OSF Healthcare System v. Insperity Group Health Plan
Docket: Case No. 1:14-cv-01135-SLD-JEH
Court: District Court, C.D. Illinois; March 10, 2015; Federal District Court
OSF Healthcare System is suing Insperity Group Health Plan and United-HealthCare Insurance Company for unpaid medical bills totaling $408,621.26 under ERISA (29 U.S.C. § 1132(a)(1)(B)). Michael Gray, insured through Insperity, received medical treatment from OSF for severe health issues from November 8 to December 23, 2011, after being transferred from another hospital. Gray assigned his benefits to OSF, which billed $506,209.30 for services rendered. Insperity, in partnership with United, designated United as the Claims Administrator, responsible for benefit claim decisions. United denied full payment due to OSF being a non-network provider, despite OSF's appeals. OSF has received $97,588.04 but seeks the remaining balance. Insperity's motion to dismiss the case was denied, and oral argument was not granted. The legal standard for dismissal requires accepting well-pleaded facts as true and assessing whether they plausibly support a claim for relief, distinguishing between factual allegations and mere conclusions. ERISA provides mechanisms for participants to recover benefits owed under their plans, with the relevant provision allowing beneficiaries to enforce their plan rights and seek due benefits, framing the case as a contractual dispute over plan obligations.
Rules for interpreting claims under 29 U.S.C. 1132(a)(1)(B) are established by federal common law aligned with ERISA's policies. ERISA allows plans to sue and be sued, diverging from traditional trust law, with the plan typically being the defendant in benefits claims. However, under 1132(d), other entities, such as insurers, can also be defendants if a valid legal theory supports the claim. In cases where a plaintiff is a participant or beneficiary of an insurance-based ERISA plan, and the insurer decides eligibility and benefits, the insurer is deemed a proper defendant.
Insperity contends it is not a proper party in this case, asserting that it only contracted with United to provide health insurance benefits and did not influence the benefits decision. Insperity argues that the Seventh Circuit’s 2013 Larson ruling altered the traditional view by stating that only the insurer can be liable when it solely decides benefits. However, this interpretation misrepresents Larson, where plaintiffs, in a class action, sued insurers over copayment rules, not the plans. The district court had dismissed the case, claiming insurers were not proper defendants, but the Seventh Circuit clarified that ERISA does not prevent claims against insurers.
The court noted that even without direct contractual privity between beneficiaries and insurers, insurers could still be liable for ERISA claims due to their obligation to pay benefits. Thus, a claim for benefits under ERISA must target the party responsible for payment. Insperity's argument that Larson restricts liability to the obligor overlooks the ongoing liability of plans contracting with insurers. Liability principles dictate that a third party can have enforceable rights under a contract made for their benefit, which applies to beneficiaries of ERISA plans who are entitled to benefits funded by the plans through insurers.
In contract law, insurance companies act as promisors, plans as promisees, and beneficiaries as third parties with enforceable rights. The promisee plans maintain liability to the beneficiaries due to their original contractual relationship, as a party who commits to paying a debt remains responsible for that debt. Under ERISA, the performance of a promise to pay money to a beneficiary designates the promisee as a surety for the promisor. The case of Larson clarifies that beneficiaries can sue insurance companies directly under ERISA for benefits owed, as the statute does not restrict who may be sued. Larson applies the federal common law of contracts, establishing that insurers are obligors when contract obligations run directly to beneficiaries. The interpretation of ERISA does not limit the potential defendants, allowing for actions against parties beyond just the plans, as seen in precedents like Leister and Mein, which recognize various parties as proper defendants. In this case, the plaintiff asserts that Gray was covered under the Insperity health plan, and since United, the insurance company, was responsible for benefit determinations and claims payments, it is also subject to ERISA claims, a point not contested by Insperity.
Insperity's assertion that the Plan documents contradict OSF's claim of the Plan's responsibility for benefit payments is partially accurate but also flawed. The Complaint's attached documents confirm that United handled OSF's claim for benefits, yet they also indicate Insperity's obligation to provide health benefits to both Gray and OSF. The disagreement over out-of-circuit precedent is noted, with such cases deserving "respectful consideration" but not being binding. Cyr v. Reliance Standard Life Insurance Co. is highlighted, establishing that potential defendants in actions under 29 U.S.C. § 1132(a)(1)(B) are not limited to plans and administrators, a view supported by Larson. Insperity references a Ninth Circuit case indicating that a fully insured plan could be dismissed if the insurer made all benefit decisions; however, that case found the Dell Defendants were not responsible for benefit claims, while Insperity is held responsible in this situation. Another cited Eleventh Circuit case contends that a fully insured plan cannot be a proper party; however, the Court rejects this perspective in favor of the view that ERISA allows plans to be liable for judgments even when fully insured. Furthermore, there is no in-circuit authority found to limit plan liability based on full insurance. Thus, OSF has provided sufficient credible facts to suggest Insperity's liability under § 1132(a)(1)(B), making dismissal inappropriate.
Defendant Insperity’s Motion to Dismiss is denied. In evaluating a motion to dismiss, all well-pleaded allegations in the complaint are assumed true and viewed favorably towards the plaintiff. The court notes that it can consider exhibits attached to the complaint as part of the pleadings. Insperity, previously known as the "Administaff Group Health Plan," is involved in a case regarding an ERISA plan, which outlines the rights of beneficiaries and includes provisions related to premium collection, benefit definitions, claims submission, and dispute resolution. Such plans must be established through a written instrument that designates fiduciaries responsible for plan management. The court references a previous case (Cox) which concluded that a plan was not a proper party due to the delegation of authority to an insurer for benefits decisions. However, this court draws different legal conclusions regarding the obligations of plans to beneficiaries, while agreeing with Cox that liability under 1132(a)(1)(B) pertains to parties responsible for providing benefits to beneficiaries under ERISA.
