On November 9, 2012, Judge William Martini of the United States District Court for the District of New Jersey dismissed a putative class action lawsuit brought by several chiropractors, who accused Horizon Healthcare Services, Inc. (“Horizon”) of systematically and improperly rejecting insurance claims for chiropractic treatments. See Demaria v. Horizon Healthcare Services, Inc., No. 2:11–cv–7298 (WJM), 2012 WL 5472116 (D.N.J. Nov. 9, 2012).
Horizon and related entities underwrite and/or administer health insurance benefits for millions of people in the state of New Jersey who are participants in numerous employer-sponsored, individual and governmental health insurance coverage plans. The plaintiff chiropractors regularly provided certain types of chiropractic treatments to patients who were the actual plan participants. In their complaint, the plaintiffs asserted that, “as a matter of course,” they obtained written assignments from plan participants, which allegedly entitled the plaintiffs to any claims for reimbursement that would otherwise be payable to the plan participants. The plaintiffs would then seek reimbursement from Horizon for the services they rendered to the plan participants. According to the complaint, Horizon “systemically and improperly denied their insurance benefit claims” for various types of treatments provide by the plaintiffs. Id. at *1.
Horizon initially denied the reimbursement claims, stating that the plaintiffs were not eligible to be paid for the procedure. Later, Horizon took the position that it “bundled” reimbursement for all the services provided by the chiropractors into a “global fee” that was paid for one of the chiropractic services. Id. at *1-2. The New Jersey Department of Banking and Insurance held that Horizon’s bundling practices violated the state’s Unfair Claim Settlement Practices Act, and Horizon was ordered to individually evaluate the claims. The plaintiffs conceded that Horizon was in compliance with the state agency’s order by April 15, 2010, but nevertheless, the plaintiffs filed suit, seeking relief from Horizon for its previous pattern of improperly processing reimbursement claims for chiropractic services. Id. at *2.
Horizon filed a motion to dismiss and argued, inter alia, that the plaintiffs failed to demonstrate standing to assert claims against Horizon for its alleged violations of ERISA.
In reviewing Horizon’s motion to dismiss, Judge Martini noted that, pursuant to ERISA Section 502(a), the plaintiffs would only have standing to sue if their complaint set forth sufficient facts demonstrating that they are (or were) plan “participants” or “beneficiaries.” Id. at *3. Although the plaintiffs themselves were not “participants” or “beneficiaries” of the plan, the Court considered whether a healthcare provider such as a chiropractor may obtain standing through a valid assignment. Although the Third Circuit has not definitively ruled on whether a healthcare provider may obtain ERISA Section 502(a) standing through an assignment, the Court went on to acknowledge that many other circuit courts have expressly held that providers may have standing to assert an ERISA Section 502(a) claim “where a beneficiary or participant has assigned to the provider that individual's right to benefits under the plan.” Id.
Citing to Judge Chesler’s discussion and analysis of the same question of whether health care providers may have standing to bring suit under ERISA in Franco v. Connecticut General Life Ins. Co., 818 F. Supp. 2d 792 (D.N.J. 2011), Judge Martini noted that “the scope of the ‘assignment of benefits’ is critical to determining whether a provider has standing to sue under ERISA.” Demaria, 2012 WL 5472116, at *4 (citing Franco, 818 F. Supp. 2d at 809). Judge Martini stated that the plaintiffs would meet their burden of establishing standing under ERISA if their complaint “contain[ed] specific factual allegations to render plausible their claim that the Assignments they received from the Plan Participants conferred them with the right to receive the full benefits of that Plan.” Demaria, 2012 WL 5472116, at *4. However, he held that “vague references to a common practice and purported assignment will not satisfy this burden,” in which case, dismissal would be appropriate. Id.
Turning to the complaint, Judge Martini determined that the plaintiffs “vaguely assert that they obtained Assignments from Plan Participants which entitle them to any claims for reimbursement which would otherwise be payable to the Plan Participants under the terms of each Plan. Moreover, pursuant to these Assignments, the Plan Participants remained personally liable to Plaintiffs for any non-Covered Services. . . .” Id. Like the health care providers’ complaint in the Franco case, the allegations, at best, “provide only the most ambiguous and conclusory information about what the purported assignments entail. At worst for [Plaintiffs], they indicate that the assignments were limited to a patient's assigning his or her right to receive reimbursement from [Horizon] for the covered portion of the service bill, which in no way can be construed as tantamount to assigning the right enforce his or her rights under the plan.” Id.
Judge Martini dismissed the matter in its entirety, but the dismissal was without prejudice. The plaintiffs could, in theory, come back with an amended complaint, but the Court’s message is clear—health care providers need a specific assignment of benefits and the right to enforce the participant’s rights under the plan in order to possibly have standing to sue under ERISA.