ERISA trends: Out-of-network payments and COVID-19 testing reimbursement

Recent developments point to upcoming trends for out-of-network pricing cases

Recent cases indicate several characteristics about how out-of-network pricing disputes will proceed in 2023. First, insurers and plans should be mindful of appropriately opposing discovery in actions contesting whether insurers or plans satisfied obligations to pay the usual and customary rate (UCR) or another pricing rate. In litigation involving out-of-network reimbursement, insurers/plans and providers often clash over the issue of how deeply providers can investigate reimbursement methodologies and documents potentially relevant to them, particularly in light of legal privileges or the requirements of the Employee Retirement Income Security Act of 1974 (ERISA).

First, in the coming year, plans should be mindful of preserving the defensive privileges surrounding pricing methodology. Some courts will allow invasive discovery into company policies and procedures for reimbursing out-of-network claims, internal communications between in-house counsel and corporate business teams on these issues and other communications mentioning pricing methodology and data. In this context, plans should be particularly aware of recent cases involving the “fiduciary exception” to the attorney-client privilege. Some of these cases somewhat surprisingly place the burden of proof on the plan/administrator to show that it was not acting in its fiduciary capacity at the time of a given communication, rather than requiring providers to show the exception applies. See, for example, L.D. v. United Behav. Health, No. 20-cv-02254-YGR (JCS), 2022 U.S. Dist. LEXIS 139618, at *54 (N.D. Cal. Aug. 5, 2022).

Second, insurers and plans should anticipate that the outcome of many cases in 2023 will be decided on how much evidence providers gain through discovery and how clear (or unclear) plan language on pricing is. Insurers and plans should also be mindful that, in certain jurisdictions, courts may require ERISA fiduciaries to disclose certain information about pricing methodology merely as a part of denials. And some courts may hold ERISA fiduciaries to a higher level of proof than others in showing that they properly calculated reimbursement. Compare In re WellPoint, Inc. Out-Of-Network “UCR” Rates Litig., 903 F. Supp. 2d 880, 921 (C.D. Cal. 2012) (in which UCR methodology was not required to be disclosed by an ERISA fiduciary) (collecting cases) with Zack v. McLaren Health Advantage, Inc., 340 F. Supp. 3d 648, 662 (E.D. Mich. 2018) (in which “ERISA requires disclosure of pricing methodology [concerning the reasonable and customary amount] … as part of benefit and appeals denials.").

Third, plans and insurers can expect more litigation in 2023, focusing on how UCR should be defined. For example, the Texas Supreme Court recently issued a decision in a pair of cases that will change the landscape in Texas and the Fifth Circuit concerning out-of-network reimbursement: Texas Medicine Resources, L.L.P. v. Molina Healthcare of Texas, Inc., No. 21-0291, 2023 Tex. LEXIS 24 (Tex. Jan. 13, 2023) and United Healthcare Ins. Co. v. ACS Primary Care Physicians Sw., P.A., No. 22-0138, 2023 Tex. LEXIS 24 (Tex. Jan. 13, 2023). In these cases, the Court held that there is no private right of action under Texas emergency care UCR statutes for claims arising prior to January 1, 2020. Plans and insurers can anticipate that parties will cite the Court’s recent opinion as precedent in other cases involving out-of-network reimbursement where the parties will argue about the exact scope of the rulings. More broadly, the decision may cast ripples beyond Texas and the Fifth Circuit because cases in other states will question how to determine whether a private cause of action should be implied from a statute and may likewise interpret similar statutory language on out-of-network reimbursement.

Cases involving COVID-19 testing reimbursement foreshadow how providers’ claims are expected to evolve

Several provider disputes involving COVID-19 reimbursement have been percolating through the courts. Typically, providers of COVID-19 tests or diagnostic services and medical laboratories assert claims against health plans regarding the plans’ failure to properly reimburse COVID-19 testing services. Specifically, the most common allegations include purported breaches of the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief and Economic Security Act (CARES Act). Providers have typically cited provisions of the CARES Act, stating that a plan or insurer “shall reimburse” an out-of-network provider of COVID-19 diagnostic testing for such testing in an amount that equals the “cash price” for such service as listed by the provider on its public website or “may negotiate” a rate with the provider for less than the cash price. These provisions in the CARES Act amend portions of the FFCRA that concern coverage requirements for such diagnostic testing.

As an initial line of defense, the battles in these cases focus on whether providers can bring a private cause of action in the first instance under the CARES Act or FFCRA. Most courts have found that providers do not have a private cause of action under either statute. See, for example, Murphy Med. Assocs., LLC v. Cigna Health & Life Ins. Co., 2022 WL 743088, at *6 (D. Conn. Mar. 11, 2022) (“[N]either § 6001 of the FFCRA nor § 3202 of the CARES Act contains a private right of action.”); Am. Video Duplicating, Inc. v. City Nat’l Bank, 2020 WL 6882735, at *4 (C.D. Cal. Nov. 20, 2020) (“[E]very court to address whether the CARES Act created an implied private right of action has held that it does not.”). But one outlier court has held that providers do have such standing, and thus, plans should be attentive to any courts that may join this minority view. See Diagnostic Affiliates of Ne. Hou, LLC v. United Healthcare Servs., Inc., No. 2:21-CV-00131, 2022 WL 214101, at *4–9 (S.D. Tex. Jan. 18, 2022). That said, thus far, courts that have assessed Diagnostic Affiliates have not found its reasoning to be persuasive or in line with Supreme Court precedent. See, for example, Saloojas, Inc. v. Cigna Healthcare of Cal., Inc., 2022 U.S. Dist. LEXIS 183608, at *12-13 (N.D. Cal. Oct. 6, 2022).

Even so, some courts are allowing providers’ claims concerning COVID-19 testing to proceed by reasoning that if a provider has standing to sue under ERISA by virtue of a plan beneficiary’s assignment of benefits, then a plan may have breached an ERISA plan’s terms in its failure to reimburse certain COVID-19 testing claims. In those cases where providers survived initial motions to dismiss, the litigation is moving into later stages, and thus, we can expect to see more litigation focusing on how much providers should be paid for such claims. Providers are arguing that they should be reimbursed based on the “cash price” they publicly posted based on the statutory language in the CARES Act. If courts like Diagnostic Affiliates agree that providers are, in fact, entitled to some reimbursement, we can expect litigation over this language concerning the “cash price” given providers may have artificially inflated prices they publicly posted.

These cases remain important to watch in 2023 as providers continue to challenge reimbursements by alleging purported violations of the FFCRA and CARES Act. See Aventus Health, LLC, et al. v. United Healthcare, Inc., et al., U.S.D.C. M.D. FL, Doc. No. 6:22-2408-RBD-EJK, (filed Dec. 27, 2022) (a putative class action in which a group of out-of-network laboratories challenge reimbursement rates for COVID-19 testing, seeking to enforce a private right of action under the FFCRA and CARES Act).

Best practices and conclusions

Insurers and plans should implement best practices that account for the developments discussed in this article. They should expect fiercer discovery battles on out-of-network pricing in the near future and take steps to preserve defensive privileges. They should ensure that the language used in plans they administer clearly defines the rate for out-of-network reimbursement and contains more uniform pricing language across plans, where possible. Insurers and plans should keep abreast of how the Texas Supreme Court will define UCR and how its decisions will shape litigation in Texas, the Fifth Circuit and beyond. They should also anticipate new theories, like those arising in the COVID-19 testing cases, and devote attention to accounting for all of these trends expected in the year ahead.