United States District Court, E.D. Pennsylvania
July 31, 2015
HOWARD BLOOM, D.C. and WEATHER VANE CHIROPRACTIC, P.C., Plaintiffs,
INDEPENDENCE BLUE CROSS et al., Defendants
HOWARD BLOOM, D.C., WEATHER VANE CHIROPRACTIC, P.C.,
Plaintiffs: THOMAS S. MCNAMARA, LEAD ATTORNEY, INDIK &
MCNAMARA, PHILADELPHIA, PA.
INDEPENDENCE BLUE CROSS, INC., QCC INSURANCE COMPANY,
KEYSTONE HEALTH PLAN EAST, INC., AMERIHEALTH HMO, INC.,
Defendants: OLIVIA CLEAVER, CONNELL FOLEY LLP, CHERRY HILL,
Austin McHugh, United States District Judge.
case involves the broad but sometimes hard to define scope of
jurisdiction under the Employee Retirement Income Security
Act of 1974, 29 U.S.C. § 1001, et seq. ("
ERISA" ). The central question: is this case a simple
payment dispute, unworthy of federal jurisdiction, or are
Plaintiffs, even though they are providers, properly raising
an issue as to the scope of patients' coverage, giving
rise to interests protected by ERISA?
are Dr. Howard Bloom, a chiropractor, and his practice,
Weather Vane Chiropractic, P.C. Defendants are insurance
providers, Independence Blue Cross, Inc. (" IBC" ),
QCC Insurance Company, Keystone Health Plan East, Inc., and
AmeriHealth HMO, Inc. From May 2005 until October 2013, Dr.
Bloom was a participating provider in Defendants' network
of health care providers. Together, Defendants and Dr. Bloom,
as an in-network provider, offered medical services to plan
beneficiaries under the terms of their health care plans
(" IBC Plans" ). During the course of his business
relationship with Defendants, Dr. Bloom's individual
rights and duties as an in-network provider were separately
governed by a Professional Provider Agreement ("
Provider Agreement" ).
assert that IBC rescinded coverage for certain medical
procedures, after allegedly covering those same services for
years, and have brought suit to enforce what they contend are
their individual and derivative rights under the relevant IBC
plans governed by ERISA. Specifically, Plaintiffs allege that
Defendants' retroactive denial of covered benefits
amounted to an " Adverse Benefits Determination"
under ERISA, triggering the notice and appeal process
afforded to plan beneficiaries by the statute. In addition,
Plaintiffs directly bring supplemental state law claims,
including breach of the Provider Agreement, fraud, negligent
misrepresentation, and malicious prosecution. Defendants have
moved to dismiss the entirety of Plaintiffs' First
Amended Complaint, arguing Plaintiffs fail to state plausible
ERISA claims, depriving this Court of subject matter
jurisdiction. Because I am persuaded that Plaintiffs allege
an ERISA coverage dispute under the IBC Plans via a valid
assignment of rights from the plan participants, as opposed
to a simple payment dispute under the Provider Agreement,
Defendants' Motion to Dismiss will be denied.
Relevant Facts Alleged in Plaintiffs' First Amended
First Amended Complaint includes various details of the
dispute that are not essential to resolving the instant
Motion to Dismiss. In the description of the facts below, I
focus only on those allegations that are particularly
relevant to the current Motion.
Howard Bloom is a licensed chiropractor in Pennsylvania who
conducts his professional practice through Plaintiff Weather
Vane Chiropractic, P.C. (" Weather Vane" ). First
Amended Complaint ¶ 15. Including its subsidiaries,
Plaintiff identifies Defendant IBC as the leading health
insurer in southeastern Pennsylvania, administering health
insurance benefits of more than 2.2 million Pennsylvanians.
Id. at ¶ 21.
Pursuant to the terms of the applicable IBC Plans, IBC is
required to provide IBC Plan Beneficiaries with payment or
reimbursement for specified covered health care services
('Covered Services')." Id. at ¶
22. " IBC Plan Beneficiaries" include direct plan
participants, as well as their eligible spouses and children.
Id. at ¶ 5. In order to receive the full extent
of benefits under the IBC Plans, beneficiaries are often
required to obtain Covered Services by utilizing "
in-network" or " participating providers,"
since those providers have contractually agreed to
participate in the applicable IBC plan and to render care on
a fixed fee basis, as separately regulated by individual
" provider agreements." Id. at ¶ 22.
Stated differently, the IBC Plans control what services are
considered " Covered Services" for beneficiaries,
while provider agreements dictate the rights and
responsibilities of the provider in performing those
services. Of greatest significance here, the Provider
Agreement at issue, which sets fees, does not in any way
purport to control what medical services are eligible for
coverage under the relevant IBC plans.
2005, Dr. Bloom signed a Professional Provider Agreement with
Defendants QCC, Keystone, and AmeriHealth (together, "
Independence" ). Id. at ¶ 37. The purpose
of the Agreement is readily apparent on the first page:
" Independence and [Dr. Bloom] mutually desire to enter
into this Agreement whereby [Dr. Bloom] shall render Covered
Services to Beneficiaries of the various Benefit Programs and
shall be compensated by Independence therefor, as more
explicitly described hereafter." Memorandum of Law In
Support of Defendants' Motion to Dismiss, Exhibit A at 1.
