit said.

For out-of-network providers, such as the one in this case, this line of decisions limits the providers’ standing to bring an ERISA suit for reimbursement – thereby limiting their available remedies for nonpayment. However, the Third Circuit suggests there might be some relief by way of a Power of Attorney in lieu of the assignments that have been traditionally used.

Caroline E. Oks is an Associate in the Gibbons Commercial & Criminal Litigation Department.
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