Employee Benefit Plan Review – From The Courts

11th Circuit Holds ERISA Plan’s Anti-Assignment Provision Bars Third-Party Doctor’s Claim for Reimbursement for Services 

The Employee Retirement Income Security Act of 1974 (ERISA) provides that plan participants and plan beneficiaries may bring a private civil action to recover benefits due under the terms of a plan, to enforce rights under a plan, or to recover penalties for a plan administrator’s failure to provide documents. 29 U.S.C. § 1132(a)(1), (c). ERISA also limits the right to sue for breach of fiduciary duty to plan participants, plan beneficiaries, plan fiduciaries, and the Secretary of Labor. 29 U.S.C. § 1132(a)(2).

Moreover, only plan participants, plan beneficiaries, and plan fiduciaries may bring a civil action to obtain equitable relief to redress a practice that violates ERISA or the terms of a plan. 29 U.S.C. § 1132(a)(3).

Healthcare providers typically are not “participants” or “beneficiaries” under ERISA and, therefore, lack the power to sue under ERISA, unless a participant or beneficiary assigns to the provider in writing his or her right to payment of benefits under the ERISA plan.

When a plan contains an unambiguous anti-assignment provision, however, the U.S. Court of Appeals for the Eleventh Circuit recently confirmed that a healthcare provider may not bring claims under 29 U.S.C. § 1132 even if it has received an assignment from a plan participant or beneficiary.

The Case

A medical provider treated a patient who was a participant in an ERISA-governed group health benefit plan for which one defendant was the plan administrator and the other was the claims fiduciary. The plan contained an anti-assignment provision: “You may not assign your Benefits under the Policy to a non-Preferred provider without our consent.” The provider was a non-preferred provider under the terms of the plan. Despite the plan’s anti-assignment provision, the medical provider had the plan participant execute an assignment directing the claims fiduciary to pay the participant’s benefits directly to the provider.

After treating the participant, the provider submitted claims for reimbursement to the claims fiduciary seeking reimbursement for the provided services. The claims fiduciary approved a portion of the claims. The provider appealed to the claims fiduciary challenging the partial payment. The claims fiduciary rejected the provider’s first-level appeal. The provider then submitted a second-level appeal, requested that either the claims fiduciary or the plan administrator send her a copy of the summary plan description, and also inquired whether the plan contained an anti-assignment provision. The claims fiduciary rejected the provider’s second-level appeal and did not respond to the provider’s document request or indicate whether the plan had an anti-assignment provision.

The provider then obtained a second assignment from the plan participant, authorizing the provider to request plan documents on the participant’s behalf. The second assignment also assigned to the provider the participant’s right to “pursue claims for benefits, statutory penalties, breach of fiduciary duty, [and] any ERISA claim matter.”

After obtaining the second assignment, the provider sued the claims fiduciary and plan administrator, asserting that they had underpaid her claims and failed to provide the requested plan documents.

The U.S. District Court for the Northern District of Georgia granted the defendants’ motion to dismiss, concluding that the plan’s anti-assignment provision barred the provider’s claim for failure to pay plan benefits. The district court assumed that the plan’s anti-assignment clause did not bar the provider’s claims relating to the failure to provide plan documents, but dismissed the case because the participant’s original assignment did not transfer to the provider the right to sue for these non-payment-related claims and the second assignment could not be applied retroactively against the claims fiduciary and plan administrator.

The provider appealed to the Eleventh Circuit.

The Eleventh Circuit’s Decision

In its decision affirming the district court, the Eleventh Circuit held the plan’s anti-assignment provision prohibited the participant from assigning plan benefits to the provider – a non-preferred provider – and, therefore, barred the provider’s claim seeking to recover unpaid benefits under 29 U.S.C. § 1132.

The court was not persuaded by the provider’s argument that the claims fiduciary and plan administrator should be equitably estopped from, or waived, relying on the plan’s anti-assignment provision because they had not notified her of the provision after she asked whether the plan contained such a term.

Under ERISA, equitable estoppel applies only when “the plaintiff can show that (1) the relevant provisions of the plan at issue are ambiguous, and (2) the plan provider or administrator has made representations to the plaintiff that constitute an informal interpretation of the ambiguity.” The court determined that equitable estoppel did not apply because the anti-assignment provision was unambiguous. It also concluded that even if the doctrine of waiver applied under ERISA, a question presently undecided by the court, the provider’s allegation that the claim fiduciary and plan administrator failed to respond to her inquiry regarding whether the plan contained an anti-assignment provision was insufficient to establish that they had intentionally and voluntarily relinquished their rights under the plan’s anti-assignment provision.