" Covered Services" are defined in the Provider
Agreement as " Medically Necessary health care services
and supplies that are to be provided by [Dr. Bloom] to
Beneficiaries for which a Beneficiary has coverage pursuant
to the applicable Benefit Program or Benefit Program
Agreement." Id. at ¶ 1.10.
at Dr. Bloom's practice, Weather Vane, ordinarily signed
a standard " Financial Policy" form, which included
the following assignment clause: " THIS IS A DIRECT
ASSIGNMENT OF MY RIGHTS AND BENEFITS UNDER THIS POLICY."
First Amended Complaint at ¶ 122. Weather Vane's
services included massage therapy provided by licensed
massage therapists, known as " Delegated Adjunctive
Therapeutic Massage Procedures" (" DATMP" ).
Id. Weather Vane provided DATMP to patients "
for more than five years prior to 2006." Id. at
¶ 47. During the pre-2006 time period, Defendants
considered DATMP to qualify as a Covered Service under the
relevant IBC plans and paid Dr. Bloom directly for those
2006, IBC issued a billing guide supplement that informed
participating providers that IBC would cover massage, but
would not cover any services performed by a massage
therapist. Id. at ¶ ¶ 49-51. The guide
provided: " Note: IBC does not provide reimbursement for
services that are performed by a massage therapist. This
applies to independently practicing massage therapists as
well as those who are employed and supervised by an eligible
health care professional." Id. at ¶ 51.
Bloom alleges the note " was not incorporated or
referenced in the Provider Agreement or, on information and
belief, in the plan documents of IBC Plan
Beneficiaries." Id. at ¶ 53. Accordingly,
Dr. Bloom submits that the billing note did not, and could
not, preclude reimbursement for DATMP. Id. at ¶
54. Moreover, Dr. Bloom alleges that despite the billing
note, IBC continued to pay for DATMP services provided to
beneficiaries who were covered for such procedures under
their applicable IBC plans. Id. at ¶ 55.
IBC reversed course in 2007 and demanded reimbursement for
" overpayments" made to Dr. Bloom and other
Pennsylvania chiropractors by Keystone for massage services
provided to their insureds from 2006 to 2007, claiming those
massage procedures were not Covered Services under the
applicable Keystone plans. Id. at ¶ 56. After
receiving pushback regarding the legality of the overpayment
notices from the Pennsylvania Chiropractic Association and
numerous individual chiropractors--specifically whether the
procedures were Covered Services under the plans and whether
IBC had the legal right to recover payments
retroactively--IBC suspended its recollection efforts.
Id. at ¶ 57. IBC resumed its recollection
efforts in December 2008. Id. at ¶ 58. Dr.
Bloom initially entered an agreement to repay IBC in
installments, subject to a reservation of his rights to
recover those repayments, but he ceased payments when he
learned of a lawsuit challenging IBC's right to recover
under the circumstances. Id. at ¶ ¶ 59-60.
alleged attempt to discourage other chiropractors from
delegating activities to unlicensed support personnel, IBC
decided to refer accusations of insurance fraud against Dr.
Bloom to the state Attorney General in or around 2009.
Id. at ¶ ¶ 62-65. Nonetheless, IBC
continued to pay for massage services reported by Weather
Vane from 2008 until Dr. Bloom's arrest in 2011.
Id. at ¶ 66.
issued a Medical Policy Bulletin effective June 18, 2008,
which included a provision that specified IBC " does not
provide reimbursement for services that are performed by
someone other than an eligible health care provider .... This
includes massage therapists." Id. at ¶ 68.
Subsequent 2009 and 2011 Bulletins contain the same or
similar provisions. Id. at ¶ ¶ 70-71.
However, despite these bulletins, Dr. Bloom contends that IBC
has in fact continued to reimburse providers for services
that the provider delegates to subordinates, such as physical
therapists who delegate to assistants. Id. at ¶
January 4, 2013, Dr. Bloom was acquitted of all criminal
charges. Id. at ¶ 91. Three days later, on
January 7, 2013, IBC informed Dr. Bloom that IBC would
require pre-payment review of all of his claims, requiring
Plaintiffs to attach supporting medical records for every
patient's claim(s). Id. at ¶ 93. By letter
dated April 4, 2013, IBC advised Dr. Bloom of its intent to
terminate his Provider Agreement unless he " cured"
various alleged breaches within 30 days. Id. at
¶ 97. The April 4, 2013 letter further advised Dr. Bloom
that in order to " cure" the alleged breaches, he
would be required to repay $352,948 in overpayments,
primarily for services rendered by massage therapists.
Id. at ¶ 98. IBC subsequently began to
unilaterally offset claims due to Dr. Bloom against the
$352,948 in alleged overpayments. Id. at ¶
IBC's request, Dr. Bloom submitted a Certificate of
Compliance to IBC in May 2013. Id. at ¶ 101.
Dr. Bloom alleges that up to 2013, IBC repeatedly confirmed
that patients could receive coverage for DATMP performed by a
massage therapist when Weather Vane employees would call IBC
for pre-certification and confirmation of coverage.
