American Chiropractic Ass'n v. American Specialty Health Inc.

Citations: 14 F. Supp. 3d 619; 57 Employee Benefits Cas. (BNA) 2766; 2014 U.S. Dist. LEXIS 41769; 2014 WL 1301943Docket: Civil Action No. 12-7243

Court: District Court, E.D. Pennsylvania; March 27, 2014; Federal District Court

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Motions to dismiss filed by Defendants American Specialty Health Inc., American Specialty Health Networks, Inc., CIGNA Corporation, and Connecticut General Life Insurance Company were reviewed under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). These motions aimed to dismiss claims brought under the Employee Retirement Income Security Act (ERISA) on grounds of lack of standing, failure to exhaust administrative remedies, and failure to state a claim (ECF 41 and 43). Plaintiffs, including the American Chiropractic Association, Dr. Steven G. Clarke, and Carol A. Lietz, opposed the motions (ECF 51). The Court accepted the factual allegations in the Plaintiffs’ complaint as true for the purpose of considering the motions, focusing specifically on standing and exhaustion.

Carol A. Lietz, a subscriber to a healthcare plan administered by CIGNA, raised issues regarding the handling of her chiropractic claims. Lietz utilized a Health Savings Account (HSA) for out-of-pocket medical expenses. The plan defined 'Covered Health Services' and 'Eligible Expenses for Covered Health Services,' differentiating between in-network and out-of-network services. After receiving chiropractic services from an in-network provider, Dr. Inchiostro, a claim for $160.00 was submitted, but ASHN reimbursed only $88.00 according to the in-network fee schedule. Lietz contested the amount deducted from her HSA, arguing it should reflect the actual payment received by Dr. Inchiostro, not the billed amount of $127.28. Additionally, Dr. Inchiostro raised concerns to ASHN about discrepancies in reimbursement amounts and fee schedules affecting patient reimbursements. Ultimately, the Court granted the Defendants’ motions to dismiss.

ASHN appears to retain extra funds beyond the agreed fee schedule, as indicated by a customer service representative's advice to consult the contract for clarification. However, the contract lacks any explanation for the withholding of HRA funds, which raises concerns for both the patient and the healthcare provider. ASHN's emailed response clarifies that reimbursement is based solely on the fee schedule outlined in the Payor Summary and that any other agreements with Cigna are confidential. Notably, there is no evidence that Lietz or Dr. Inchiostro contacted Cigna for further clarification.

Lietz's primary complaint centers on discrepancies in Explanation of Benefits (EOB) statements, which show a billed amount based on Cigna's negotiated rate with ASHN, differing significantly from the lower rate agreed upon between ASHN and the actual provider, resulting in consumer billing at a higher rate. Lietz alleges that Cigna's manipulation of rates is aimed at achieving compliance with medical loss ratio regulations.

Dr. Clarke, an ONET chiropractor not contracted with the defendants, claims he provided services to Cigna plan participants who authorized payments to him while remaining financially responsible for the charges. He asserts that ASHN, as Cigna's agent, implemented internal policies that improperly limited benefits for ONET services to five sessions and two therapies per session, regardless of medical necessity, without disclosing these limitations to insured patients, which contradicts Cigna's reimbursement obligations for necessary chiropractic care.

Plaintiff American Chiropractic Association (ACA) represents over 15,000 chiropractors and seeks equitable and injunctive relief for its members allegedly harmed by the Defendants’ violations of ERISA and various state laws. When evaluating a motion to dismiss under Rule 12(b)(6), the court must accept all well-pleaded facts as true while ignoring legal conclusions. The court must assess whether these facts establish a plausible claim for relief, requiring more than mere entitlement statements; factual content must enable a reasonable inference of the defendant's liability. Courts typically only consider allegations in the complaint, attached exhibits, and public records, but may also consider undisputed documents referenced in the complaint without converting the motion to a summary judgment. A motion challenging standing falls under Rule 12(b)(1), as standing is jurisdictional. The plaintiff must demonstrate facts affirmatively suggesting the right to jurisdiction, consistent with the standard for Rule 12(b)(6). Under ERISA, only plan participants or beneficiaries may bring civil actions to recover due benefits, enforce rights, or clarify future benefit rights, with specific definitions for "participant" and "beneficiary" provided by the statute, encompassing current or former employees and members of employee organizations eligible for benefits.

The Supreme Court interprets the term "participant" under ERISA to include current employees, former employees with a reasonable expectation of returning, or those with a colorable claim to vested benefits. To demonstrate potential eligibility for benefits, a claimant must establish a colorable claim that they are likely to succeed in a benefits suit or will meet eligibility requirements in the future. For plaintiffs to pursue civil actions under ERISA, they must possess a colorable claim to benefits under the relevant plan, which requires a lower burden of proof than a likelihood of success on the merits.

In the case of Plaintiff Lietz, it is undisputed that she is a participant in an ERISA plan and has standing to seek reimbursement for mistakenly charged out-of-pocket payments. However, Defendants contend that Lietz must first exhaust her administrative remedies before filing suit and have moved to dismiss her complaint. Case law mandates that, barring limited exceptions, a federal court will not consider an ERISA claim unless the plaintiff has exhausted available remedies under the plan, a requirement that is strictly enforced. Lietz acknowledges she did not pursue administrative review of her claims.

