The case of Silver v. International Longshore and Warehouse Union, et al., handed down just a few weeks ago on August 22, 2016, provides additional insight into ways out-of-network healthcare providers can obtain payment for their services, and possibly more than what the Plan would otherwise pay in benefits, despite a health plans’ allegations that the claims are pre-empted by ERISA.
In Silver, an out-of-network physician sued the self-insured health plan to recover payment for health care services provided to the Plan’s insureds. Silver sued under various state law causes of action, including breach of oral contract, and for the reasonable value of its services (called “quantum meruit”) and the trial court dismissed all his claims on the basis they were all preempted by the Employee Retirement Income Security Act of 1974 (ERISA).
ERISA, as most healthcare providers and insurance payors know, preempts all state law claims which conflict with federal law or which must be brought under federal law. If a claim is preempted it means the provider would have to sue under ERISA and, generally, would not be able to sue under its own name. ERISA also limits the amounts recoverable to the benefits allowed under the health plan, and possibly to attorneys fees if the provider prevails in the ERISA suit. You would also have to appeal first under ERISA before suing.
The state law claims, such as quantum meruit, allow the provider to sue in the provider’s name and, if the provider wins, allow it to recover more than what the Plan may otherwise pay. For example, an ERISA claim will only pay what the plan benefits allow. The damages for a state law claim for quantum meruit are the “reasonable value” of the services provided. The “reasonable value” could exceed what the Plan’s benefits are.
On appeal, the California appellate court for the Second Appellate District reversed the trial court’s dismissal of Silver’s state law claims and allowed the case to proceed to trial. Silver persuaded the appellate court that this was NOT an ERISA case because the elements of a quasi contract had been formed, and he did not need to sue as an assignee of a Plan beneficiary. After a lengthy analysis of ERISA preemption the Court found the following facts established the contract:
1. Before rendering services Silver had called the Plan, determined the amount it would pay, and memorialized the information in writing;
2. Silver relied on the Plan’s assurances of payment; and
3. The claims were not based on anything that would conflict with the Plan’s administration of benefits.
The key for that Court was that Silver was suing “not as an assignee” of an ERISA beneficiary, but as an “independent entity claiming damages.”
Lessons from this case: obtain and verify assurances of coverage and payment and, if you need to litigate, base your claims, not on the existence of the Plan or the Plan benefits, but on a breach of contract failure to make payment as promised for services rendered.
Robert Amador, Amador Law Corporation, Torrance, California. 9.8.16
Experienced Business and Healthcare Attorneys.