On September 11, 2015, the United States Court of Appeals for the Third Circuit, in North Jersey Brain & Spine Center v. Aetna, Inc., joined five other federal courts of appeals in holding that a patient’s assignment of benefits to his or her health care provider is sufficient to confer standing upon the provider to sue for non-payment of those benefits under §502(a) of the Employee Retirement Income Security Act of 1974 (ERISA). 29 U.S.C. §1132(a).  In so holding, the circuit court reversed the district court’s order dismissing the action filed by North Jersey Brain & Spine Center (NJBSC) against Aetna Life Insurance Company (Aetna) for non-payment of benefits.

The litigation arose out of NJBSC’s provision of medical services to three patients insured under healthcare insurance plans administered by Aetna. The patients had signed “Insurance Authorization and Assignment” forms authorizing NJBSC to appeal to Aetna on their behalf and receive payments for all services rendered.  Thereafter, NJBSC filed suit against Aetna, alleging that the insurer authorized the procedures but failed to pay the related claims, in violation of ERISA.  Aetna moved to dismiss on the basis that NJBSC, which is not a participant and beneficiary of Aetna’s ERISA covered plan, did not have sufficient derivative standing as an assignee under the language of the assignment at issue to assert claims against it for alleged ERISA violations.  The New Jersey district court, finding that “more than the right to payment is necessary to confer derivative standing under ERISA” (emphasis added), dismissed the allegations without prejudice to NJBSC’s right to file an amended complaint consistent with its opinion.

On NJBSC’s appeal, the question considered by the circuit court was the type of assignment required to confer derivative standing upon a healthcare provider under ERISA.  The Third Circuit held that “as a matter of federal common law, when a patient assigns payment of insurance benefits to a healthcare provider, that provider gains standing to sue for that payment under ERISA §502(a). An assignment of the right to payment logically entails the right to sue for nonpayment… After all, the assignment is only as good as payment if the provider can enforce it.”  In so deciding, the court noted that it was guided by ERISA’s intent to protect the interests of participants, transferring the burden of payment to the providers who are better situated and financed to pursue unpaid claims, joining the First, Fifth, Sixth, Ninth and Eleventh Circuits * in its conclusion.

The opinion does not address whether the plan itself prohibited the assignment of rights and/or benefits under ERISA, and such non-assignment provisions have been held enforceable by the courts. SeeDavidowitz v. Delta Dental Plan, Inc., 946 F. 2d 1476 (9th Cir. 1991). In response to an action filed against Aetna by another provider in an earlier action, a New Jersey district court judge held that the Aetna plan’s anti-assignment provision at issue there trumped the assignment of benefits to the provider, adopting the majority view of federal courts considering the issue. See Neurological Surgery Associates, P.A. v. Aetna Life Ins. Co., 2014 U.S. Dist. LEXIS 75906 (D.N.J. June 4, 2014). Moreover, the circuit court’s opinion in NJBSC v. Aetna does not address the issue whether the assignment confers the right to seek penalties and attorney’s fees under the statute.

A copy of the Third Circuit’s opinion may be accessed here.

* Similar conclusions have been reached by district courts in the remaining circuits.

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