Medical Providers Beware: Ninth Circuit Says Plan Had No Duty to Disclose Anti-Assignment Provision Barring Provider’s ERISA Claims
In Eden Surgical Center v. Cognizant Technology Solutions Corporation et al., No. 2:15-cv-01633-RGK-E (Apr. 26, 2018), Eden Surgical Center performed surgery on a beneficiary of the Cognizant Technology Solutions Corporation employee group health plan (the Plan), administered by Aetna. Prior to the surgery, Eden, which was an out-of-network provider, contacted Aetna and was informed that the Plan would pay Usual and Customary Rates (UCR) for the surgery. When the Plan paid nothing for Eden’s claims, Eden submitted administrative appeals to the Plan challenging the Plan’s adverse benefit determination and seeking Plan documents—invoking a written assignment of ERISA rights and benefits it obtained from the patient in doing so. The Plan did not respond to Eden’s appeals.
The Plan document contains a provision prohibiting Plan beneficiaries and participants from assigning ERISA rights and benefits to third parties, including medical providers. Eden was unaware of the provision because the Plan did not respond to its appeals or requests for Plan documents. In addition, an Aetna representative mistakenly informed Eden that the Plan did not contain an anti-assignment provision.
Eden filed suit against the Plan and Cognizant under ERISA, seeking benefits, document disclosures, and statutory remedies. The district court granted summary judgment for the Plan and Cognizant on the ground that the Plan’s anti-assignment provision deprived Eden of standing to sue on the patient’s behalf. On appeal, Eden did not dispute the validity of the anti-assignment provision, but rather argued that the Plan waived it or was estopped from relying on it.
In a blow to out-of-network providers seeking to assert ERISA rights as an assignee, the Ninth Circuit affirmed. As to Eden’s equitable estoppel argument, the Ninth Circuit held that Eden did not reasonably rely on Aetna’s misrepresentation that the Plan did not contain an anti-assignment provision in deciding to file suit. “Eden could have—and should have—attempted to obtain the plan documents from the purported assignor to verify whether the plan contained an anti-assignment provision, if knowledge of that fact was indeed critical to its decision to file suit.” The court also held that Aetna’s earlier alleged misrepresentation that the Plan would pay UCR for the surgery was irrelevant to the standing analysis, as “a misrepresentation concerning the reimbursement rate has no impact on whether the anti-assignment provision is enforceable or not.
The Ninth Circuit also rejected Eden’s argument that the Plan waived the right to rely on the anti-assignment provision by withholding Plan documents from Eden. “[A]lthough Eden takes issue with Defendants’ pre-litigation conduct—in particular, its silence in response to Eden’s administrative appeals—Eden cites no authority for the proposition that Defendants had an affirmative duty to make it aware of the anti-assignment provision.
This decision underscores the importance of conducting due diligence into an ERISA plan’s assignment provisions before filing suit asserting derivative standing under ERISA. Providers will not be permitted to claim ignorance in order to surmount an anti-assignment provision standing hurdle. In addition, this case highlights the need for providers to ensure that they have robust patient assignments and to use expansive language describing the capacity in which they are filing an administrative appeal, which should include rights beyond a mere assignment. For example, the Cognizant Plan justified its refusal to respond to Eden’s appeals and document requests by claiming Eden did not make clear that it was pursuing appeals both as the patient’s assignee and authorized representative. Had Eden asserted appeal rights as an authorized representative, the Plan would have had to respond, as both ERISA and the Plan document allow a beneficiary’s “authorized representative” to file appeals.