:: Provider Reimbursement Case Fails Because of Standing Defect

Finally, a plaintiff must have a cause of action under the applicable statute. This was formerly called “statutory standing.” In the past, we suggested that this was either “a separate aspect of standing or a part of the prudential aspect of standing.” Lerner v. Fleet Bank, N.A., 318 F.3d 113, 126 n. 12 (2d Cir.2003); see also Kendall v. Emps. Ret. Plan of Avon Prods., 561 F.3d 112, 118 (2d Cir.2009).

The Supreme Court has recently clarified, however, that what has been called “statutory standing” in fact is not a standing issue, but simply a question of whether the particular plaintiff “has a cause of action under the statute.” Lexmark Int’l, Inc. v. Static Control Components, Inc., ––– U.S. ––––, ––––, 134 S.Ct. 1377, 1387, 188 L.Ed.2d 392 (2014). This inquiry “does not belong” to the family of standing inquiries, id., because “the absence of a valid … cause of action does not implicate subject-matter jurisdiction, i.e., the court’s statutory or constitutional power to adjudicate the case.” Id. at 1386 n. 4 (emphasis in original) (internal quotation marks omitted); see also Nw. Airlines, Inc. v. County of Kent, 510 U.S. 355, 365, 114 S.Ct. 855, 127 L.Ed.2d 183 (1994) (“The question whether a federal statute creates a claim for relief is not jurisdictional.”).

Am. Psychiatric Ass’n v. Anthem Health Plans, Inc., No. 14-3993-CV, 2016 WL 2772853, at *4 (2d Cir. May 13, 2016)

This recent Second Circuit opinion reflects the complexity of provider reimbursement cases in the ERISA context.

The Parties

The appellants were two individual psychiatrists, Susan Savulak, M.D., and Theodore Zanker, M.D. (“the psychiatrists”), and three professional associations of psychiatrists, the American Psychiatric Association, the Connecticut Psychiatric Society, Inc., and the Connecticut Council of Child and Adolescent Psychiatry (collectively, “the associations”).

The appellees were four health-insurance companies: Anthem Health Plans, Inc. (doing business as Anthem Blue Cross & Blue Shield of Connecticut); Anthem Insurance Companies, Inc. (doing business as Anthem Blue Cross and Blue Shield); Wellpoint, Inc.; and Wellpoint Companies, Inc. (collectively, “the health insurers”).

The Issue


The psychiatrists and the associations alleged that the health insurers’ reimbursement practices discriminate against patients with mental health and substance use disorders in violation of the Mental Health Parity and Addition Equity Act of 2008 (“MHPAEA”), Pub.L. No. 110–343, Div. C §§ 511–12, 122 Stat. 3861, 3881, codified at 29 U.S.C. § 1185(a), and the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1001–1461.

Here is the tricky part of the case –

The associations brought suit on behalf of their members and their members’ patients, while the psychiatrists brought suit on behalf of themselves and their patients. The district court dismissed the case after concluding that the psychiatrists lacked a cause of action under the statute and the associations lacked constitutional standing to pursue their respective claims.

The Standing Issue

The foregoing may not seem very complicated or troublesome. After all, the physicians frequently are the stakeholders in cases of insurance reimbursement.  As such, a suit on behalf of their patient constituency.  Unfortunately, ERISA was not set up for such cases but rather for governing the relationship between the plan and the plan participants and beneficiaries.

And thus:

 The district court concluded that the psychiatrists lack third-party “statutory standing” to bring claims on behalf of their patients. The district court also rejected Dr. Savulak’s distinct assignee-based theory of a cause of action.

The district court assumed without deciding that the assignments of ERISA claims made by two patients to Dr. Savulak were not precluded by the anti-assignment provisions of their plans. But the district court concluded that the assignment conveyed legal rights only, and moreover that the complaint did not plead any facts suggesting that the assignment was in exchange for medical treatment, as required for a provider to have a cause of action under ERISA.

More generally, the district court held that the physician-patient relationship does not grant third-party standing in this case because the psychiatrists asserted no constitutional claims on behalf of their patients and because the statutes at issue did not broadly confer a private right of action upon providers. Finally, the district court found that the associations lacked constitutional standing because their individual members lacked standing.

As An Aside . . .

Although the district court concluded that the psychiatrists and the associations lacked standing, the district court also concluded that the plaintiffs failed to state a claim for relief.

First, the court rejected the psychiatrists’ and the associations’ contention that the health insurers were acting as fiduciaries “with respect to a plan” under ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A).

Second, the court held that even if the insurers were acting as fiduciaries, ERISA § 502(a)(1)(B) (claims for benefits) provides adequate relief, thus requiring dismissal of the ERISA § 501(a)(3) (fiduciary) claims.

