Purported Assignment and Power of Attorney Held Invalid in Provider’s Suit to Recover Health Benefits

On December 4, 2018 United States District Judge Noel L. Hillman dismissed a suit for unpaid medical bills by a healthcare provider against its patient’s ERISA-governed health benefits plan, finding the assignment/power of attorney proffered by the provider deficient and invalid, while agreeing with the plan that its anti-assignment provision was both valid and enforceable. Citing and expanding upon Third Circuit precedent from earlier in the year, the court particularly scrutinized the document alleged to be a power of attorney signed by the patient, finding it wanting under New Jersey law.

In Enlightened Solutions, LLC v. United Behavioral Health, No. 18-6672, 2018 U.S. Dist. LEXIS 205799 (D.N.J. Dec. 4, 2018), the plaintiff-provider had provided detox and rehab treatment to a patient for his addiction. The provider submitted claims to the plan pursuant to an Assignment of Benefits entered into between the provider and the patient. Some claims were paid, though others were not. The defendants (the plan and its administrator) moved to dismiss the provider’s unpaid claims asserting the operative ERISA plan’s anti-assignment provision as precluding the provider’s attempts to seek reimbursement on behalf of its patient. This, they contended, was so even in instances where the plan had paid some of the claims, like here, given the plan’s explicit language that such payments do not constitute a waiver of the anti-assignment provision. The plan further argued that the provider lacked standing for breach of fiduciary duty and similar claims because such are only available to the patient himself.

The subject anti-assignment provision states:

Non-Assignment of Claims.

A Claimant may not assign his/her Claim under the Plan to a Nonparticipating Provider without the Plan’s express written consent. Regardless of this prohibition on assignment, the Plan may, in its sole discretion, pay a Nonparticipating Provider directly for Covered Expenses rendered to a Claimant. Payment to a Nonparticipating Provider does not constitute a waiver, and the Plan retains a full reservation of all rights and defenses.

Admittedly, the patient did not get the plan’s written consent to assign his claims. Despite this explicit condition, the provider nonetheless sought to make the anti-assignment provision unenforceable by arguing waiver and estoppel since some of their claims had been paid. The provider also alleged ambiguity in the plan language and that the assignment signed by the patient constitutes a power of attorney. Each of these theories was ultimately found unavailing by the court, as having been...