Ninth Circuit Opens Door to Claims by Out of Network Providers

Lawsuits by out-of-network medical providers against ERISA plans and their third party administrators rank as one of the most common ERISA-type cases being raised these days. In these cases, out-of-network medical providers purport to provide services to patients—often substance use or mental health treatments—and then directly seek payment from group health plans or their third party administrators. To avoid the restrictions of ERISA claims for benefits (including abuse of discretion review and plan anti-assignment clauses), these medical providers regularly raise state law claims trying to turn routine communications about benefits into state law breach of contract claims—this despite the fact that such communications are nothing more than communications about plan terms, rather than express promises to pay benefits outside the terms of any relevant group health plan.

In Bristol SL Holdings v. Cigna Health and Life Ins. Co., the Ninth Circuit may have just made those claims easier for medical providers to prosecute. It first concluded that Bristol had standing to raise the ERISA claims alleged in the Complaint, even though it was neither a plan participant nor a medical provider with an assignment from a participant—but instead purchased the right to raise the claims in question from the bankrupt medical provider’s assets. Although prior Ninth Circuit case law would seem to preclude such third parties from raising ERISA claims, the Ninth Circuit panel distinguished such precedent as involving an entity that purchased hundreds of claims from hundreds of providers, thus effectively turning them into (in the Court’s eyes) a marketable commodity. But the Court believed that allowing a corporate entity to purchase an assignment in a bankruptcy sale did not raise the same concerns. The exact line between the two lines of authority will have to be worked out in future cases.

In a separate memorandum (in theory not precedential), the Court also held that whether communications about benefits made during verification of benefit calls between the provider and Cigna created enforceable contracts raised fact issues that would have to be resolved at trial. Frustratingly, the Court did not point to any specific language that might have created such a contract, but instead referred to phone calls in the record between the provider and Cigna during which such contracts might have been formed. This provides little guidance to future litigants as to how to avoid or defeat these types of claims—particularly given that the notion that call center employees for a third party group health plan administrator might be making promises to pay medical providers for claims outside the terms of an ERISA plan is a questionable proposition.

Regardless of the merits—or the Ninth Circuit’s unclear analysis—the decision is a shot in the arm to out of network medical providers.

Andrew Holly

Andrew represents clients in a wide range of complex civil matters.

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