Health Plan’s Anti-Assignment Clause Is Enforceable

A health care provider, attempting to recover payment for services provided to a participant in an ERISA health plan, brought this lawsuit after an unsuccessful claim and appeal via the plan’s internal claims process. The provider was acting under an assignment of benefits from the participant. The trial court dismissed the case, ruling that the provider did not have standing (i.e., was not permitted to bring the lawsuit) because the plan stated that the right to payment for benefits is personal to the participant and is not assignable. (In general, courts permit providers or other entities to pursue claims on behalf of participants so long as the plan terms do not prohibit or restrict assignments.) The provider appealed, arguing that preventing plan participants from allowing providers to try to recover payment for their services is antithetical to ERISA and public policy.

The Third Circuit rejected the provider’s arguments, noting that, while ERISA expressly prohibits assignment of pension benefits, it is silent as to assignment of welfare benefits. This silence could be interpreted to mean that anti-assignment clauses must be enforceable or, alternatively, that Congress intended to preserve participants’ rights to assign benefits—the court found applicable case law inconclusive. Finding the parties’ policy arguments on the pros and cons of anti-assignment clauses similarly unpersuasive, the court looked to other circuits for guidance. According to the court, all circuit courts to address the issue have concluded that ERISA leaves the issue of whether a plan permits or prohibits the assignment of benefits to the “negotiations of the contracting parties,” and that the “terms of an unambiguous private contract must be enforced.” On this basis, the other circuits have enforced anti-assignment clauses in ERISA plans, and this one followed suit. The provider’s alternate argument—that the insurer, by its actions, waived its right to enforce the anti-assignment clause—was also unsuccessful. And the provider’s attempt to rely on the limited power of attorney included in the assignment document was rejected for procedural reasons. Accordingly, the Third Circuit affirmed the trial court’s dismissal.

EBIA Comment: As the court noted, the enforceability of anti-assignment clauses in ERISA plans is well established in every circuit that has considered similar arguments from providers. The cases generally do not address who are the “contracting parties” in an ERISA plan; as a practical matter, neither individual participants nor providers (whether in-network or out-of-network) have much opportunity to negotiate the terms of the plan document. Providers will have to turn to other mechanisms to attempt recovery; the court appeared to leave open the possibility that providers acting under a power of attorney may be able to pursue claims on behalf of ERISA plan participants. Meanwhile, a trial court in the Third Circuit has promptly applied this ruling to various anti-assignment clauses in pending cases (see, e.g., Univ. Spine Ctr. v. Anthem Blue Cross Blue Shield (D. N.J. 2018) For more information, see EBIA’s ERISA Compliance manual at Sections XI.E (“Assignment of Benefits”) and XXXVI.G (“Who Can File ERISA Benefits Litigation?”). See also EBIA’s Self-Insured Health Plans manual at Section IX.E (“Recommended Plan Provisions”).

Contributing Editors: EBIA Staff.