Lietz argues against the exhaustion requirement on the grounds of futility, which necessitates a clear and positive showing of futility. The Third Circuit outlines factors for evaluating futility, including the plaintiff’s diligence in seeking administrative relief and the existence of a fixed policy denying benefits. Lietz does not assert that she diligently sought administrative relief or that her situation warranted immediate judicial review. Her only action was a single informal inquiry by her chiropractor to ASHN regarding a billing discrepancy, which does not fulfill the exhaustion requirement.

Moreover, Lietz's claim of a broad policy by Defendants affecting the calculation of deductibles lacks sufficient factual support to establish a fixed policy that would render an administrative appeal futile. Consequently, she has not adequately shown futility to warrant a waiver of the exhaustion requirement. Additionally, Lietz's assertion that dismissal for failure to exhaust is premature is undermined by her reliance on cases that involved more substantial factual allegations supporting claims of futility, which are not present in her complaint.

Lietz's allegations fail to establish the necessary "clear and positive showing of futility," leading to the conclusion that the dismissal of his claims for not exhausting administrative remedies is justified. Additionally, Dr. Clarke's claims against the defendants must be dismissed due to a lack of standing under ERISA's civil enforcement provision, which is typically restricted to plan participants or beneficiaries. As defined by ERISA, Dr. Clarke does not qualify as either. He argues he can sue as an assignee of his patients, who are participants or beneficiaries, but to assert standing as an assignee under ERISA, he must prove a valid assignment exists. He presents a standard Assignment of Benefits form from several Cigna-insured patients, which authorizes payment to him for services rendered but does not grant him the right to enforce his patients' rights under their plans. Courts in this Circuit have consistently ruled that similar assignments do not permit providers to pursue ERISA claims on behalf of patients. The case law indicates that such assignments only allow for direct payment collection from insurers and do not transfer the right to litigate under ERISA. The Court finds this reasoning compelling, noting that the assignments here appear to only confer the right to reimbursement rather than the full rights under the health plans.

The document establishes that the assignment of benefits forms used by Dr. Clarke do not grant him the authority to litigate under ERISA, as they only assign the right to receive reimbursements from CIGNA without transferring rights to enforce other plan rights. Patients remain financially responsible for all charges, regardless of insurance payments. An "Authorized Representative" form submitted by Plaintiffs, which was not part of the original complaint, attempts to broaden Dr. Clarke's authority but does not suffice to grant him standing. The form does not indicate whether the patient was part of an ERISA plan or that they suffered any injury due to the alleged wrongdoing, both of which are necessary for standing. Consequently, Dr. Clarke lacks standing, and the court grants the motion to dismiss his claims.

Regarding Plaintiff ACA, the court finds that it has also failed to establish associational standing based on the criteria set forth in Hunt v. Washington State Apple Advertising Commission. ACA's members, like Dr. Clarke, do not qualify as ERISA participants or beneficiaries, thus they lack standing to sue individually. Furthermore, ACA's claims necessitate the participation of its members to prove essential elements, such as membership in ERISA-governed plans and injuries suffered by patients. Therefore, ACA's claims are also dismissed for lack of standing.

The district court, referencing the case of Franco, determined that evaluating the claims necessitates an individual assessment of patient assignments to verify compliance with ERISA's requirements. The court concluded that ACA did not satisfy the Hunt test for associational standing, leading to the dismissal of its claims. In Count III, ACA presented state law claims against the Defendants for alleged violations of anti-discrimination, prompt pay, and utilization management statutes in New Jersey, Tennessee, Connecticut, and Missouri, relying on supplemental jurisdiction. However, as the federal claims were dismissed, the court opted not to exercise supplemental jurisdiction over the state law claims, indicating that such claims should be dismissed if federal claims are resolved before trial. Consequently, the court granted the Defendants' motions to dismiss the Plaintiffs' complaint, citing lack of standing and failure to exhaust administrative remedies, thereby rendering the review of potential claims for relief unnecessary. An order confirming this dismissal was issued on March 27, 2014.

Lietz's claims are distinct from those of Dr. Clarke and the ACA, raising concerns about the appropriateness of joining these claims in a single action. The Plan, attached to CIGNA’s motion to dismiss, is pertinent since the Plaintiffs reference it in their complaint, allowing the Court to consider it in the dismissal motions. The EOB statement does not indicate that Dr. Inchiostro received an $88.00 payment. The Third Circuit has not definitively ruled on the standing to sue under ERISA § 502 by assignment, as seen in various district court cases. In contrast, other circuits have affirmed that providers can sue under ERISA with valid assignments of benefits from beneficiaries. The Court emphasizes that it should not consider post-filing allegations when assessing a complaint's sufficiency, nor can a complaint be amended through opposition briefs. Plaintiffs' reliance on Pennsylvania Psychiatric Soc. v. Green Spring Health Services is incorrect, as that case involved a concession by defendants concerning the Hunt test's first prong, and it did not address the key issue of whether ERISA claims were assigned by beneficiaries to their provider chiropractors.