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Anti-Assignment Provision Bars Healthcare Provider's Benefit Claim
Ninth Circuit Court of Appeals, in Eden Surgical Center v.
Cognizant Technology Solutions Corp., dismissed a healthcare
provider's lawsuit against a group health plan in which the provider
sought benefits as the assignee of a plan participant.
Background. Many healthcare providers have recently
increased efforts to collect for services rendered to participants in
ERISA-covered group health plans when the plan refuses to pay some or
all of the cost of the services provided. In this context, some
providers have taken the view that when a participant assigns his or
her rights to plan benefits to the provider, that assignment includes
all of the participant's rights under the plan, including the right
to sue for benefits not paid.
prevent healthcare providers from bringing lawsuits against group
health plans, many plan sponsors include anti-assignment provisions
in their plan documents. Such provisions either completely prohibit,
or substantially limit, the participant's ability to assign their
rights under the plan.
Law. In general, courts have upheld anti-assignment
provisions. Thus, even when a plan participant knowingly (or
unknowingly) assigns all rights to a healthcare provider, that
assignment will be void if the plan expressly prohibits such an assignment.
Facts. In 2014, the
plaintiff provided surgical services to one of the plan's
participants. Before providing the services, the plaintiff
verified the participant's medical benefits under the plan through a
recorded phone call. It was advised by a plan representative that the
reimbursement would be in accordance with usual and customary rates
("UCR"). Later, it was revealed that the plan
actually pays Medicare rates, not UCR.
After completing the procedures, and having the participant assign
his benefits, the plaintiff submitted claims for reimbursement.
The plan issued adverse benefits determinations on a portion of the
claims and issued payment for the claims equal to the Medicare rate.
The plaintiff appealed to the plan for the full payment and issued a
demand letter. The plan administrator did not respond to either the
appeal or the demand letter.
In the interim, the plaintiff contacted the
plan's insurer and was told that the plan did not contain an
anti-assignment provision. When the plaintiff sued, the plan
administrator sent the plaintiff a letter stating that the plan
contained an anti-assignment provision barring its claim.
The district court dismissed the plaintiff's claim on the basis that
the plan contained a valid anti-assignment provision that prevented
the plaintiff from asserting the participant's rights. The plaintiff
appealed the district' court's determination to the Ninth Circuit on
the basis that the doctrine of equitable estoppel renders the
anti-assignment provision unenforceable.
Ninth Circuit. On reviewing the matter, the Ninth Circuit
noted that reasonable reliance on a material representation is one of
the requirements necessary to establish an equitable estoppel claim.
In the instant case, the court observed that the plaintiff did not
attempt to obtain the plan documents until after it had already filed
the lawsuit. Therefore, the court concluded that any reliance
the plaintiff placed on the insurer's misrepresentation concerning
the existence of an anti-assignment provision was
The court noted that "[w]hile it is true that a 'plan
administrator may not fail to give a reason for a benefits denial
during the administrative process and then raise that reason for the
first time when the denial is challenged in federal court,'... that
is not what happened here." Specifically, the court found that
the plan had raised the anti-assignment provision as a defense after
the suit commenced to contest the plaintiff's standing to sue, not as
a reason to deny benefits.
In addition, the Ninth Circuit concluded that
although the plaintiff took issue with the plan's pre-litigation
conduct,( i.e., its silence in response to plaintiff's
administrative claims appeal), the plaintiff provided no authority
for the proposition that the plan had an affirmative duty to make it
aware of the anti-assignment provision. Accordingly, the Ninth
Circuit affirmed the district court's decision to dismiss the