Am. Orthopedic & Sports Med. v. Independence Blue Cross Blue Shield

890 F.3d 445

AMERICAN ORTHOPEDIC & SPORTS MEDICINE, on assignment of Joshua S., Appellant

v.INDEPENDENCE BLUE CROSS BLUE SHIELD ; Horizon Blue Cross Blue Shield of New Jersey

No. 17-1663

United States Court of Appeals, Third Circuit.

Argued: November 15, 2017

Opinion Filed: May 16, 2018

Samuel S. Saltman, [Argued], Callagy Law, 650 From Road, Suite 565, Paramus, NJ 07652, Counsel for Appellant

Susan M. Danielski, [Argued], Gerald J. Dugan, Dugan Brinkmann Maginnis & Pace, 1880 John F. Kennedy Boulevard, Suite 1400, Philadelphia, PA 19103, Counsel for Appellee Independence Blue Cross Blue Shield

Michael E. Holzapfel, [Argued], Becker LLC, 354 Eisenhower Parkway, Plaza II, Suite 1500, Livingston, NJ 07039, Counsel for Appellee Horizon Blue Cross Blue Shield of New Jersey

Before: AMBRO, KRAUSE, and RENDELL, Circuit Judges

OPINION OF THE COURT

KRAUSE, Circuit Judge.

With the evolution of managed healthcare and the advent of provider networks and other cost-control mechanisms, many insurers in recent years have incorporated into their health insurance plans clauses that purport to bar insureds from assigning their claims to any third party—even the healthcare provider that rendered the service. This appeal presents the question whether such "anti-assignment clauses" are enforceable, or whether, as argued by the healthcare provider in this case whose claim was dismissed for lack of standing, they are antithetical to the Employee Retirement Income Security Act ("ERISA") and to public policy. For the reasons that follow, we conclude that anti-assignment clauses in ERISA-governed health insurance plans are enforceable, and we will therefore affirm the judgment of the District Court.

I. Factual and Procedural History

In October 2015, Appellant American Orthopedic and Sports Medicine performed shoulder surgery on "Joshua," a patient who was covered by a health insurance plan issued by Appellees (the "Insurers").¹

After the surgery, Appellant charged Joshua for the procedure. Because Appellant did not participate in the Insurers' network, it was not limited to the fee schedule prescribed by the Insurers. Instead, it charged Joshua a total of $58,400 and submitted a claim in that amount to the Insurers on Joshua’s behalf. The claim form identified the various medical services rendered to Joshua and indicated that he had "authorize[d] payment of medical benefits" to Appellant. J.A. 38. As Appellant’s charges far exceeded the plan’s allowed reimbursement, the Insurers responded by processing Joshua’s claim according to its out-of-network cap of $2,633, applying his deductible of $2,000 and his 50% coinsurance of $316, issuing him a small reimbursement check for the remaining $316, and informing him that he would still owe Appellant the remaining $58,083.

Dissatisfied, Appellant appealed its claim through the Insurers' internal administrative process. At the same time, it arranged for Joshua to sign a document entitled "Assignment of Benefits & Ltd. Power of Attorney," which reflected that Joshua was assigning to Appellant his right to pursue claims under his health insurance plan for the surgery and, in the alternative, that he granted to Appellant a limited power of attorney to recover the payment on his behalf through an arbitration or lawsuit. J.A. 36. After the Insurers apparently denied the appeal, Appellant sued them in New Jersey state court for violations of ERISA and its implementing regulations, and for breach of contract. At that point, the Insurers removed the suit to federal court and moved to dismiss, pointing out that Joshua’s insurance plan included an anti-assignment clause that stated, "[t]he right of a Member to receive benefit payments under this Program is personal to the Member and is not assignable in whole or in part to any person, Hospital, or other entity," Independence Response to Court Letter *90 (filed Nov. 10, 2017) (emphasis added),² and arguing that Appellant therefore lacked standing to sue. The District Court agreed and dismissed Appellant’s complaint, and this appeal followed.

II. Jurisdiction and Standard of Review

The District Court had jurisdiction under 28 U.S.C. § 1331, and we have jurisdiction under 28 U.S.C. § 1291. We exercise plenary review over a District Court’s decision to dismiss for lack of standing. Leuthner v. Blue Cross & Blue Shield of Ne. Pa. , 454 F.3d 120, 124 (3d Cir. 2006). To the extent that the Insurers "contest[ ] the sufficiency of the pleadings," we "only consider the allegations of the complaint and documents referenced therein" and we do so "in the light most favorable to the plaintiff." In re Schering Plough Corp. Intron/Temodar Consumer Class Action , 678 F.3d 235, 243 (3d Cir. 2012) (quoting Gould Elecs. Inc. v. United States , 220 F.3d 169, 176 (3d Cir. 2000) ).