Id. at ¶ 102-106. By letter dated September 26,
2013, IBC informed Dr. Bloom that he had not cured the
various material breaches of his Provider Agreement, and, as
a result, his Provider Agreement would be terminated
effective October 23, 2013. Id. at ¶ 107.
their First Amended Complaint, Plaintiffs bring ten claims
against Defendants challenging their conduct. The first four
counts arise under the federal Employee Retirement Income
Security Act (" ERISA" ). The remaining counts
allege violations of state law.
first count alleges Defendants violated ERISA based on the
terms of the IBC ERISA Plans, claiming that Defendants'
denial of benefits and efforts to retroactively rescind
coverage through the recoup of payments constituted Adverse
Benefits Determinations. Accordingly, Plaintiffs contend that
Defendants failed to comply with ERISA's statutory notice
and appeal requirements in violation of federal law.
second count alleges that ERISA entitled them to a review of
claims denials, and further that Defendants did not provide
Plaintiffs with the review. Plaintiffs claim that
Defendants' failure to provide the required process
entitles them to injunctive and declaratory relief as well as
Three of Plaintiffs' First Amended Complaint seeks
clarification of " Plaintiffs' rights to future
benefits under the terms of IBC ERISA Plans."
Id. at ¶ 178. Specifically, Plaintiffs request
a declaratory judgment establishing they are entitled to
direct payments from IBC for DATMP.
Four asks the Court for an injunction to prevent Defendants
from denying claims for DATMP in the future.
fifth count alleges a state law breach of contract claim.
Specifically, Plaintiffs assert IBC violated the Provider
Agreement between Dr. Bloom and IBC.
Six asserts a claim of promissory estoppel against
Defendants. According to Plaintiffs, Defendants repeatedly
confirmed to Plaintiffs' employees that patients could
receive " therapeutic massage when performed by a
licensed massage therapist." Id. at ¶ 194.
Plaintiffs acted on those confirmations and provided the
service, and Plaintiffs argue that Defendants should be
estopped from now claiming those services were not covered.
Seven alleges IBC intentionally interfered with
Plaintiffs' contractual relations with their patients who
have IBC insurance plans.
Eight brings a claim of common law fraud against IBC.
Plaintiffs allege that IBC defrauded Plaintiffs by
pre-certifying DATMP when IBC knew that it would not
reimburse Plaintiffs for the services.
ninth count alleges IBC negligently misrepresented its
policies by pre-certifying DATMP.
Ten asserts a claim of malicious prosecution against
Defendants. Plaintiffs claim Defendants misled the
Pennsylvania Office of the Attorney General into filing
criminal charges against Dr. Bloom.
Defendants' Motion to Dismiss
argue that Plaintiffs lack standing to bring their federal
claims, depriving this Court of jurisdiction. Defendants
contend that the ERISA statute under which Plaintiffs'
claims arise does not authorize Plaintiffs to bring those
claims, and that the dispute in this case does not implicate
ERISA at all, characterizing the issue as a simple matter of
contract under the Provider Agreement. Defendants conclude by
arguing that because Plaintiffs' federal claims should be
dismissed, this Court should decline to retain supplemental
jurisdiction over Plaintiffs' state law claims.
Standard of Review
Motion to Dismiss, brought pursuant to Fed. R. of Civ. P.
12(b)(1) and (6), challenges Plaintiffs' standing and
thus this Court's jurisdiction to hear Plaintiffs'
claims. Ballentine v. United States, 486 F.3d 806,
810, 48 V.I. 1059 (3d Cir. 2007) ( " A motion to dismiss
for want of standing is also properly brought pursuant to
Rule 12(b)(1), because standing is a jurisdictional
matter." ). Plaintiffs bear the burden of showing the
Court has jurisdiction. Id. Though the
jurisdictional burden of proof rests on the Plaintiffs'
shoulders, in construing the allegations before the Court, I
" must accept as true all material allegations set forth
in the complaint, and must construe those facts in favor of
the nonmoving party." Id.
Plaintiffs' Standing under ERISA
assert several grounds for standing. They first argue that
they have standing to bring ERISA claims because they are
directly " beneficiaries" of the insurance plans at
issue in this case. Alternatively, Plaintiffs argue that even
if they are not directly " beneficiaries," then
they have standing via a valid assignment, allowing them to
stand in the shoes of their patients, who would
unquestionably have standing to bring an ERISA action as plan
Whether Plaintiffs Have Direct Standing under ERISA as
authorizes only certain categories of persons to bring civil
actions to enforce ERISA's requirements: "
participants," " beneficiaries," "
fiduciaries," and the Secretary of Labor. 29 U.S.C.
§ 1132(a). The statute also defines which classes of
persons may bring which civil actions. Of relevance here, the
statute provides that a " participant or
beneficiary" may bring an action to obtain certain
information from a plan administrator, " to recover
benefits due to him ... to enforce his rights under the terms
of the plan, or to clarify his rights to future benefits
under the terms of the plan." Id. A participant
or beneficiary may also bring a suit to enjoin " any act
or practice which violates any provision of this subchapter
or the terms of the plan." Id. at (a)(3). 29
U.S.C. § 1002(8) defines " beneficiary" as
" a person designated by a participant, or by the terms
of an employee benefit plan, who is or may become entitled to
a benefit thereunder."
contend that they have standing as beneficiaries for the
purposes of 29 U.S.C. § 1132, arguing that once Dr.
