On June 1, 2015, the U.S. District Court for the District of New Jersey granted class certification in DeMaria v. Horizon Healthcare Inc., d/b/a BlueCross BlueShield of New Jersey, No. 11-7298 (WJM) (D.N.J. June 1, 2015). DeMaria was brought by participating and nonparticipating chiropractors who treated patients insured by defendant Horizon Healthcare Services Inc., d/b/a BlueCross BlueShield of New Jersey and Horizon HMO.

The plaintiff chiropractors alleged that Horizon systematically denied payment of insurance benefits for certain chiropractic treatments provided by the plaintiffs. The district court held that the complaint satisfied the elements for class certification under Federal Rules of Civil Procedure 23(a), as well as Rules 23(b)(1) and 23(b)(3), and granted class certification. DeMaria sets forth a blueprint to class action certification for health care providers seeking to challenge policies by health care insurers that may systematically deny or reduce benefits paid.

The DeMaria plaintiffs alleged that the class members regularly provided three types of chiropractic treatment: (1) chiropractic manipulative therapy ("CMT"), (2) evaluation and management services ("E/M"), and (3) ancillary physical therapy ("PT").

Horizon allegedly paid the plaintiffs for CMT, but denied all claims for E/M and PT on the grounds that its “bundling” practice incorporated payments for all chiropractic treatments into a “global fee” for CMT. Horizon’s denial of these claims was automatic, as was its denial of all appeals. Horizon’s explanation of benefits ("EOB") stated that the claims for E/M and PT were denied because chiropractors were “not eligible” for payment for those services. Plaintiffs sought relief for Horizon’s denial of E/M and PT claims on the ground that Horizon’s bundling practice violated the Employee Retirement Income Security Act and breached its contracts.

Beginning its analysis, the court stated that the class certification motion posed a simple concrete question: Can the court fairly and efficiently determine whether the bundling policy violated the rights of the proposed classes, or do the individual inquiries that will be required to ultimately determine what, if any, actual damages each class member gets, pose such an overwhelming problem as to make class certification impractical and unfair?

Granting class certification, the court explained that all of the claims arise from common evidence, which began with the uniform definition of “therapeutic manipulation,” a covered treatment under all Horizon plans that included E/M and PT. The court noted that it was undisputed that Horizon’s plan documents did not reference its bundling policy, which was only revealed on EOB statements as a payment made for CMT and a denial of claims for E/M and/or PT in instances when the provider administered CMT at the same time. Not only was Horizon’s denial of claims and appeals automatic and systematic, but it was also unrelated to any medical criteria.

Plaintiffs alleged two ERISA theories of liability: (1) Horizon’s denial of claims on the basis that chiropractors were not eligible for reimbursement for E/M and PT is false; and (2) Horizon’s denial of all appeals violated the “full and fair review” of appeals required by ERISA, 29 U.S.C. Section 1133. Plaintiffs’ contract claims, based upon the same evidence, allege that the bundling policy violated Horizon’s contractual obligation to pay for “therapeutic manipulation,” as defined in Horizon’s plans.

Turning first to the Rule 23(a) analysis, the court found the four elements of commonality, typicality, adequacy and numerosity were satisfied because all class members suffered the same injury as a result of being subjected to an improper claims denial practice, with a common question of whether the automatic denial under the bundling policy violated ERISA and/or New Jersey contract law.

Plaintiffs’ claims are typical, the court explained, because all class members submitted the same Form 1500 for CMT, E/M and PT, and were paid for CMT only but denied payment for PT and E/M on the grounds of chiropractor eligibility. As to Horizon’s defenses that its bundling policy was a “reasonable practice” consistent with its legal obligations and supported by Horizon’s provider manuals, the chiropractic industry literature and chiropractic industry practice generally, the court noted that these defenses applied to all of plaintiffs’ allegations that the bundling policy violated ERISA and state law, and were therefore consistent with class adjudication. There was no doubt that the plaintiffs were adequate representatives or as to the numerosity of the class.

Moving to the predominance analysis under Rule 23(b)(3), the court rejected Horizon’s contention that individualized issues would predominate over the central and common question of the legality of Horizon’s bundling policy. The court noted that the varying language of the assignment of benefits forms obtained by individual chiropractors from their patients was irrelevant because all class members seeking payment submitted a Form 1500 to Horizon, which contained identical assignment language stating that the patient “authorizes payment of medical benefits to the undersigned physician or supplier for the services described below,” and Horizon accepted all Form 1500 assignments. The court noted that the Form 1500 “creates a derivative right to sue for payment under both ERISA and New Jersey contract law,” and also that any anti-assignment clauses in Horizon’s contracts with its insureds had been waived by Horizon because it accepted assignments and made claims payments to the providers based upon the submission of a Form 1500. The court stated, "It would be patently unfair to allow the patient to assign his rights to payment to a provider but not let the provider sue for breach of the assigned contract for payment."