III. Discussion

Appellant contends it has standing to sue here, first, because anti-assignment clauses in ERISA-governed health insurance contracts are unenforceable against healthcare providers and, second, because even if those clauses are enforceable, the Insurers waived their right to enforce it in this case. If we conclude the anti-assignment clause here is enforceable against healthcare providers, Appellant raises a third argument in the alternative, i.e., that we should remand to allow it an opportunity to correct the deficiencies in Joshua’s Power of Attorney and pursue Joshua’s claims on his behalf in an agency capacity. We address these arguments in turn.

A. Enforceability of Anti-Assignment Clauses

The parties stake out opposing views on the enforceability of anti-assignment clauses, grounding their positions in ERISA’s text, congressional policy, and persuasive authority from other Courts of Appeals. For the reasons explained below, we conclude that none justify a departure from the general rule that courts will enforce the terms of an agreement that was freely negotiated between contracting parties.

i. ERISA’s Text

ERISA is a "comprehensive legislative scheme" designed to "protect ... the interests of participants in employee benefit plans and their beneficiaries," Aetna Health Inc. v. Davila , 542 U.S. 200, 208, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004) (internal quotation marks omitted), and to do so provides for a variety of standards and regulations for both "pension plans" and "welfare plans," 29 U.S.C. § 1002(1), (2) ; see also N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co. , 514 U.S. 645, 650-51, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995). The latter category includes health insurance plans, 29 U.S.C. § 1002(1), and ERISA provides employees covered by such plans with the right to sue to "recover benefits due ... under the terms of [the] plan," id. § 1132(a)(1)(B). That right, however, is limited to the "participant" or "beneficiary" under the plan, id. § 1132(a)(1), with those terms limited respectively to employees, current or former, eligible to receive benefits under a covered plan, id. § 1002(7), and to persons designated by a participant or the terms of the plan to receive some benefit from the plan, id. § 1002(8).³ Although a healthcare provider does not fall into either category, see Pascack Valley Hosp. v. Local 464A UFCW Welfare Reimbursement Plan , 388 F.3d 393, 400 (3d Cir. 2004), we held in North Jersey Brain & Spine Center v. Aetna, Inc. , 801 F.3d 369 (3d Cir. 2015) (hereinafter " NJBSC "), that a valid assignment of benefits by a plan participant or beneficiary transfers to such a provider both the insured’s right to payment under a plan and his right to sue for that payment, id. at 372.

Appellant argues that because we interpreted ERISA in NJBSC to allow for the assignment of benefits, we should now hold that such assignments also may not be disallowed. But in NJBSC we merely held—in the absence of an anti-assignment clause—that "when a patient assigns payment of insurance benefits to a healthcare provider, [the] provider gains standing to sue for that payment." Id . We had no occasion to address the effect or enforceability of an anti-assignment clause, and thus, despite Appellant’s heavy reliance on that case, it has little bearing here.

The Insurers, on the other hand, posit that if Congress had intended to prohibit anti-assignment clauses in ERISA-governed health insurance plans, it would have done so explicitly, just as it did in the pension plan context.⁴ And, notably, as anti-assignment clauses have become an increasingly prominent feature of health insurance contracts in more recent years, Congress also has had ample opportunity to mandate assignability if indeed that were its intent. Yet despite repeated amendments and a largescale overhaul of the healthcare system via the Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010), it has not done so.

In addition, the Insurers highlight the Supreme Court’s observation in Mackey v. Lanier Collection Agency & Service, Inc. , 486 U.S. 825, 108 S.Ct. 2182, 100 L.Ed.2d 836 (1988), that "[Congress] had before it a provision to bar the alienation ... of ERISA plan benefits, and chose to impose that limitation only with respect to ERISA pension benefit plans, and not ERISA welfare benefit plans. In a comprehensive regulatory scheme like ERISA, such omissions are significant ones." Id. at 837, 108 S.Ct. 2182. Some Courts of Appeals have concluded, based in part on that language from Mackey , that Congress' silence on assignability of welfare benefits means anti-assignment clauses in the health insurance context must be enforceable. See, e.g. , Davidowitz v. Delta Dental Plan of Cal., Inc. , 946 F.2d 1476, 1480-81 (9th Cir. 1991) ("Congress carefully considered assignment of both pension and welfare plan benefits, and consciously decided to prohibit pension plan assignments but remain silent on welfare benefits.... Congress intended not to mandate assignability."); Ark. Blue Cross & Blue Shield v. St. Mary’s Hosp., Inc. , 947 F.2d 1341, 1349 (8th Cir. 1991) ("If Congress...