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Third Circuit Upholds Anti-Assignment Provision Barring Provider’s ERISA Suit Against Insurer

The US Court of Appeals for the Third Circuit recently confirmed that “anti-assignment” provisions — provisions prohibiting insureds from assigning their rights under a health plan to third parties, including medical providers — are enforceable as long as they are unambiguous.

In University Spine Center v. Aetna, Inc., No. 18-2842, 2019 WL 2149590 (3d Cir. May 16, 2019), a medical provider brought suit against Aetna under the Employee Retirement Income Security Act of 1974 29 U.S.C. § 1001, et seq., seeking reimbursement for surgical services rendered to a beneficiary of an Aetna-administered health plan.

The provider brought suit on the patient’s behalf, invoking an assignment under which the patient “transferred [to the provider] all of his rights to benefit payments under his insurance plan, as well as all of his related rights under [ERISA].” The District Court dismissed the provider’s complaint, holding that an anti-assignment provision in the patient’s plan was enforceable and deprived the provider of standing. The anti-assignment provision read: “Coverage and your rights under this plan may not be assigned. A direction to pay a provider is not an assignment of any right under this plan or of any legal or equitable right to institute any court proceeding.

On appeal, the Third Circuit affirmed dismissal of the provider’s ERISA claim, finding that the plan’s anti-assignment provision clearly prohibited the patient from assigning his right to receive benefit payments to the provider. The court disagreed that language allowing direct payment of plan benefits to a provider was synonymous with an assignment. Since the anti-assignment provision was unambiguous and thus enforceable, the court held that the provider lacked derivative standing under ERISA to sue on the patient’s behalf.

In so holding, the Third Circuit followed its precedential 2018 opinion in American Orthopedic & Sports Medicine v. Independence Blue Cross Blue Shield, 890 F.3d 445 (3d Cir. 2018), and joined the unanimous ranks of other appellate courts — including the First, Second, Fifth, Ninth, Tenth, and Eleventh Circuits — upholding the validity of anti-assignment clauses.

This case highlights the importance of carefully reviewing health plan documents for anti-assignment language, and analyzing the scope and ambiguity of any anti-assignment language, before asserting derivative standing under ERISA. In addition, providers should ensure that their assignments of benefits are drafted broadly to authorize the provider to act as the patient’s personal representative, in addition to the patient’s assignee. Providers should also consider whether there are viable arguments that the insurer waived the anti-assignment provision, including by making direct payment to or through other interaction with the provider.

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