Court Allows Medical Provider to Appeal Claim Denial on Behalf of Plan Participant

A federal trial court has ruled that a medical provider may appeal a claim denial on behalf of a group health plan participant for purposes of ERISA’s administrative exhaustion requirement. In this case, a claim for an employee’s air ambulance transportation was partially denied by the insurer, and the transport company (which had been given written authorization to act on the employee’s behalf) submitted a letter to the insurer’s appeals coordinator disputing the decision. The letter included the employee’s name and member number, the date of service, the billed amount, and the claim number, and stated that it was an appeal of the partial payment. The insurer responded that the claim had been processed correctly and declined additional review. Several months later, the employee’s attorney requested related records and information, which the insurer provided after securing a form from the employee designating the attorney as his authorized representative. Almost a year later (after the plan’s 180-day appeal window had closed), the attorney advised the insurer that he was representing the employee in “continuing his appeal.” The insurer—without reference to the original letter from the transport company—denied this appeal as untimely.

In the resulting lawsuit, the insurer argued for dismissal, stating that the employee had failed to exhaust his administrative remedies. The court disagreed, finding that the totality of the circumstances suggested that the letter from the transport company constituted a timely appeal on behalf of the employee. Though the letter did not specifically state that the employee was exercising his right to appeal, it was copied to the employee and stated that “we are appealing your decision” (emphasis by the court). The court concluded that the insurer should have either recognized the letter as an appeal or notified the transport company and the employee of its intention not to treat it as such. Finding that this timely appeal had thus exhausted the employee’s administrative remedies, the court allowed the lawsuit to proceed.

EBIA Comment: Health care providers commonly ask plan participants to execute an assignment of benefits giving the provider the right to reimbursement from the plan. But an assignment of benefits is not the same as identification of an authorized representative permitted to act on the participant’s behalf. The practical effect of this distinction under the DOL claims procedure regulations is that a participant who has only executed an assignment of benefits must receive all required notifications regarding the claim, even if the plan will ultimately pay the provider if the claim is approved. The insurer may have been reluctant to treat the transport company’s letter as an appeal because it assumed the transport company had only an assignment of benefits. In contrast, it likely treated the attorney’s untimely letter as an appeal because it had previously requested and received an “Appointment of Authorized Representative” form. For more information, see EBIA’s ERISA Compliance manual at Sections XI.E (“Assignment of Benefits”) and XXXIV.D.3 (“Definition of Authorized Representative”). See also EBIA’s Self-Insured Health Plans manual at Section XXVI.C.4 (“Definition of Authorized Representative”).

Contributing Editors: EBIA Staff.