Ninth Circuit Clarifies Standing of Medical Providers in ERISA Lawsuits

The Ninth Circuit Court of Appeals in S. Coast Specialty Surgery Ctr. v. Blue Cross of Cal., __ F. 4th __, 2024 WL 105317 (9th Cir. Jan. 10, 2024) (Before Circuit Judges Graber, Mendoza, Jr., and Desai), recently clarified a longtime standing issue in the law that a healthcare provider may sue an insurance company under ERISA to recover from the insurance company benefits that otherwise might otherwise be recoverable only by the patient. South Coast Specialty Surgery Center, Inc. (“South Coast”) brought an ERISA action against Blue Cross of California dba Anthem Blue Cross (“Blue Cross”) to recover benefits on behalf of patients who had been treated by South Coast and who had assigned their benefits to South Coast. The district court dismissed South Coast’s lawsuit on the basis that South Coast lacked authority to bring an ERISA action, as South Coast was neither a beneficiary nor a plan participant. The district court construed this assignment as giving South Coast the right to receive direct payment from Blue Cross but not the right to sue for nonpayment of benefits.

South Coast appealed the dismissal of its suit and argued to the Ninth Circuit that because each of its patients, who were beneficiaries, had signed an Assignment of Benefits agreeing to allow South Coast to receive benefits from Blue Cross, the patients had effectively assigned their right to sue under ERISA to South Coast. The Ninth Circuit had little trouble holding that South Coast’s patients had validly assigned their right to benefits to South Coast, and that such an assignment included the right to sue for nonpayment of benefits.

The Ninth Circuit’s reasoning was based partly on ERISA’s stated purpose of effectuating “a careful balancing of the need for prompt and fair claims settlement procedures against the public interest in encouraging the formation of employee benefit plans.” Concluding that South Coast had no authority to sue despite its patients having assigned it their rights to receive benefits would leave South Coast with no legal recourse after essentially “fronting” the costs of its patients’ care. The court noted that not allowing South Coast to sue “stymies Congress’s purpose in enacting ERISA.” The court concluded that: “[c]onstruing an assignment of benefits as including the right to sue for non-payment thus increases patient access to healthcare and transfers any responsibility of litigating unpaid claims to the provider-an entity that is much better positioned to pursue those claims in the first place.” A nice place to end the decision and begin the year. Therefore, so long as an ERISA beneficiary has validly assigned his right to receive benefits, the provider to which he assigned that right also has the right to bring an ERISA action against the insurer for nonpayment of benefits.