Second Circuit Agrees On Standing Deficiency

The Second Circuit agreed that the psychiatrists’ lacked standing to assert their ERISA § 502(a)(3) claims as third parties bringing suit on behalf of their patients.

The court began by a somewhat esoteric parsing of standing phrases and concepts, noting that the plaintiffs’ argument “conflates the prudential third-party standing doctrine with the requirement that the plaintiff have a cause of action under the statute—a requirement formerly known as ‘statutory standing’.”

Bottom line: to have standing under ERISA, a plaintiff must both (#1)  “assert a constitutionally sufficient injury arising from the breach of a statutorily imposed duty” and (#2) “identify a statutory endorsement of the action” – and the plaintiffs’ failed to meet the second requirement.

Question #1 – Constitutional Standing

The plaintiffs satisfied the first factor:

The health insurers do not contest that the psychiatrists have constitutional standing, and we agree with the district court that the psychiatrists’ personal financial stakes in the suit (as a result of “dramatically reduced” reimbursement rates) meet the constitutional requirements of injury in fact, causation, and redressability.

Question #2 – “Statutory Standing”

The district court concluded that plaintiffs lacked “statutory standing,” i.e., a cause of action under the statute.  (The parties muddled the issue with reference to prudential standing but “because Congress specified in the statute who may sue, prudential standing principles do not apply.)

We turn now to the core issue in this appeal: whether plaintiffs have a cause of action under ERISA against the health insurers arising from the health insurers’ alleged MHPAEA violations. We consider whether, applying the “traditional principles of statutory interpretation,” the plaintiffs here fall “within the class of plaintiffs whom Congress has authorized to sue.” Lexmark, 134 S.Ct. at 1387–88. We agree with the district court that they do not.

Rationale –

Section 502(a)(3) provides that a civil action under ERISA may be brought “by a participant, beneficiary, or fiduciary.” 29 U.S.C. § 1132(a)(3).

The psychiatrists do not argue that they are participants, beneficiaries, or fiduciaries under ERISA, nor could they. Indeed, the psychiatrists’ arguments are aimed at circumventing this hurdle.  . . . [W] e cannot expand the congressionally-created statutory list of those who may bring a cause of action by importing third-party prudential considerations. The psychiatrists here lack a cause of action under ERISA’s § 502(a)(3), irrespective of whether they may stand in the shoes of their patients in other matters.

We also agree with the district court that the association plaintiffs lack constitutional standing under Article III because their members, as we have shown, lack standing.

Note:  You may recall that physicians have been able to use assignments in some cases to file claims against ERISA plans.  This has also been the case in the Second Circuit:

Like most of our sister circuits, we have allowed physicians to bring claims under § 502(a) based on a valid assignment from a patient. See, e.g., I.V. Servs. of Am., Inc. v. Trustees of Am. Consulting Eng’rs Council Ins. Tr. Fund, 136 F.3d 114, 117 n. 2 (2d Cir.1998) (“[T]he assignees of beneficiaries to an ERISA-governed insurance plan have standing to sue under ERISA.”); see also Tango Transp. v. Healthcare Fin. Servs. LLC, 322 F.3d 888, 891 (5th Cir.2003) (collecting cases from other circuits on derivative standing in general).

The observed, however, that:

“[t]his narrow exception grants standing only to healthcare providers to whom a beneficiary has assigned his claim in exchange for health care benefits.” Simon v. Gen. Elec. Co., 263 F.3d 176, 178 (2d Cir.2001); see also Montefiore Med. Ctr. v. Teamsters Local 272, 642 F.3d 321, 329 (2d Cir.2011) (holding that the “exception to the [ordinary] ERISA standing requirements” for “healthcare providers to whom a beneficiary has assigned his claim in exchange for health care” is “narrow” (internal quotation marks omitted)).

Therefore, simply asserting that claims under ERISA § 502(a)(3) for violations of MHPAEA have been assigned by the patients to Dr. Savulak is insufficient by itself to give Dr. Savulak a cause of action under the statute. Rather, to obtain standing, the patients’ assignment of the right to sue for benefits must be exchanged for healthcare benefits.

Other cited authorities for the foregoing: Spinedex Physical Therapy USA Inc. v. United Healthcare of Ariz., Inc., 770 F.3d 1282, 1289 (9th Cir.2014); Pascack Valley Hosp. v. Local 464A UFCW Welfare Reimbursement Plan, 388 F.3d 393, 403 (3d Cir.2004); Cagle v. Bruner, 112 F.3d 1510, 1515 (11th Cir.1997).