A federal trial court has issued what could be the final decision in a long-running dispute between a large dialysis provider and a group health plan that classified all dialysis providers as “out-of-network,” resulting in a lower reimbursement rate for dialysis providers than for providers of other medical services.
DaVita v. Marietta Mem’l Hosp. Emp. Health Benefit Plan, 2026 WL 668321 (S.D. Ohio 2026)
The U.S. Supreme Court ruled in 2022 that the plan did not violate the Medicare Secondary Payer (MSP) rules by limiting coverage for outpatient dialysis, even though the treatment is used almost exclusively for patients with end-stage renal disease (ESRD). The case was sent back to the trial court, which dismissed the provider’s MSP claim in accordance with the Supreme Court’s ruling. However, the court did not dismiss a separate allegation that the employer, as plan sponsor, discriminated against participants with ESRD in violation of HIPAA’s health status nondiscrimination rules by eliminating network coverage for dialysis and exposing the participants to higher costs. The court also declined to dismiss the provider’s claim for benefits under ERISA § 502, to the extent it was based on the alleged HIPAA violation.
The court has now disposed of the remaining claims by holding that there was no violation of HIPAA’s nondiscrimination rules. The court explained that the rules prohibit both (1) plan terms that facially discriminate against protected health factors, and (2) neutral plan terms adopted with an invidious intent to harm participants based on protected health factors. In this case, it was undisputed that the plan language did not facially discriminate against ESRD patients because the limitations applied to all participants who received outpatient dialysis, regardless of their diagnosis. Thus, the provider had to prove that the employer acted with discriminatory intent. The court found the evidence insufficient to establish such intent, concluding that “at best,” the provider’s evidence offered speculation that the employer was aware of and considered the adverse effects of the limitation on ESRD patients before adopting them. In reality, the court said, this evidence simply showed that the employer exercised due diligence by analyzing cost data before making plan decisions—a permissible exercise under ERISA.
EBIA Comment: This case (which could still be extended by an appeal) may provide some comfort to plan sponsors in that they generally have latitude to structure welfare plans to control costs, including by limiting or carving out certain services. However, such decisions should be based on legitimate business reasons, such as cost containment, rather than an intent to target individuals with particular health conditions. Careful documentation of the decision-making process is recommended to lessen litigation risk. For more information, see EBIA’s HIPAA Portability, Privacy & Security manual at Section XI.C (“Health Status and Genetic Information Nondiscrimination Rules: Nondiscrimination Rules for Eligibility and Benefits”), EBIA’s Self-Insured Health Plans manual at Sections XIII.D (“Benefits Must Not Be Discriminatory”) and XIII.E (“Coverage Limitations and Exclusions”), and EBIA’s ERISA Compliance manual at Section XXXVI (“ERISA Litigation”).
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