Finally, the court rejected the provider’s contention that the claims fiduciary and plan administrator improperly denied her request for plan documents, because the district court decided that the original assignment related only to the participant’s right to benefit payments, not to plan documents, and the provider had not appealed that aspect of the district court’s holding. The Eleventh Circuit concluded that it did not matter if the second assignment conveyed the participant’s right to plan documents and statutory penalties because the provider requested these documents before the participant executed the second assignment. [Griffin v. United Healthcare of Georgia, Inc., No. 18-10208 (11th Cir. Oct. 25, 2018).] 

Sixth Circuit Affirms Decision Rejecting Plaintiff’s Breach of Fiduciary Duty Claim

The U.S. Court of Appeals for the Sixth Circuit recently affirmed a district court’s decision rejecting a plaintiff’s claim that her late husband’s former employer breached its fiduciary duty under the Employee Retirement Income Security Act of 1974 (ERISA).

The Case

The plaintiff sued her late husband’s former employer, the plan administrator, claiming that it had breached its fiduciary duty under ERISA by failing to notify him of his right to convert his group life insurance coverage under an ERISA plan to an individual policy after his group coverage ended while he was receiving long-term disability benefits due to termination of his employment.

The U.S. District Court for the Eastern District of Tennessee granted the defendant’s motion to dismiss, holding that the plaintiff did not adequately plead a breach-of-fiduciary-duty cause of action.

The plaintiff appealed to the Sixth Circuit.

The Sixth Circuit’s Decision

In the panel’s two-to-one decision affirming the district court’s decision, the court explained that it had recognized three conditions under which an ERISA fiduciary may breach its duty to disclose:

1. An early retiree asked a plan provider about the possibility of the plan changing and received a misleading or inaccurate answer;
2. A plan provider on its own initiative provided misleading or inaccurate information about the future of the plan; or
3. ERISA or its implementing regulations required the employer to forecast the future and the employer failed to do so.

The court originally applied these conditions in a case that was factually distinguishable from the present case, but the court here easily applied the three conditions to the facts at issue. Although the court did not expressly say it, a fiduciary might violate its duty to disclose accurate information in contravention of condition one if a plan participant or beneficiary asks for information and it provides false or misleading information. Moreover, a fiduciary might violate its duty to disclose accurate information in contravention of condition two if, on its own initiative, it provides false or misleading information about the plan or plan benefits. Finally, a fiduciary might violate its duty to disclose accurate information if ERISA or its regulations requires the fiduciary to disclose certain information and the fiduciary fails to provide it in violation of ERISA or its regulations.

The court held that the plaintiff’s allegation that her husband’s former employer was required to, yet failed to, disclose life insurance conversion information satisfied none of the three conditions for fiduciary liability.

The court reasoned that the plaintiff’s claim “plainly” did not satisfy condition three, because neither ERISA nor its implementing regulations requires fiduciaries to notify individual plan participants or their beneficiaries regarding a plan’s conversion rules when the plan itself provides such notice. The court noted that ERISA “does not contain any provision that requires a plan administrator to provide notice to plan participants other than a summary plan description and information of the benefits plan as discussed under 29 U.S.C. §§ 1021(a)(1) and 1022,” and that neither ERISA nor its regulations requires summary plan descriptions to contain conversion information. Further, the court determined that the plaintiff’s claim also did not satisfy condition one, because the complaint did not allege that she or her husband had inquired about the plan’s conversion rules or requested any information regarding his benefits until after his death.

Further, the court held that the plaintiff’s claim did not satisfy the second condition because the plaintiff failed to allege that the defendant made either a misrepresentation or inaccurate statement regarding her husband’s conversion rights under the plan. The court stated that “a failure-to-disclose claim cannot proceed when nothing requires the fiduciary to expressly disclose the information at issue.” And as stated above, neither ERISA nor its regulations require plan fiduciaries to individually notify participants of their rights to convert group coverage into an individual policy. Moreover, the plaintiff did not allege that the defendant was required to disclose anything beyond what was contained in the summary plan description. Finally, the court stated that the complaint had no detailed allegations that the defendant knew that the right to convert was an important issue to the plaintiff’s husband.

