Third Circuit Affirms the Enforceability of Anti-Assignment Clauses in ERISA Plans, While Also Affirming a Provider’s Right to Proceed in Challenging a Benefit Denial on Behalf of a Patient through a Limited Power of Attorney.
On May 16, 2018, the Third Circuit in American Orthopedic & Sports Medicine v. Independence Blue Cross Blue Shield held anti-assignment clauses in ERISA governed health insurance plans are generally enforceable. Notably, however, the court also explicitly concluded that such an anti-assignment clause cannot prohibit a provider from pursuing a judicial challenge of an adverse benefit determination on a patient’s behalf pursuant to a limited power of attorney.
In 2015, the Third Circuit in North Jersey Brain & Spine Ctr. v. Aetna, Inc. affirmed that healthcare providers may obtain “derivative” statutory standing under ERISA to challenge benefit denials on behalf of their patients when they receive a lawful assignment of benefits—which the Court held did not require any precise set of “magic” words to effectuate. The outcome of this case provided beneficiaries of employee-sponsored plans increased access to care by allowing providers to challenge benefit denials by insurance companies and claims administrators directly, rather than requiring a patient to file suit.
Following this holding, many healthcare providers began commencing suits against claims administrators of ERISA plans patients attempting to collect benefits due for services rendered. Due to a surge in litigation, many ERISA plans began to more commonly include so-called “anti-assignment” clauses in their policies to prohibit beneficiaries from assigning their rights under their plan to a healthcare provider.
The Third Circuit’s decision in American Orthopedic & Sports Medicine stemmed from an out of network provider performing shoulder surgery on a patient with health benefits through an ERISA plan. The claim administrator – on behalf of the plan – paid a small fraction of the bill submitted by the surgeon and notified the patient that he would be responsible for the remaining balance directly. Through the plan’s internal administrative process, the provider filed for an appeal while simultaneously obtaining an assignment of benefits and power of attorney from the patient. The claim administrator nevertheless denied the appeal, which in turn resulted in the provider commencing suit to recover the cost of the surgery. The District Court dismissed the provider’s suit, concluding that the provider lacked standing by virtue of the invalidity of its assignment based on a clear and unambiguous anti-assignment provision in the underlying plan. On appeal, the provider argued that anti-assignment clauses in ERISA governed health insurance plans are unenforceable as a matter of law and public policy.
In considering the dispute, the Third Circuit first noted that ERISA was silent and “inconclusive” as to the enforceability of anti-assignment clauses. After then concluding that anti-assignment clauses were generally unenforceable, the court then proceeded to address the provider’s other argument regarding a power of attorney. Despite the plan’s argument that there was no distinction between an assignment of benefits and a power of attorney, the Third Circuit stated, “our holding . . . that the anti-assignment clause is enforceable means that [the] beneficiary. . . did not transfer the interest in his claim, but it does not mean that [he] cannot grant a valid power of attorney.” Indeed, the critical distinction between pursuing a claim as an assignee as opposed to pursuant to a power of attorney is that a power of attorney does not transfer ownership of the claim, and the provider is merely proceeding on behalf of the patient—as the patient’s agent.
Thus, moving forward, the inclusion of a limited power of attorney in a provider’s assignment of benefits form is imperative. By conferring authority on a healthcare provider under a power of attorney, the healthcare provider is then able to step into the shoes of the patient and conduct litigation and other legal proceedings as needed. This process eliminates the possibility of a suit for benefits brought by a provider being dismissed based upon an anti-assignment clause in the underlying ERISA plan.
Buttaci Leardi & Werner LLC works with healthcare providers and patients across the country in challenging wrongful benefit denials. Our efforts on behalf of clients have secured millions upon millions of dollars in previously denied reimbursements, including one of the largest class action settlements by a commercial health carrier with a class of licensed healthcare providers in history.