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Anti-Assignment Provision in Administrative Services Agreement Was Unenforceable

· 5 minute read

· 5 minute read


Long Island Neurological Associates v. Highmark Blue Shield, 2019 WL 1284263 (E.D. N.Y. 2019)

A physician group sued a plan sponsor and the plan’s TPA after the plan paid less than $9,000 of a $123,000 bill for pediatric neurological surgery performed by one of the group’s physicians. In pursuing the claim and appeal, and filing the lawsuit, the physician group was acting pursuant to both an assignment of benefits and an authorized representative designation executed by the child’s parents. The plan sponsor and TPA argued that the lawsuit should be dismissed because the plan’s administrative service agreement (ASA) contained a provision prohibiting assignment of rights and benefits under the plan, thus precluding the physician group’s actions. The physician group argued that the anti-assignment provision was unenforceable because the ASA was not a plan document.

The court agreed, noting that anti-assignment clauses in plan documents are generally enforceable, and that the key question here was whether the ASA was a plan document. The court emphasized that the purpose of ERISA’s written plan document requirement is to enable participants and beneficiaries to determine their rights and obligations under the plan. A document that merely memorializes the agreement between the plan’s sponsoring employer and a service provider does not serve this purpose. Furthermore, terms in such an agreement that are never disclosed to participants and beneficiaries cannot be held against them (see our Checkpoint article). The court considered decisions from two appellate courts and numerous district courts, concluding that the consensus appears to be that an ASA is not an ERISA plan document; consequently, plan participants and beneficiaries cannot be bound by its terms. It distinguished cases cited by the plan sponsor and TPA, explaining that anti-assignment provisions enforced in those cases were not contained solely in the ASA. Here, no evidence was presented that anti-assignment language was included in the SPD or other plan documents.

EBIA Comment: Despite the outcome in this case, an ancillary document, such as an ASA, could be treated as a binding plan document in some circumstances—for example, if it is expressly incorporated by reference in the plan document or specifically captioned as a plan document (see, e.g., our Checkpoint article). Another important consideration is whether the provisions in question were disclosed to participants and beneficiaries. For more information, see EBIA’s ERISA Compliance manual at Sections VIII (“Plan Design and the Written Document Requirement”) and XI.E (“Assignment of Benefits”). See also EBIA’s Self-Insured Health Plans manual at Section XXVI.C.3.b (“Disputes With Health Care Providers and Certain Other Entities; Assignment of Benefits”).

Contributing Editors: EBIA Staff.

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