Bloom provided services to insured patients, Dr. Bloom became
" entitled to a benefit" --specifically, payment
for the covered services he provided patients. According to
Plaintiffs, this entitlement also empowers Dr. Bloom with the
right to bring a civil action pursuant to 29 U.S.C. §
1132 if IBC fails to comply with ERISA's requirements.
does not, on its face, explicitly reject the possibility that
a provider of medical services could become a beneficiary
with standing to sue, but most cases have rejected such an
interpretation. See, e.g., Chiropractic
Nutritional Assocs., Inc. v. Empire Blue Cross and Blue
Shield, 447 Pa.Super. 436, 669 A.2d 975, 980 (Pa. Super.
Ct. 1995) (" It is clear that health care providers do
not have independent standing to sue under ERISA because they
are 'non-enumerated' parties." ); Hobbs v.
Blue Cross Blue Shield, 276 F.3d 1236, 1241 (11th Cir.
2001) (" Healthcare providers such as physician
assistants generally are not considered "
beneficiaries" or " participants" under
ERISA." ). The term " beneficiary," at least
one court has persuasively reasoned, " carries the
connotation of a person, other than the employee-participant,
who is covered by the plan's provisions--e.g., a spouse
or dependent," rather than a medical provider.
Cameron Manor, Inc. v. United Mine Workers of
America, 575 F.Supp. 1243, 1245-46 (W.D. Pa. 1983)
(" we conclude that the term [" beneficiary" ]
as employed in the statute does not permit of a construction
broad enough to include a provider of health services to
participants" ). See also Northeast Dept.
ILGWU Health and Welfare Fund v. Teamsters Local Union No.
229 Welfare Fund, 764 F.2d 147, 154 (3d Cir. 1985)
(holding that a pension fund lacked standing to sue under
ERISA because it was not an enumerated party under 29 U.S.C.
other cases have considered the rights of medical services
providers to sue insurance companies and found they may sue
with indirect standing after receiving an assignment
of the right to sue from an insured patient. See
CardioNet, Inc. et al. v. Cigna Health Corp., 751
F.3d 165 (3d Cir. 2014); Zaslow v. Miles, 1998 WL
855496, at * 2 (E.D. Pa. Dec. 9, 1998) (" Numerous
district courts in this circuit ... have held that health
care providers have standing to sue under §
1132(a)(1)(B) where there has been an assignment of rights
under the plan." ). Standing through assignment would be
unnecessary if providers could sue directly as beneficiaries.
rely on what may be the only case to have accepted medical
providers as beneficiaries with direct standing to sue. In
Pa. Chiropractic Ass'n v. Blue Cross Blue Shield
Ass'n, (N.D.Ill. March 28, 2014), the Court held
that medical providers were beneficiaries under the terms of
the insurance plan at issue. Id. at *43-44 (N.D.Ill.
March 28, 2014). The court reasoned that the term "
benefits" in ERISA is broad enough to encompass the
payment of money. Id. at *30. The Plan at issue
provided that physicians would receive payments directly from
the insurance company, and so, the court concluded,
physicians receiving payments were " beneficiaries"
with standing to bring civil actions to enforce ERISA's
rules. Id. at *43.
contend that res judicata or collateral
estoppel require this court to accept the decision of
Pa. Chiropractic in this case. I disagree. In their
First Amended Complaint, Plaintiffs argue that the question
of whether participating providers who provided medical
services to patients insured by Defendants " was
actually litigated by IBC" in Pa. Chiropractic,
the issue was adjudicated against IBC, IBC was fully
represented in the case, and the " determination of the
issue was a necessary part of the decision against IBC."
First Amended Complaint ¶ 127.
Res Judicata does not apply here because Plaintiffs
were not parties in Pa. Chiropractic. The Third
Circuit recently recited the requirements for res
[c]laim preclusion, formerly referred to as res judicata,
gives dispositive effect to a prior judgment if a particular
issue, although not litigated, could have been raised in the
earlier proceeding. Claim preclusion requires: (1) a final
judgment on the merits in a prior suit involving; (2) the
same parties or their privities [sic]; and (3) a subsequent
suit based on the same cause of action.
Blunt v. Lower Merion School Dist., 767 F.3d 247,
276 (3d Cir. 2014) (quoting Bd. of Trs of Trucking Emps.
Of N. Jersey Welfare Fund, Inc.--Pension Fund v. Centra,
983 F.2d 495, 504 (3d Cir. 1992)). The Plaintiffs in this
case were not involved in Pa. Chiropractic, and so,
by definition, res judicata or claim preclusion
does collateral estoppel apply. In general courts may find a
party is estopped from re-litigating an issue when:
" (1) the issue sought to be precluded [is] the same as
that involved in the prior action; (2) that issue [was]
actually litigated; (3) it [was] determined by a final and
valid judgment; and (4) the determination [was] essential to
the prior judgment."
