In Penn. Chiro. Assoc. v. Independence Hosp. Indem. Plan, Inc., — F.3d –, 2015 WL 5853690 (7th Cir., Oct. 1, 2015), two chiropractors who had signed preferred provider agreements with an insurer claimed that the insurer violated ERISA in determining payments to them. In particular, plaintiffs claimed that the insurer had improperly recouped overpayments without holding a hearing.
As the court described the function of the agreement: “Providers bill the insurer directly and do not know (or care) whether a given patient obtained the coverage as part of an ERISA welfare-benefit plan or through some other means, such as an affinity-group policy or an insurance exchange under the Affordable Care Act.”
Plaintiffs conceded they were not participants in any plan, but argued that they were beneficiaries, contending that the preferred provider agreements assigned to them the right to receive participants’ benefits. The court held:
The problem with this contention all but catapults off the page: a “beneficiary” is a person designated “by a participant” or “by the terms of an employee benefit plan,” and plaintiffs are neither. … Plaintiffs do not rely on a valid assignment from any patient. Nor do they rely on a designation in a plan. Instead they rely on their contracts with an insurer. That does not meet the definition in § 1002(8). No employee’s benefits are at issue and none had to pay an extra penny as a result of the insurer’s treatment of some procedures as capitation based rather than fee-for-service based; plans’ duties to their participants are unaffected by this litigation.
The court expressly aligned itself with the Second Circuit, and decisions from other circuits, which distinguish between a provider’s status as an assignee of a particular claim, and its status as voluntary members of a network.
A couple of other points are noteworthy. First, the court disagreed with the notion that this was a question of “standing” to sue under ERISA, as other courts have labeled it. It stated that the plaintiffs unquestionably had standing to sue the insurer, but “whether their claim comes within the zone of interests regulated by [ERISA].” It explained that there was value in “keeping standing distinct from statutory coverage.”
Second, the court chose some unfortunately broad language in addressing plaintiffs’ concern that, if they could not sue under ERISA, ERISA might preempt their contractual claim, stating that preemption was not a concern because “[t]he state law of insurance contracts is a form of state law regulating insurance and is enforceable whether or not a given insurer sells its policy to employers.”