Assignments of Benefits (AOB) are integral to a provider’s practice. These forms, along with providing consent for treatment and/or admission, help to ensure that a provider obtains a right to payment from either the patient or the patient’s health insurance. In a typical scenario, a patient will sign an AOB in favor of the provider that allows the provider to pursue payment from the insurance company. Once treatment is completed, the provider will submit the AOB and claim for payment. Upon approval of the claim, the insurance company will pay the provider directly. The goal is to avoid having to pursue payment from the patient, unless there is a patient responsibility portion owed.1
Provider AOBs May Be Insufficient to Secure Payment from ERISA Plans
When the patient is the beneficiary of an ERISA plan, providers may face difficulties enforcing an AOB to obtain payment. The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that governs health benefit plans, among others. ERISA health benefit plans are employment-based plans that provide coverage for medical care. ERISA sets the standards of conduct for fiduciaries that manage an employee benefit plan, and the terms of the ERISA plan can act to limit what an ERISA plan payor is required to pay. Furthermore, such plans can attempt to limit who can be the recipient of plan benefits. As will be discussed below, some ERISA plans attempt to limit a provider’s right to receive payments based on an AOB.
Because of plan limitations on payments that are often found in ERISA plans, ERISA fiduciaries may deny all or part of provider claims. If the provider is out-of-network and has no contract with the plan or its third party administrator (such as Aetna, United HealthCare, or Blue Cross Blue Shield), then the provider must choose to forego the payment, pursue the patient for the amounts owed (if permitted by relevant state law), or pursue any available administrative appeals and/or litigation against the payor.
Unfortunately, once a claim is denied, a provider’s administrative appeals rights and ability to file suit against the payor often hinges on whether the provider has a valid AOB. In ERISA cases, providers often do not have a direct contract with the payor, and are neither participants in nor beneficiaries to the ERISA plan. Therefore, the provider must obtain derivative standing through the assignment from the patient or the plan participant to file a claim, pursue any administrative appeals, and file suit.2
To Ensure a Right to File Suit to Pursue Payment, AOBs Should Include Specific Language Assigning the Benefits and the Right to Sue and Receive Benefits
Traditionally, AOBs include vague language that the provider has been assigned the right to “pursue payment” from an available payor, including an ERISA plan, without specifically assigning the right to take all necessary action, including, but not limited to, pursuing available administrative appeals or filing suit. Some ERISA plans have sought to capitalize on the lack of a specific assignment of the right to sue to pursue benefits. In these cases, the ERISA plans will deny the provider’s claim, thereby forcing the provider to file suit. Once the provider files suit, the ERISA plan will argue that because the AOB does not specifically include the right to sue, the provider does not have standing to file suit to pursue the payment at issue.
In a recent case, N. Jersey Brain & Spine Ctr. v. Aetna, Inc., the Third Circuit addressed this issue.3 In this case, the New Jersey Brain & Spine Center (NJBSC) submitted a claim to Aetna to request payment for services rendered to three patients who were members of ERISA-governed healthcare plans that were administered by Aetna.4 NJBSC held an AOB that both authorized it to appeal to the insurance company on the patient’s behalf and assigned “all payments for medical services rendered to myself or my dependents” to NJBSC.5 NJBSC reserved the right to bill patients for any amount not covered by the patients’ insurance. NJBSC’s claims were ultimately underpaid or denied, and NJBSC filed suit to obtain payment based on the AOB signed by the patients.6 NJBSC did not allege that it was contracted with Aetna.7
After the case was removed to the United States District Court for the District of New Jersey,8 the case was dismissed because the District Court determined that the AOB did not confer standing to NJBSC to sue under ERISA.9 NJBSC appealed the order.10 The issue before the Court of Appeals for the Third Circuit was whether a patient’s explicit assignment of payment of insurance benefits to his/her healthcare provider, without direct reference to the right to file suit, is sufficient to give the provider standing to sue for those benefits under ERISA Section 502, 27 § U.S.C. 1132(a).11