The dissent disagreed with the majority, because – according to the dissent – the court failed to consider that the confirmation of benefits the defendant sent to the plaintiff’s husband after his group life insurance coverage ended failed to inform him that he had only 31 days to convert his group life insurance coverage, even though the plan documents themselves did. This omission, the dissent noted, was a sufficient basis to deny the defendant’s motion. [Vest v. Resolute FP US Inc., No. 18-5046 (6th Cir. Oct. 10, 2018).] 

10th Circuit Upholds Decision by Claims Fiduciary Denying Long-Term Disability Claim Based on ERISA Plan’s Pre-Existing Condition Provision

The U.S. Court of Appeals for the Tenth Circuit recently affirmed a district court’s decision affirming a denial of long-term disability benefits to a truck driver based on the pre-existing condition exclusion in the driver’s employer’s plan, an employee welfare benefit plan governed by the Employee Retirement Income Security Act of 1974 (ERISA).

The Case

The plan offered eligible employees both short and long-term disability benefits. The plan’s long-term disability component included a pre-existing condition limitation that stated:

[The claims fiduciary] will not pay for benefits for any period of Disability caused or contributed to by, or resulting from, a Pre-existing Condition. A “Pre-existing Condition” means any Injury or Sickness for which you incurred expenses, received medical treatment, care or services including diagnostic measures, or took prescribed drugs or medicines within 3 months before your most effective date of insurance.

The plaintiff truck driver began experiencing cloudy and foggy vision in December 2014. On December 4, he was diagnosed with posterior vitreous detachment (PVD) in his right eye.

The plan became effective on January 1, 2015.

On February 25, 2015, the plaintiff saw a retina specialist who diagnosed him with macula-off retinal detachment of the right eye. After three unsuccessful surgeries to correct this condition, he suffered permanent vision loss, rendering him unable to work as a truck driver.

He received short-term disability benefits under his employer’s group disability plan but the claim fiduciary determined that the plaintiff was ineligible for long-term disability benefits under the plan because the plan’s pre-existing condition exclusion applied. It reasoned that the diagnosis he received in December 2014 caused the condition for which he sought long-term disability benefits; therefore, he was not eligible for benefits.

The plaintiff appealed administratively and provided the claims fiduciary medical documentation noting that “[w]hile a posterior detachment is certainly a risk factor for developing a retinal detachment, [PVD] was not the ultimate cause of [the driver’s] visual loss.”

The claims fiduciary upheld its determination after reviewing the plaintiff’s appeal, as well as reviewing his second appeal. The plaintiff driver sued.

The U.S. District Court for the District of Colorado entered judgment for the claims fiduciary, and the driver appealed to the Tenth Circuit.

The Tenth Circuit’s Decision

In its decision affirming the district court, the Tenth Circuit applied the abuse of discretion standard of review. The court next held because the claims fiduciary twice referred the driver’s case to independent peer reviewers during its review of each of the driver’s appeals, the claims fiduciary sufficiently mollified its structural conflict of interest, existing because it both funded long-term disability benefits and made benefit determinations under the plan.

The court held that the claims fiduciary had made a “reasonable and good faith determination” that the plaintiff had a pre-existing condition – PVD – that had caused or substantially contributed to his vision loss and that he had sought treatment for the condition during the three month look back period. The court noted that the claims fiduciary had relied on five doctors’ opinions, two of whom were the plaintiff’s treating physicians and all of whom agreed that it was highly probable that PVD was causally related to the plaintiff’s ultimate vision loss, i.e., the condition for which he sought disability benefits.

The court disagreed with the plaintiff’s contention that the causal relationship between PVD and his vision loss was “too tenuous,” noting that the PVD was “not part of a long chain of ailments” that eventually led to his vision loss but, rather, that it led “directly” to his need for further treatment and surgeries.

The court noted that the peer reviewers agreed that PVD was a cause of the plaintiff’s vision loss, adding that he sought treatment for vision difficulties, and nothing else, and was diagnosed with PVD. The court reasoned that “[a] condition need not be the ultimate cause of a person’s claim for LTD benefits to qualify as a pre-existing condition.”

Accordingly, the court determined that the claims fiduciary reasonably determined that the plaintiff was ineligible for long-term disability benefits. [Green v. Life Ins. Co. of North America, No. 17-1383 (10th Cir. Sep. 26, 2018).]