Further, Horizon’s argument that claims might be denied for reasons other than the bundling policy was undermined by the limited scope of relief sought on a classwide basis: an order that Horizon reprocess the class members’ claims, which the court found necessary in order to keep the class manageable. The court held that Horizon’s proffered possible reasons for denying the claims were all subordinate to the question of the bundling policy’s legality, and could be addressed in subsequent litigation. The court also held that the ERISA classes could be certified under Rule 23(b)(1)(B) because the determination of the bundling policy’s legality for the named plaintiffs would have the effect of determining its legality for all proposed class members, even in the event of ruling in Horizon’s favor.

What Are DeMaria's Takeaways?

First, a health care provider seeking to challenge an insurer’s repeated denials of its claims for treatment or services rendered must be seeking payment for services covered by the express definitional terms of the insurer’s plans. That is a given. If the claims that are systematically denied are not within the language of the insurer’s plans, there is no basis for the health care provider to challenge the systemic practice.

Second, to the extent that a health care insurer’s claims review policy is unrelated to claim-specific medical criteria, but is instead based upon a systematic interpretation of defined terms of covered treatment under its plans, such a policy may be subject to challenge under ERISA on a classwide basis by health care providers whose claims are denied. A uniform policy that systematically denies claims without regard to an individualized application of medical criteria has the potential to impact participating and/or nonparticipating providers on a uniform basis, irrespective of the medical issues arising with respect to individual patients. A claim challenging such a policy is appropriate for handling on a classwide basis in order to avoid the potential for inconsistent adjudications and to efficiently adjudicate an issue that has a uniform adverse impact on similarly situated providers.

Third, DeMaria clarifies that a key issue relating to the validity of a health care insurer’s uniform claims handling policy is whether the policy is included or articulated within the insurer’s plan documents. The court specifically noted that Horizon’s bundling policy “appeared nowhere in any plan documents,” but instead was unilaterally implemented by Horizon sometime in the 1990s, and disclosed on Horizon’s EOB statements when it made payments for CMT but denied payments for E/M and/or PT when the provider administered CMT along with E/M and/or PT at the same time. The fact that the challenged policy was not articulated in the plan documents provided the basis for plaintiffs’ allegations that the defendant violated ERISA and state law.

Fourth, DeMaria supports the argument that health insurers’ denials of claims based upon CPT codes may be invalid where the services reflected in the CPT codes are within the policy coverage as set forth in the health insurers’ plans, and the services provided, along with the corresponding CPT codes, fall within the defined coverage. In DeMaria, the insurer sought to limit payment for chiropractic treatment to one type of CPT-coded “therapeutic manipulation” per patient visit, a limitation that was inconsistent with the plan document definition of “therapeutic manipulation” that included the three different types of chiropractic services regularly provided by the class members. Whether through the practice of “bundling” or otherwise, an insurer’s rejection of payment for covered services would be subject to challenge under DeMaria where the coverage defined by the plan documents includes multiple kinds of services as defined by separate CPT codes. The insurer’s attempt to impose additional limitations on claims not expressly set forth in the plan remains subject to challenge under DeMaria. Fifth, the possibility of future individualized damages issues does not undermine class certification under DeMaria. Class certification is appropriate to address the legality of a health insurer’s uniform policy that results in the denial of benefits without regard to individual medical or other issues, and any individual issues as to damages may be addressed in subsequent proceedings. Therefore, provided that a plaintiff health care provider can define the class question presented as the legality of the insurer’s uniform application of its claim policy, there can be a cognizable claim for class certification under Rule 23.

Finally, DeMaria establishes that the differing anti-assignment clauses in contracts between a health insurer and its insureds will not be an impediment to standing for the health care provider. Where an insurer has accepted Form 1500 assignments, it has engaged in a course of dealing or waiver that precludes the insurer from contesting the health care provider’s standing to challenge the insurer’s systematic denial of claims.

DeMaria establishes a blueprint for health care providers to obtain class certification in order to challenge policies by health insurers that may systematically deny or reduce benefits paid. Given the clear definition of the legal and factual issues raised by the class question in DeMaria, it appears that the court’s analysis rests on solid ground under Rule 23. Accordingly, health care providers seeking to challenge health insurers’ claims policies may want to consider and follow DeMaria‘s approach to obtain class certification.