The Court held that when a patient assigns payment of insurance benefits to a healthcare provider, the provider gains standing to sue for that payment under ERISA Section 502(a).12 The Court reasoned that this outcome will help to ensure that beneficiaries of employee-sponsored plans will have increased access to care and will allow providers to make direct claims against payors – rather than requiring a patient to bring suit, and avoid suits against or demands for payment from the beneficiary.13
On the same day that the NJBSC decision was issued, the Third Circuit also released a non-precedential decision in Am. Chiropractic Ass’n. v. Am. Specialty Health, Inc.14 In this case, the Third Circuit upheld that a provider that obtains an AOB authorizing payment of medical benefits to it has standing to file suit against the insurance company or payor, even if the patient remained “financially responsible for all charges whether or not they are paid by insurance.”15 Following precedent from other Circuits, the Court held that merely continuing a patient’s responsibility to pay the provider for amounts covered by insurance is not a reason to invalidate the assignment.16
As the healthcare arena continues to evolve after the enactment of the Patient Protection and Affordable Care Act (PPACA), payors are continuously looking for ways to avoid or minimize payments to providers to reduce costs. If a provider pursues a claim through litigation, an ERISA plan’s first defense is to claim that the provider lacks standing to file suit. This tactic is not new, and some federal courts have reached inconsistent conclusions regarding whether an assignment of the right to payment confers standing to sue.17 Until there is a definitive answer or until providers revise their AOBs to clearly include language that the plan beneficiary has assigned the right to pursue payment, inclusive of all necessary steps, including pursuing administrative appeals and/or filing suit, ERISA plans will likely continue to challenge a provider’s standing in these cases.
If a Provider Seeks to Pursue an ERISA Plan for Cause of Action Arising Separately from the Payment of Benefits, AOBs Should Include an Assignment of All Causes of Action Arising Under ERISA
The above cases dealt with the narrower issue of whether an AOB is sufficient to confer standing on a provider to file suit against an ERISA plan to seek payment for services rendered. Other courts have addressed whether providers, through an AOB, have standing to pursue additional claims, other than for payment, under ERISA.
In Innova Hosp. San Antonio, L.P. v. Blue Cross & Blue Shield of Ga., Inc.,18 Innova Hospital asserted several causes of action against Blue Cross & Blue Shield of Georgia, including a claim for plan benefits under the ERISA plan and claims for violations of other ERISA requirements, including failure to comply with various requests for information, failure to provide a full and fair review, and violations of claims procedure regulations.19 Blue Cross & Blue Shield moved to dismiss Innova Hospital’s claims pursuant to Federal Rule of Civil Procedure 12(b)(6), alleging that Innova Hospital lacked standing to file suit.20
Innova Hospital alleged that its assignment included the “right to receive reimbursement benefits directly and the right to ‘pursue all causes of action…’.”21 The defendants alleged that the AOB was insufficient to confer standing for causes of action not related to payment, but failed to provide any support for this position.22 The Court held that, at this stage, Innova Hospital’s allegations were sufficient to pursue relief for ERISA violations other than just payment.23
More recently, in Peacock Med. Lab., LLC v. UnitedHealth Group, Inc.,24 the Southern District of Florida limited a provider’s right to pursue non-payment ERISA claims where an AOB only assigned the right to receive benefits. In Peacock, Peacock Medical Laboratories (Peacock) alleged that it had standing to file suit against UnitedHealth for failure to pay claims.25 Peacock alleged that UnitedHealth Group violated ERISA by denying and failing to provide the criteria used to deny the claims, failing to provide a full and a fair review of their denied claims, breaching its fiduciary duties, and failing to provide requested plan documents.26 Peacock submitted AOBs in support of its claims.27
The Southern District of Florida held that Peacock did not have standing to bring the claims under ERISA, even though the patients had signed AOBs.28 Unfortunately for Peacock, the AOBs in this case were insufficient to confer standing because the assignment only provided Ambrosia Treatment Center,29 an affiliate of Peacock, the right to receive benefits.30 The court held that even if Peacock was a proper assignee, the assignment only conferred limited standing to receive benefits, not for other claims under ERISA, including breach of fiduciary duty or civil penalties.31
Providers Must Routinely Review and Analyze their AOBs to Protect their Right to Payment from ERISA Plans
This area of the law is evolving. The current cases provide some guidance to consider:
Does the provider have the right to collect payment and/or benefits from the insurance company?
