Third Circuit Holds No "Magic Words" Needed in an Assignment of Benefits to Create Derivative Standing under ERISA
On September 11, 2015, in North Jersey Brain & Spine Center v. Aetna, Inc., the Third Circuit held in a precedential opinion that a patient’s assignment of benefits does not have to directly reference the right to file suit to confer derivative standing upon a health care provider under the Employee Retirement Income Security Act of 1975 (“ERISA”).
North Jersey Brain & Spine Center (“NJBSC”) brought suit against Aetna for nonpayment of benefits after Aetna either allegedly underpaid or refused to pay for claims for insureds under ERISA health care plans. Aetna contended that NJBSC did not have derivative standing to sue on behalf of the patients whose claims were denied due to insufficiently worded assignment of benefits. Specifically, Aetna argued that because the assignments in question did not explicitly state that the patient was assigning their right to sue, NJBSC did not have standing. In this case, the assignments signed by each and every patient read that the provider could appeal any claim denial on behalf of the patient, and additionally assigned all payments for the services in question to NJBSC. NJBSC also reserved the right to bill the patient for any unpaid amounts. The assignments, however, were totally silent on the right of the provider to file a lawsuit for non-payment or underpayment of the services in question.
The District Court dismissed NJBSC’s complaint on the basis that the assignments were insufficient, but noted that the district was split as to whether a mere assignment of payment, in fact, conferred derivative standing on providers. As such, the question for the Third Circuit was “what type of assignment is necessary to confer standing.” ERISA is silent on that issue, and so as the Court explained, it must develop a federal common law based on reason, experience, and common sense.
In doing so, the Third Circuit found that the assignment of right of payment “logically entails the right to sue for non-payment” thereby conferring derivative standing on the provider. The court noted that its decision was reinforced by the fact that ever other Circuit to address the same question reached the same conclusion – that there is no “magic words” needed in an assignment of benefits to confer derivative standing to a provider seeking to challenge an adverse benefit determination under ERISA. This, the Court noted, ensured the uniformity in benefit dispute processes underlying the statutory interest of ERISA because the rules governing provider assignments and derivative standing will not change by Circuit.
Moreover, the Court explained that it was “guided by Congress’s intent that ERISA ‘protect the interests of participants in employee benefit plans.’” Patients’ interests are protected by the Court’s determination because their access to care will increase insofar as providers will be confident in their right to reimbursement and in their ability to enforce that right. This allows the patient access to care without showing their ability to pay. Should providers not have the right to file suit, there would be no incentive for providers to accept assignments of benefits. As such, patients would be more likely to have to demonstrate ability to pay. In light of these various interests, the Court found that the assignment of the right to payment indeed confers standing to sue under ERISA.
If you are a health care provider who has been impropery denied payment from an ERISA plan administrator, contact the experienced health care attorneys at Buttaci Leardi & Werner, LLC to learn about the steps to take to enforce your right to payment.