Seventh Circuit Rejects In-Network Providers' Bid For ERISA Claims Procedures

Claims by providers seeking to assert the rights of ERISA plan participants have been percolating in courts throughout the country.[1] The Seventh Circuit has now weighed in, rejecting the notion that providers who have payment disputes with ERISA plans are entitled to utilize a plan's ERISA-mandated claims appeal procedures simply by virtue of being part of the plan's network.[2]

The litigation began in 2009, when the Pennsylvania Chiropractic Association and several chiropractors filed suit against Blue Cross and Blue Shield Association and a number of Blue Cross and Blue Shield entities to challenge the insurers' recoupment policies. The insurers had paid for health care services the providers had provided to patients, but subsequently unilaterally determined those payments were calculated on the wrong basis (e.g., fee for service rather than a capitated fee). The Insurers demanded repayment or withheld future payments in order to recoup the overpayments.

Although they had provider contracts with the insurers that specified the basis for calculation of their fees, the plaintiffs characterized the recoupments as retroactive denials of benefits due under the underlying ERISA plans of the insurers' customers and argued that they were entitled to the same protections afforded to plan participants under ERISA Section 503's claims procedure, 29 U.S.C. 1133, which requires that every employee benefit plan:

provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant, and afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim. Following a trial in December 2013, Judge Kennelly of the Northern District of Illinois accepted the plaintiffs' theory. The judge entered a permanent injunction against one of the insurers, Independence Blue Cross ("IBC") requiring that its claims notices and appeal procedures meet the ERISA procedural requirements. This injunction would have required recoupment notices to include an explanation of IBC's reasoning; identify plan provisions to support IBC's position; describe information the provider could submit to avoid repayment; and provide notice of appeal rights. In the event of an appeal, the injunction...