Providers must ensure that the AOB clearly assigns the right to payment to the provider and the right of the provider to receive the payment. Furthermore, providers must ensure that the AOBs are properly executed by the patient or the plan participant. If the AOB purports to assign the right of payment to more than one provider, then all of the providers should be listed clearly in the AOB to ensure that each provider preserves its right to pursue and receive payment.
If the provider has the right to collect payment, does the AOB contain the necessary language to confer standing on the provider to pursue administrative appeals and file suit? Does the AOB include the right to file suit for payment alone or does it confer greater rights?
At a minimum, the AOB must assign the provider the right to pursue and receive payment. Assuming that a claim will be denied, the AOB should include an assignment of the right to pursue all administrative appeals and litigation as necessary to pursue payment. If a provider is interested in possibly making claims other than for payment under ERISA, it is imperative that a provider include broader language that includes the right to pursue all causes of action, including, but not limited to the right to pursue payment and other ERISA claims.
Moreover, in order for providers to ensure that they have the best chance at receiving payment for services rendered to ERISA plan beneficiaries, it is imperative that providers routinely review and revise their AOBs. Although PPACA gave providers additional protections by including a claimant’s authorized representative in the definition of claimant in 29 C.F.R. 2590.715-2719, as it relates to internal claims and appeals processes, this protection likely will not extend to the right to file suit.
In order to avoid future problems, providers must include the right to receive benefits directly, as well as an assignment of the right to pursue payment, other alleged ERISA violations, and other causes of action against a payor. Failure to include these specific assignments could limit a provider’s ability to recover and, ultimately, hurt the provider’s bottom line.
*The information in this article is not intended as legal advice. By reading this article, no attorney/client relationship is formed.
Jessica Guobadia is a commercial attorney whose practice focuses on business and contract law, including healthcare reimbursement and employment disputes. Although located in The Woodlands, Texas, Ms. Guobadia represents providers throughout the State of Texas. She can be reached at email@example.com or (281) 296-6920.
If the provider is contracted with the insurer, then the patient will generally only owe a patient responsibility portion, including deductibles, copayments, and coinsurance. In many instances, providers will also submit a bill to an out-of-network insurer in an attempt to be paid the allotted portion, pursuant to the plan, from the applicable payor, leaving the remaining balance to be paid by the patient.
CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165, 176 n.10 (3d Cir. 2014).
N. Jersey Brain & Spine Ctr. v. Aetna, Inc., 801 F. 3d 369 (3rd Cir. 2015).
Id at 370.
Id at 371.
Notice of Removal, North Jersey Brain & Spine Center v. Aetna, Inc., No. 2:13-cv-05286, In the United States District Court for the District of New Jersey (D. N.J. September 4, 2013).
NJBSC filed suit against Aetna in the New Jersey Superior Court for non-payment of benefits pursuant to Section 502(a) of ERISA, 29 U.S.C. § 1132(a). Based upon the ERISA claims, Aetna removed the case to federal court, as federal courts generally have exclusive jurisdiction of ERISA claims. N. Jersey Brain & Spine Ctr., supra, 801 F. 3d at 371.
Id. at 370.
Id at 372.
Id. at 373-374.
625 Fed. Appx. 169 (3rd Cir. 2015).
Id. at 175.
Productive MD, LLC v. Aetna Health & Aetna Life Ins Co., 969 F. Supp. 2d 901, 913 (M.D. Tenn. 2013) (citing Cromwell v. Equicor Equitable HCA Corp., 944 F.2d 1272, 1277 (6th Cir. 1991)) (held assignment of the “payment of medical benefits ... for services rendered” was sufficient to confer standing.); TouroInfirmary v. Am. Mar. Officer, 2007 U.S. Dist. LEXIS 86574 (E.D. La. Nov. 21, 2007) (held language that authorized direct payment to the provider and made patients responsible for charges not paid by the health plan did not confer standing on the provider to file suit under ERISA).