National R.R. Passenger Corp. v. Pennsylvania Utility
Com'n, 342 F.3d 242, 252 (3d Cir. 2003). These
technical elements are satisfied here. However, where a
plaintiff seeks to use collateral estoppel offensively, trial
courts have " broad discretion to determine when it
should be applied." Parklane Hosiery Co., Inc. v.
Shore, 439 U.S. 322, 331, 99 S.Ct. 645, 58 L.Ed.2d 552
(1979). If " the application of offensive estoppel would
be unfair to a defendant, a trial judge should not allow the
use of offensive collateral estoppel." Id. One
circumstance in which applying offensive collateral estoppel
would be unfair to a defendant arises " if the judgment
relied on as a basis for the estoppel is itself inconsistent
with one or more previous judgments in favor of the
defendant." Id. As discussed above, numerous
other courts have disagreed with the holding in Pa.
Chiropractic. Seizing on one adverse decision to the
exclusion of all others would be unfair.
conclude that Plaintiffs are not beneficiaries with direct
standing to bring their claims under ERISA. Next I must
consider Plaintiffs' alternative theory for standing:
derivative standing after an assignment of benefits from
Plaintiffs' patients as plan participants.
Whether Plaintiffs have Derivative Standing under
general matter, providers of medical services can acquire
derivative standing through an assignment of rights from
their patients. In CardioNet, the Third Circuit
adopted the " majority position that health care
providers may obtain standing to sue by assignment from a
plan participant." CardioNet, 751 F.3d at 176
n.10. Thus, if Plaintiffs received a valid assignment of
rights from their insured patients, they have standing to
bring their ERISA claims against Defendants.
that a valid assignment of rights from patients to a provider
can confer standing, Defendants argue that any assignment
from Dr. Bloom's patients is invalid because of an
anti-assignment provision in the relevant insurance plans.
The anti-assignment clause that appears in all the relevant
The right of a Covered Person to receive benefit payments
under this coverage is personal to the Covered Person and is
not assignable in whole or in part to any person, Hospital or
other entity nor may benefits of this coverage be
transferred, either before or after Covered Services are
rendered . . . .
of Law in Support of Defendants' Motion at 8.
Third Circuit has not conclusively answered the question of
whether an anti-assignment provision in an ERISA Plan can
invalidate a patient's assignment to an in-network
provider such as Dr. Bloom. Similar anti-assignment
provisions have been enforced in other circuits.
Physicians Multispecialty Group v. Health Care Plan of
Horton Homes, Inc., 371 F.3d 1291, 1295 (11th Cir.
2004); City of Hope Nat. Med. Center v. HealthPlus,
Inc., 156 F.3d 223, 229 (1st Cir. 1998) (" ERISA
leaves the assignability or non-assignability of health care
benefits under ERISA-regulated welfare plans to the
negotiations of the contracting parties" ); St.
Francis Regional Medical Center v. Blue Cross and Blue Shield
of Kansas, Inc., 49 F.3d 1460, 1464 (10th Cir. 1995);
Cohen v. Independence Blue Cross, 820 F.Supp.2d 594
(D.N.J. 2011); Briglia v. Horizon Healthcare Servs.,
Inc., 2005 WL 1140687, at *4-5 (D.N.J. May 13, 2005)
(collecting " a number of federal and state courts
[which] have found that unambiguous anti-assignment
provisions in group health care plans are valid." );
Chiropractic Nutritional Assocs., Inc. v. Empire Blue
Cross and Blue Shield, 447 Pa.Super. 436, 669 A.2d 975,
981 (Pa. Super. Ct. 1995) (" We are persuaded ... that
ERISA's silence as to the issue of assignability of group
health benefits leaves the matter open for agreement between
the contracting parties." ).
argue that this matter is distinguishable from the line of
cases referenced above for two reasons. First, they claim
that the anti-assignment provision bans only the assignment
of the right to receive benefit payments, and does
not prevent patients from assigning their right to bring an
ERISA action contesting coverage in the event
benefits are denied (i.e., when faced with an Adverse Benefit
Determination). Second, Plaintiffs contend that Defendants
waived their right to assert the anti-assignment provision
through their conduct.
support their contention that IBC's anti-assignment
provision applies to benefits payments but not coverage
disputes in several ways. First, they argue that Pennsylvania
state courts " have recognized that the right to assign
a cause of action is separate and distinct from the
right to assign benefits." Plaintiffs'
Opposition at 11. Defendants' anti-assignment clause only
discusses the right to receive benefit payments, and so, by
its literal terms, does not prevent patients from assigning
their rights to bring ERISA lawsuits. In fact, the entire
clause as phrased assumes coverage, discussing the
rights of a " Covered Person" to receive payments
for " Covered Services" under " this
coverage." Accordingly, the plain terms of the
assignment clause do not address or even refer to disputes as
Plaintiffs argue that the purpose of the anti-assignment
provision cannot have been intended to prevent patients from
assigning their rights to medical providers who provided
covered services. Specifically, Plaintiffs maintain that
although anti-assignment clauses might validly be used to
prevent assignments of benefits to unrelated third-parties,
such as creditors or out-of-network providers, the purpose of
an anti-assignment clause in an ERISA plan cannot logically
extend to prohibiting assignments to the providers who form
the network through which the benefits protected by ERISA are
provided. Moreover, " [d]enying standing to in-network
health care providers to bring claims as assignees of plan
participants undermines ERISA's goal of improving benefit
coverage for employees." Plaintiffs' Opposition at
12 (citing Lutheran Med. Ctr. of Omaha, Neb. v.
