Law360 (June 10, 2024, 5:46 PM EDT) — The Ninth Circuit’s recent decision finding Cigna is off the hook for $8.6million in out-of-network mental health and substance use disorder treatment claims against employee benefit plans administered by the insurer could discourage similar litigation, benefits attorneys say.
The Ninth Circuit on May 31 upheld a California court’s grant of summary judgment to Cigna on claims from Bristol SL Holdings, which through bankruptcy became the successor-in-interest to claims for out-of-network treatment for mental health and substance use disorder treatment from a facility in Costa Mesa, California, called Sure Haven.
Bristol said Cigna drove Sure Haven into bankruptcy when it abruptly stopped paying millions in claims from 106 patients under plans it administered regulated by the Employee Retirement Income Security Act.
When Cigna stopped paying claims from Sure Haven, it told the company it had gathered enough evidence to conclude the provider was engaging in prohibited activity called fee-forgiving, which describes a situation when a care provider fails to collect an insured patient’s cost share but continues to bill the insurer. But Bristol, on behalf of Sure Haven, had claimed Cigna’s failure to pay breached a separate verbal contract enforceable under state law that Cigna had made with the treatment center over thousands of phone calls when it verified coverage terms for patients insured by ERISA plans Cigna administered before admission.
Attorneys say the decision represents an employer side-win that distinguishes some law on ERISA preemption in the Ninth Circuit involving providers’ claims against administrators of ERISA plans.
“The court has put non-participating providers on notice that alleged oral promises made by an insurer during precertification may no longer be enforceable under state law,” said J.J. Conway, of J.J. Conway Law, a longtime plaintiff-side ERISA attorney who focuses on health claims.
“Non-contracted providers will have to be more diligent in finding ways to guarantee reimbursement,” he said.
Here are three key takeaways on the decision from benefits attorneys.
State Laws Can’t Co-Exist With ERISA Claims
Attorneys say a particularly decisive new piece of authority from the case for the ERISA defense bar has to do with how the panel upheld preemption of Bristol’s state-law claims by pointing to the existence of an ERISA claim as supporting Cigna’s argument for preemption.
The denial of benefits claim under ERISA in the suit “only further confirmed” a reference to an ERISA plan involved in the claim that demonstrated why the state law claims were preempted, the panel said.
Joe Torres, chair of the ERISA litigation practice at Jenner & Block, said the decision “does point out one challenge for out-of-network providers,” which is that bringing both state-law and ERISA claims could expose their case to a preemption argument.
In the Ninth Circuit, the panel decided “those two things can’t really coexist,” Torres said.
Elizabeth Hopkins, senior partner at Kantor & Kantor LLP and a plaintiff-side ERISA attorney, agreed that the defense scored a win in the case and said the decision was “a pretty decisive win on preemption.”
“I doubt people are going to try to bring state law claims anymore,” Hopkins said, referring to those involving ERISA plans in the Ninth Circuit.
Fee Forgiving Can Lose Providers Coverage
Another key takeaway for attorneys is how fee-forgiving, such as failure to collect and document assessment of copays, played a big role in Cigna’s defense against Bristol, because such activity was specifically prohibited under the ERISA plans involved.
Bristol denied that Sure Haven had practiced in fee-forgiving all the way to the present appeal, which marks the second time Bristol has sought Ninth Circuit revival. Cigna initially won dismissal for lack of standing, which the Ninth Circuit reversed in January 2022.
The Ninth Circuit panel on May 31 said evidence of the fee-forgiving activity, including Sure Haven’s failure to provide proof of patients’ payments, backed up the reasonableness of Cigna’s claims denials under ERISA.
Employer-side attorney Anne Tyler Hall, managing partner at Hall Benefits Law, said the fee-forgiving issue provides a takeaway for providers: “fee-forgiveness is not a provider’s best strategy,” she said, particularly involving out-of-network claims.
Hall said providers may want to get an understanding of “what will preclude payment by the plan?”
“This can create real problems for out-of-network providers,” Hall said.
Hopkins, of Kantor & Kantor, was skeptical of the panel’s treatment of the fee-forgiving issue: “that seems wrong, it seems heavy-handed,” she said of the Ninth Circuit’s ruling.
“I’m most concerned, honestly, about the ability of insurers to write into their plan, something that says, ‘We get to pay nothing, if you don’t collect co-pays from insured folks,'” she said.
Torres, with Jenner & Block, said “bad facts for a litigant will result in a bad outcome” on the fee-forgiveness issue.
“And it seems to be that there were some pretty clear facts here, that they were doing something they weren’t allowed to do,” Torres said of the treatment center.
Network Problems Persist
Another takeaway for attorneys was that provider adequacy is an issue that goes well beyond the Bristol case — it’s something that’s been a focus for the DOL as well, particularly in recent reports to Congress and White House budget requests.
In its opening brief with the Ninth Circuit filed in April 2023, Bristol said that Cigna’s decision to stop paying claims ultimately meant that a network of providers through the company and its affiliates closed in the middle of an opioid epidemic that “treated each year over 3,000 patients suffering from substance-abuse disorders and mental illness.”
The Ninth Circuit panel touched on healthcare network issues in its published decision, and said that practices like fee-forgiving inflated insurance costs “by eliminating the financial incentive for patients to seek cheaper in-network care.”
Plaintiff-side attorney Hopkins said she thinks the Ninth Circuit’s decision could negatively affect provider networks at a time when there’s a shortage of needed resources. She said the real takeaway of this case is that it’s going to add network inadequacy, “which is already really terrible, particularly in the mental health arena.”
“It’s not helping with network adequacy, if you’re putting providers out of business,” Hopkins said. “And to me decisions like this are going to lead to — especially in mental health care — providers leaving the business, which is already happening.”
–Editing by Amy Rowe and Nick Petruncio.
Hall Benefits Law, LLC
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