The Ninth Circuit affirmed two district court judgments dismissing ERISA actions brought by health care providers in DB Healthcare v. Blue Cross Blue Shield of Arizona, No. 14-16518, and Advanced Women’s Health Center v. Anthem Blue Cross Life & Health Insurance Co., No. 14-16612. The health care providers’ argument was two-fold:  (1) health care providers were “beneficiaries” under Section 502(a) of ERISA, and thus could bring suit directly under ERISA; and (2) the plaintiffs in these cases could bring derivative claims under ERISA because the subscribers had assigned their claims under the plans to the plaintiffs. The Court denied both these claims.

Consistent with the Second, Third, Sixth, Seventh, and Eleventh Circuits, the Ninth Circuit held that medical providers were not “beneficiaries” under Section 502(a) of ERISA and therefore could not bring suit directly under ERISA. A “beneficiary” is defined as “a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder.” The Court noted that the term “benefit” referred to “the specific advantages provided to covered employees, as a consequence of their employment, for particular purposes connected to alleviating various life contingencies.” The right to payment for medical services was not a “benefit” under the plan. Therefore, health care providers are not ERISA “beneficiaries” and may not sue under ERISA to recover payments due for services rendered or to otherwise enforce the statute.

The Court also denied the plaintiffs’ derivative claims. While ERISA could permit a health care provider to bring a derivative claim against a health care plan if the subscriber assigned his right to reimbursement to the provider, the plaintiffs in these cases did not have valid assignments of the subscribers’ claims. The assignments in each case were invalid for different reasons.

In DB Healthcare, the governing employee benefit plan prohibited subscribers from assigning any of their rights under the plans to third parties. Thus, the “assignment of benefits” forms executed by the subscribers in favor of the DB Healthcare plaintiffs were not valid.

In Advanced Women’s Health Center, the provider agreement between the Center and Anthem permitted assignment of subscribers’ claims. The assignments at issue, however, only permitted the Center to stand in the shoes of the beneficiaries to recover benefits due under the plan. The Center’s claims in this case concerned Anthem’s process of post-payment claims review and practice of recouping erroneous payments. The subscribers could not assert these claims; therefore, the claims were outside the health care provider’s assigned standing.

This post was authored by Kathleen Dion and is also being shared on our Health Law Diagnosis blog. If you’re interested in getting updates on developments affecting health care and life sciences, we invite you to subscribe to the blog.