Contractors, Laborers, Teamsters & Engineers Health & Welfare
Plan, 25 F.3d 616, 619 (8th Cir. 1994), abrogated on
other grounds by Martin v. Arkansas Blue Cross &
Blue Shield, 299 F.3d 966 (8th Cir. 2002)). Given
ERISA's public policy goals, specifically in the context
of protecting participants' rights to covered medical
benefits, if Defendants intended to limit patients'
rights to assign coverage disputes to providers, it was a
matter of such central importance that it should have been
have recognized that different rights can be independently
assignable. The Pennsylvania Superior Court in
Chiropractic Nutritional Assocs., Inc. v. Empire Blue
Cross and Blue Shield considered whether an
anti-assignment provision restricted patients from assigning
the right to sue following a denial of benefits. 669 A.2d at
981-82. The anti-assignment provision at issue read: "
The right of a member to receive payment is not
assignable." Id. at 982. The court decided,
" we find nothing in the instant provision which
prevents a subscribing member from assigning his or her right
to bring an action to enforce the contract in the event that
benefits are denied." Id. ; see also
Hermann Hosp. v. MEBA Medical and Benefits Plan, 959
F.2d 569, 573 (5th Cir. 1992) (" The right to sue for
denial of coverage is separate and distinct from the right to
sue to recover payment for Plan benefits rendered by [the
medical provider] and covered under the Plan." ),
overruled on other grounds by Access Mediquip,
L.L.C. v. UnitedHealthCare Ins. Co., 698 F.3d 229 (5th
rely heavily on Cohen v. Independence Blue Cross,
820 F.Supp.2d 594, 607 (D.N.J. 2011), where the court found
that a provider lacked standing under ERISA because of an
anti-assignment provision that was identical to the one in
this case. The plaintiff in Cohen generally
challenged the enforceability of anti-assignment clauses in
ERISA plans as a matter of law. Id. at 604-06.
However, from the issues addressed in the opinion, the
Cohen plaintiff apparently did not raise the
Plaintiffs' most compelling arguments here, namely the
key distinction between the right to benefit
payments and the right to dispute coverage under
ERISA. Defendants also rely on Briglia v. Horizon
Healthcare Servs. Inc., 2005 WL 1140687, at *5. The
applicable clause in Briglia read: " Covered
Persons may not assign any rights to coverage or
benefits under this Policy without Horizon BCBSNJ's
advance written consent." Id. (emphasis added).
Finding the clause " unambiguous" and enforceable,
the Briglia Court dismissed the plaintiff's
denial of benefits claims under ERISA. Id.
from these distinctions, I find it important that the
Cohen and Briglia decisions pre-dated
CardioNet where, in deciding an issue of
arbitrability, the Court of Appeals concluded that the key
question was whether the dispute involved payment under the
provider agreement or coverage for services under the benefit
plans. CardioNet, 751 F.3d at 177. Once the
availability of medical services is implicated, ERISA is
triggered, empowering patients to invoke their rights under
the statute. See id. (" claims challenging the
denial of service may be brought only outside the
confines of the [Provider] Agreement, through ERISA" ).
I have no doubt that ERISA coverage disputes fall into an
entirely different category of claims than state law breach
of contract actions over the right to receive benefit
payments under a provider agreement.
taken me a great deal of reflection to reach a somewhat
unsatisfying conclusion: at a minimum, the anti-assignment
clause is ambiguous. " Contractual language is ambiguous
'if it is reasonably susceptible of different
constructions and capable of being understood in more than
one sense.'" Madison Const. Co. v. Harleysville
Mut. Ins. Co., 557 Pa. 595, 606, 735 A.2d 100, 106
(1999). The anti-assignment clause here prohibits the
assignment of the right to receive benefit payments.
As opposed to the clear anti-assignment provision in
Briglia, which applied to " any rights to
coverage or benefits," the language of this clause may
reasonably be interpreted to only cover the right to receive
benefit payments--not the distinct right to pursue coverage
under an ERISA insurance plan following an adverse benefit
of the ambiguity, I resolve the question in favor of
Plaintiffs, who purport to stand in the shoes of plan
participants. " Where a provision of a policy is
ambiguous, the policy provision is to be construed in favor
of the insured and against the insurer, the drafter of the
agreement." Madison Const. Co., 557 Pa. at 606,
735 A.2d at 106. Resolving the interpretation of this
anti-assignment provision in favor of Plaintiffs gives effect
to the principles recently emphasized by the Third Circuit in
CardioNet regarding the " important public
policy interests served by permitting providers to bring such
claims on behalf of plan participants."
CardioNet, 751 F.3d at179. Assignments shift the
burden of litigating disputes from patients to providers who
" are better situated and financed to pursue an action
for benefits owed for their services." Id.