2014 U.S. Dist. LEXIS 184550 (N.D. Texas – Dallas, July 21, 2014).
Id at *10.
Id at *33.
Id. at *32-33.
Id at *34.
2015 U.S. Dist. LEXIS 61306 (S.D. Fl. May 11, 2015).
Id at *7.
The payments at issue were due to Peacock, not Ambrosia Treatment Center; therefore, the suit was filed by Peacock as affiliate of Ambrosia Treatment Center. The Durable Power of Attorney at issue provided that the patient appointed Ambrosia Treatment Center as the patient’s attorney–in-fact to “present, with respect to obtaining payment end/or [sic] reimbursement for hospital, medical, chemical dependency treatment and other health care services rendered to the Principal by Ambrosia Treatment Center […] and any of its affiliates, including, but not limited to […] making of claims against insurers, or other third-party payers[,] [i]nstituting and prosecuting and/or defending litigation, arbitration and/or other dispute resolution proceedings, compromise and/or statement of claims and/or disputes.” Id at *3-5.
Id at *7-8 (citing Sanctuary Surgical Centre, Inc. v. Aetna, Inc.., 546 Fed. App’x 846 (11th Cir. 2013) (Unpub’d Op.).
Assignment of Benefit (AOB)
By Steven M. Verno, CMBS, CEMCS, CMSCS
An excerpt of Medical Billing Terminology (c) 2009 Steven M. Verno. Published with author's permission.
Assignment of Benefit (AOB) is a simple term that can have very drastic consequences. Assignment means to take something and give it to someone else. Example: I assign my parking spot to Jim. Benefit is a health care service provided under a contract between a health insurance company and an employer or patient. SO, an assignment of benefit simply means the patient is asking permission to take the payment of their health benefit and give it to the doctor so that the doctor can apply the benefit payment to the medical debt owed by the patient.
This is a request sent to the insurance company, signed by the patient or member, requesting that the payment of their health benefit be sent to a person they designate to receive the payment of the health benefit. This request may or may not be honored and accepted by the insurance company depending on the patient’s or member’s health benefit contract, or State Law.
The patient’s or member’s health benefit contract may prohibit the assignment of the health benefit payment to anyone. State Law such as in Florida and Louisiana may require the insurance company to honor the Assignment request even if the contract prohibits it. If the Assignment is prohibited, the payment of the health benefit will be sent directly to the patient or member; and then requires the provider to bill the patient or member.
Assignment of Benefit and State Laws
Not every patient has the contracted right to assign their benefit payment. Even if you have the patient sign an AOB form, the insurance company doesn’t have to honor it if the patient cannot contractually assign their benefit payment to anyone. The only exception is if there is a State Law mandating it.
The provider has the option to do this on a claim by claim basis.
If accepted, the insurance company pays the patient’s health benefit directly to the person designated by the patient to receive the payment of the health benefit. The provider has checked “Yes” for “Assignment” on the claim form.Block 27 (Assignment) of the CMS 1500.
State Law such as in Florida and Louisiana may require the insurance company to honor the Assignment request even if the contract prohibits it. If the Assignment is prohibited, the payment of the health benefit will be sent directly to the patient or member. Then requires the provider to bill the patient or member.
Non-Acceptance of AOB
If the provider does NOT accept assignment, the payment of the health benefit is sent to the patient or member. Some insurance companies such as Medicare, Railroad Medicare, and Tricare allow you to bill the patient for 115% of the allowable. For example, if the allowable is $100, you can bill the patient for $115.00. Assignment only works if the patient’s contract allows the assignment of the benefit payment, or State Law mandates acceptance of Assignment.
State Assignment of Benefit Laws can be referenced on the American College of Emergency Physician (ACEP) website http://www.acep.org/advocacy.aspx?LinkIdentifier=id&id=29364&fid=1018&Mo=No