Assignment of Benefits Gives Providers The Right To Sue For Non-Payment

The Third Circuit Court of Appeals recently held that in the context of employer funded health insurance plans, health care providers, including doctors and hospitals, who treat “out-of-network” patients and who take an assignment of insurance benefits as payment have standing to sue insurers who do not make required payments or underpay the claims.  The insurers had argued that the providers had only the right to payment, if any was made, but not the right to sue insurers for wrongful denials or underpayments.  The Court rejected this argument. North Jersey Brain & Spine Center v. Aetna (3d Cir. September 11, 2015).

The implications of this holding for providers in New Jersey are significant (the Third Circuit includes New Jersey), and, although the Second Circuit (which covers New York and Connecticut) has not yet addressed the issue, the decision also impacts providers in New York and Connecticut because the Third Circuit now joins every other Circuit Court that has addressed this issue and reached the same conclusion.

First, the decision means that any time a provider accepts an assignment of benefits from a participant in an employer sponsored health care plan, any legal disputes between the provider and the plan must be resolved in federal court, under the law of ERISA.  ERISA is a complex body of federal law with many procedural requirements, and can be trap for the unwary.  In addition, the decision may limit the ability of administrators of employer sponsored health plans to audit and recoup amounts already paid under the plans.

Interestingly, the Court did not address the issue of whether a provider who accepts an assignment of benefits, but reserves the right to collect up to the full amount of the charges from the patient if the insurer does not pay, is obligated to exhaust all efforts to seek payment from the insurer before requiring the patient to pay.

Any provider in a dispute with an employer sponsored health care plan should seek legal advice regarding the impact of this decision on the dispute, as well as regarding the technicalities of ERISA generally.

~Submitted by J Martin