(citing Hermann Hosp. v. MEBA Med. & Benefits Plan,
845 F.2d at 1289 n.13. Consequently, before permitting an
anti-assignment clause to undermine this public policy,
courts should require a high level of specificity from
even more instructive, the Third Circuit took pains in
CardioNet to emphasize the difference between a
claim seeking payment or reimbursement for coverage provided
under a provider agreement, as compared to claims seeking
coverage under a benefit plan--the very distinction that
controls my interpretation of the anti-assignment clause in
As the Providers correctly note, CIGNA's argument to the
contrary rests on a conflation of claims, such as this one,
seeking coverage under a benefit plan, and claims
seeking reimbursement for coverage provided. The
distinction is key. As we explained in Pascack
Valley, a provider may bring a contract action for an
insurer's failure to reimburse the provider pursuant to
the terms of the agreement, while a claim seeking coverage of
a service may only be brought under ERISA. 388 F.3d at 403-04
(holding that a hospital had an independent breach of
contract action against the insurer because " the
dispute here is not over the right to payment, which
might be said to depend on the patients' assignments to
the Providers, but the amount, or level, of payment,
which depends on the terms of the provider agreements"
(emphasis in original; quotation marks and alterations
omitted)); see also Blue Cross of Cal. v.
Anesthesia Care Assocs. Med. Grp., Inc., 187 F.3d 1045,
1051 (9th Cir. 1999) (providers' claim not preempted by
ERISA where they " arise from [insurer's] alleged
breach of the provider agreements' provisions regarding
fee schedules, and the procedure for setting them, not what
charges are 'covered' under the [ ] Plan" ).
Here, the Providers' claims do not concern the amount of
payment to which they are entitled under the Agreement, but
the right to payment under the terms of the relevant plans.
CardioNet, 751 F.3d at 177-78. Similarly, here,
Plaintiffs' individual state law claims, as pleaded, are
controlled by Dr. Bloom's Provider Agreement.
Plaintiffs' ERISA claims, on the other hand, are brought
under " group plans governed by ERISA."
Plaintiffs' First Amended Complaint at Count I. Although
Defendants argue that it " is evident that
Plaintiffs' claims are based upon the [Provider]
Agreement and not the terms of any ERISA-governed plan,"
I am required at this early stage to accept Plaintiffs'
factual allegations as true and construe all inferences in
the coverage implications of Defendants' actions are not
patently obvious at first, the implications are real. In
effect, plan beneficiaries are deprived of the services of an
entire category of providers--licensed massage therapists.
The fact that Dr. Bloom can render the same service does not
diminish the significance of the prohibition, because
excluding an entire category of providers necessarily limits
patient options. One need only consider the medical specialty
of family practice--where nurse practitioners and physician
assistants now play prominent roles. Eliminating their
ability to provide services would necessarily affect patient
access. Accordingly, assuming Plaintiffs have lawfully been
assigned the right to stand in the shoes of the plan
participants, the First Amended Complaint pleads a plausible
ERISA action seeking coverage of a specific service under the
relevant plans. Defendants are free to argue that " this
dispute has nothing to do with ERISA beneficiaries or
benefits" and " Plaintiffs are simply dissatisfied
with the [Provider] Agreement" as this case proceeds on
the merits, but Plaintiffs have complied with controlling
pleading standards in order to move forward with their ERISA
claims. Id. at 15, 17.
even if I interpreted the anti-assignment provision in
Defendants' favor, I would find that Plaintiffs have at
least plausibly alleged facts showing IBC waived the
provision. Paragraph 125 of Plaintiffs First Amended
Complaint states that IBC:
repeatedly and routinely provid[ed] Plaintiffs with written
benefit summaries and telephone confirmation indicating that
patients insured under IBC ERISA Plans had coverage for
chiropractic care, specifically including
confirmation of coverage for therapeutic massage when
performed by a licensed massage therapist, and reported using
CPT code 97124
Complaint ¶ 125. According to Plaintiffs,
Defendants' decisions to pay Plaintiffs for covered
services for which Plaintiffs had received assignments of
benefits waived Defendants' right to deny the validity of
It is well settled that waiver may be established by conduct
inconsistent with claiming the waived right or any action or
failure to act evincing an intent not to claim the
right." Evcco Leasing Corp. v. Ace Trucking
Co., 828 F.2d 188, 195 (3d Cir. 1987). A number of
decisions have held that insurance companies waived
anti-assignment provisions by treating providers as valid
recipients of assignments. See, e.g. Productive
MD, LLC v. Aetna Health, Inc., 969 F.Supp.2d 901, 926
(M.D. Tenn. 2013) (finding plaintiffs had " alleged a
plausible waiver theory" ); Glen Ridge Surgicenter,
LLC v. Horizon Blue Cross Blue Shield of New Jersey,
Inc., 2009 WL 3233427, at *6 (finding claim for waiver
because " [a]lthough Horizon's direct payments to
GRS would not constitute a waiver if authorized under the
Horizon plans at issue .... the Complaint describes regular
interaction between Horizon and GRS prior to and after claim
forms are submitted, without mention of Horizon's
invocation of the anti-assignment clause." ). In
Premier Health Center v. UnitedHealth Group, 292
F.R.D. 204, 221 (D.N.J. 2013), the court found that medical
providers " received (a) a direct payment from United in
response to a claim for benefits; and (2) one or more letters
from United indicating that it had overpaid that claim and
demanding reimbursement of the amount that was overpaid
directly to United." This was enough to find that "
whether United waived its right to assert an anti-assignment
provision is subject to common proof." Id.
counter that its conduct paying Dr. Bloom directly for
services could not constitute waiver of the anti-assignment
clause of the ERISA Plans, because the conduct was consistent
with its Provider Agreement with Dr. Bloom. Defendants point
out that in several cases where courts found waiver of an
anti-assignment clause, the critical fact was that the
provider was a " non-participating provider,"
rendering payment of benefits inconsistent with the
anti-assignment provision. Defendants therefore argue that
their conduct towards Dr. Bloom is explained by his Provider
Agreement, and not inconsistent with the anti-assignment
provision in the Plan.
