On October 1, 2015, the United States Court of Appeals for the Seventh Circuit reversed what was previously regarded as a victory for the Pennsylvania Chiropractic Association. The case, Pennsylvania Chiropractic Association v. Independence Hospital Indemnity Plan, Inc.,[1] has a complex procedural history involving multiple parties and numerous opinions over the course of many years.  The appeal involved claims by two chiropractors and a chiropractic association against an insurer, Independence Hospital Indemnity Plan, Inc. (“Independence”).[2] The plaintiffs alleged that Independence failed to follow the Employee Retirement Income Security Act of 1974 (“ERISA”) claims procedure provided by section 1133[3] when it recouped previously paid claims.

The two chiropractor plaintiffs signed “participating provider” or “network” agreements with Independence and billed Independence directly for services provided to Independence’s insureds.  Independence paid some claims on a fee-for-service basis but then declared that it had made a mistake and recouped the payments by reducing future payments for other services that it acknowledged were owed.

Section 1133 requires that employee benefit plans provide adequate notice to participants and beneficiaries when denying their claims as well as a reasonable opportunity for full and fair review of the denial. The plaintiffs argued that Independence could not retroactively recoup payments without offering the opportunity for hearings pursuant to the ERISA claims procedure. The district court granted the plaintiffs’ request for injunctive and other equitable relief.

On appeal, the Seventh Circuit pointed out that the existence of a network contract between a medical provider and an insurer does not make that provider a “beneficiary” as the term is defined by ERISA. The court stated that the term “standing” was not appropriate to describe the issue.  The proper term, according to the court, was that there was no statutory coverage which allowed the plaintiffs to pursue remedies under ERISA.  The court added that the plaintiffs may have had contract claims, but the parties were not of completely diverse citizenship so a federal court could not adjudicate them.  The plaintiffs did not contend that contract issues could be resolved under the court’s supplemental jurisdiction, nor did they contend that Independence broke any contractual promise. For that reason, the damages and injunctions as well as the award of attorneys’ fees to plaintiffs were vacated.