Medical Providers Test Boundaries of Benefit Assignments

In two recent cases, courts have addressed the right of medical providers acting under assignments of ERISA plan benefits from patients to seek plan documents and summary plan descriptions (SPDs) and sue plan fiduciaries. In one case, a dermatologist who was pursuing appeals under assignments from several patients requested an SPD from an entity that administered ERISA plan coverage for those patients and sued to collect statutory penalties when the entity failed to provide the SPD. The trial court dismissed the action, holding that the patients did not assign their rights to sue for statutory penalties. After dismissal, the provider obtained a second assignment from each patient that explicitly conferred the right to sue for statutory penalties and purported to convey that right retroactively. On appeal, the parties disagreed on whether a person may retroactively assign rights against a third person, but the Eleventh Circuit found the issue irrelevant. The court explained that, at the time the provider requested the SPD, she had no right to it because she was neither a plan participant nor beneficiary. Because no party entitled to the SPD had requested it, no penalty liability arose—so it did not matter whether the later assignment gave the provider the right to sue.

In a second case, a surgical practice sued the plan’s claims administrator for underpaying a claim for services rendered and for breach of fiduciary duty. A federal district court dismissed the claim for benefits, finding that the provider had not identified specific plan provisions showing that the services were covered. The provider contended that it had requested, but been denied, copies of the plan and SPD, but the court explained that the claims administrator was not the plan administrator, and thus was within its rights to deny the provider’s request, even though its refusal was “unnecessarily wasteful of the [provider’s] and the court’s time.” The court allowed the claim of fiduciary breach to proceed, however, along with the issue of whether an assignment of benefits allows providers (rather than participants or beneficiaries) to sue for fiduciary breach in addition to suing for benefits under the plan. The court cited prior cases in which courts have reached inconsistent decisions about the scope of the assignment and concluded that the provider should be given the opportunity to develop and present its case.

EBIA Comment: Assignments of benefits and anti-assignment clauses have recently been hot topics for litigation (see, for example, our Checkpoint article). While the enforceability of anti-assignment clauses in ERISA plans is well-established in every circuit that has considered the issue, the extent of the rights conveyed by an assignment of benefits in the absence of an anti-assignment clause is very much a facts-and-circumstances determination. 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.