Plaintiffs have pleaded explicit confirmations of coverage
beyond mere compliance with the Provider Agreement, amounting
to waiver of the anti-assignment clause. Proving waiver is a
separate challenge, but, even if the anti-assignment
provision against Plaintiffs were enforceable, they have
plausibly alleged waiver.
final challenge to standing asserts that Plaintiffs cannot
claim injury because the patients from whom Plaintiffs
received their right to sue suffered no injury themselves.
Therefore, by Defendants' logic, Plaintiffs have no
" injury-in-fact" and no standing. See
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560,
112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). The Ninth Circuit
recently rejected a very similar argument in Spinedex
Physical Therapy USA Inc. v. United Healthcare of Ariz.,
Inc., 770 F.3d 1282 (9th Cir. 2014). There is no Third
Circuit precedent deciding the question, and I find the Ninth
Circuit's reasoning to be persuasive. The
Spinedex Court held that the insured patients of the
plaintiff provider assigned the rights they possessed "
at the time of assignment." Id. at 1291. The
patients possessed the right to sue if their rights under
ERISA were violated, and that is precisely what they
assigned. Id. (" the patients' injury in
fact after the assignment is irrelevant . . . If the
beneficiaries had sought payment directly from their Plans
for treatment provided by Spinedex, and if payment had been
refused, they would have had an unquestioned right to bring
suit for benefits." ); see also
CardioNet, 751 F.3d at 178 ( " It is a basic
principle of assignment law that an assignee's rights
derive from the assignor. That is, 'an assignee of a
contract occupies the same legal position under a
contract as did the original contracting party, he or she can
acquire through the assignment no more and no fewer
rights than the assignor had . . ." ). Thus, the
fact that Plaintiffs' patients were not forced to pay for
the medical services they received does not invalidate an
otherwise enforceable assignment of rights.
these reasons, I find that Plaintiffs have derivative
standing to pursue their ERISA claims as assignees of plan
Declaratory and Injunctive Relief
next challenge Plaintiffs' ability to seek injunctive or
declaratory relief under ERISA. Defendants take the position
that even if the assignment of rights were valid and
Plaintiffs had standing to sue, the remedies of injunctive
and declaratory relief would not be available. These remedies
would be " outside the logical scope of an
assignment." Defendants' Memorandum in Support of
their Motion to Dismiss at 22.
reject Defendants' argument. The assignment clause at
issue here specifically included patients' rights
and benefits. First Amended Complaint at ¶ 122.
It is a commonly applied principle of contract law that
" an assignee stands in the shoes of the assignor,"
and " an assignment will ordinarily be construed in
accordance with the rules governing contract interpretation
and the circumstances surrounding the execution of the
assignment document. Crawford Cent. School Dist. v.
Com., 585 Pa. 131, 137-43, 888 A.2d 616, 620-24 (2005).
Thus, I find that this assignment did include the rights to
seek any remedies related to the care they received from
Plaintiffs that were available to the plan participants who
assigned their rights.
Supplemental Jurisdiction Over State Law Claims
ask me to decline to exercise supplemental jurisdiction over
Plaintiffs' state law claims if I find that Plaintiffs
lack standing for their ERISA claims. As I have found that
Plaintiffs do have standing to bring their federal claims, I
reject this argument as moot.
foregoing reasons, Defendants' Motion will be denied. An
appropriate Order follows.
31st day July, 2015, for the reasons stated in my
accompanying memorandum opinion, Defendants' Motion to
Dismiss Plaintiffs' First Amended Complaint is DENIED.
I note that this reading of the
anti-assignment clause appears consistent with a distinction
drawn by the U.S. Department of Labor's (" DOL"
) in its interpretation of " an assignment of
benefits." While not dispositive, the DOL's website
includes an instructive section titled " FAQs About The
Benefit Claims Procedure Regulation" that specifically
distinguishes an assignment of the right to receive
benefit payments with an assignment of the right
pursue a coverage dispute and appeal a benefit
determination, as follows:
B-2: Does an assignment of benefits by a claimant to
a health care provider constitute the designation of an
No. An assignment of benefits by a claimant is
generally limited to assignment of the claimant's
right to receive a benefit payment under the terms
of the plan. Typically, assignments are not a grant of
authority to act on a claimant's behalf in pursuing
and appealing a benefit determination under a
United State Department Of Labor, Employee Benefits
Security Administration, FAQs About The Benefit Claims
visited 7/27/15) (emphasis added).
Defendants' Memorandum of Law in
Support of Their Motion at 17.