District Court in Florida Further Defines Parameters of Medical Provider’s Standing to Sue under ERISA.

Under ERISA §502(a)(1)(B), participants and beneficiaries are the only ones with standing to sue an employee benefit plan for benefits. Consequently, for a medical provider who seeks payment from an employee health plan for medical services rendered to a plan participant, the provider has no standing, unless it has a written assignment from the patient/plan participant. See e.g. Hobbs v. BCBS Alabama, 276 F 3d 1236 (11th Cir. 2001). The medical provider’s standing is wholly derivative of the plan participant’s rights.

The boundaries of the medical provider’s standing under ERISA were recently tested in the United States District Court for the Southern District of Florida. In MRI Scan Center v. MedSolutions/CIGNA, 2013 U.S. Dist. LEXIS 66741 (2013), the Plaintiff, MSC, provided imaging services to patients, including participants of employee health benefit plans insured by CIGNA. Plaintiff alleged that CIGNA had improperly inflated the cost of services by adding its own administrative fees, in order to charge higher premiums. MSC alleged that this practice was a breach of CIGNA’s fiduciary duty to the plans and plan participants in violation of ERISA. MSC brought its claim under ERISA §502(a)(3), under which standing is limited to participants, beneficiaries and fiduciaries. MSC claimed that it had proper standing in the same way that it had when it sought payment of benefits under ERISA §502 (a)(1)(B) - through written assignments from its patients who were participants of plans insured by CIGNA.

Not so fast, CIGNA argued; the assignments granted from patients/plan participants to MSC were not broad enough to cover a claim for breach of fiduciary duty. The Court agreed: “An assignment of the right to direct payment of benefits will not assign patients’/assignors’ right to bring causes of action under other ERISA provisions that are not related to the reimbursement of benefits.” Dismissing MSC’s claims against CIGNA on these grounds, the Court did not reach the issue of whether MSC could have established all elements of standing, particularly injury, under Article III. The question left for another day: Would broader language in the assignments be all that a provider needs, or do hurdles still remain under Article III?

District Courts in 11th and 4th Circuits Re-affirm Varity Rule in Face of Amara-like Claims.

After Varity Corp. v. Howe, 516 U.S. 489, 116 S. Ct. 1065 (1996), a well-established rule developed throughout the Circuits:   When a claimant has an adequate available claim for employee benefits under ERISA § 502(a)(1)(B), a claim for equitable relief under ERISA § 502(a)(3) is duplicative and therefore not appropriate.  See e.g., Korotynska v. Metropolitan Life Ins. Co., 474 F. 3d 101 (4th Cir. 2006).  In 2011, along came Cigna v.Amara, 131 S. Ct. 1866 (2011), in which the Court provided fresh suggestions of equitable remedies (such as surcharge) that a claimant might bring under ERISA § 502(a)(3).  This ignited a resurgence by claimants bringing employee benefit lawsuits to tag on an equitable relief claim for good measure.

Last month, District Courts in the 11^th and 4^th Circuit joined courts in other Circuits (see e.g., Biglands v. Raytheon, 801 F. Supp. 2d 781 (N.D. Ind. 2011)), in finding nothing in Amara that alters the Varity rule.  In Spivey v. Cigna, 2013 U.S. Dist. LEXIS 130219 (M.D. Ala.  Sept. 12, 2013), the District Court heftily rejected the argument by the plaintiff seeking disability benefits that Amara changed the Varity rule.  Likewise, in Harp v. Liberty Mutual, 2013 U.S. Dist. LEXIS 140083 (M.D. N.C. Sept. 30, 2013), also involving a disability benefit claim, the magistrate judge rejected the plaintiff’s citation to Amara, re-affirmed the Varity rule, and recommended dismissal of the plaintiff’s causes of action brought under ERISA § 502(a)(3).  (As of date of reporting, the plaintiff has not filed an objection to the Recommendation.)