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Ninth Circuit limits ERISA protection for benefits verification calls
A provider alleged a misrepresentation on what the plan would pay, and the court said negligent misrepresentation claims tied to those statements are not automatically preempted by ERISA.
A recent Ninth Circuit ruling narrowed ERISA preemption defenses that health plan administrators and plan sponsors have used to block certain lawsuits stemming from out of network medical providers, opening the door to potential state tort liability tied to benefits verification calls, according to Insurance Business.
In Healthcare Ally Management of California, LLC v. WSP USA, Inc., the dispute began when an out of network provider called a plan administrator before surgery to confirm reimbursement rates. The administrator allegedly told the provider the plan would pay the usual, customary, and reasonable rate, but after the surgery the provider was paid at the Medicare rate, which the provider claimed equaled about 5% of its charged amount.
The court said ERISA preempts claims that require interpreting plan terms, but it does not preempt negligent misrepresentation claims based on inaccurate representations made during the verification call. Because the provider’s alleged injury flowed from the alleged misrepresentation rather than from a denial of benefits, ERISA’s preemption shield did not dispose of the claim.
The ruling raises operational risk for administrators and their third party administrators in the Ninth Circuit, which covers nine states including California, Washington, and Oregon. Insurance Business also noted that the circuit landscape is split, as the Sixth Circuit ruled differently just days later in a similar dispute involving ERISA preemption.