A group of chiropractors went to war with the Blues and it seems they've won, successfully using a novel legal theory that now has lawyers setting their sights on other large insurers.
After more than four years and a trial in December, the U.S. District Court for the Northern District of Illinois has ruled in favor of the Pennsylvania Chiropractic Association in a lawsuit accusing the Philadelphia-based Independence Blue Cross of violating the Employee Retirement Income Security Act (ERISA) through improper payment withholding and insufficient explanations and appeals.
Judge Matthew Kelley concluded that IBC's practices came "nowhere near substantial compliance with ERISA's notice and appeal requirements," and ordered the insurer to modify its payment, notice and recoupment practices.
In a key question that could inform whether other providers can sue ERISA group plans for similar complaints in the future, the court concluded that Pennsylvania Chiropractic Association members can be treated as ERISA beneficiaries, since the health plan "expressly designates them to receive payment directly, and those payments constitute ERISA benefits."
"Few courts have addressed whether direct payment to a provider makes the provider a beneficiary" under ERISA, as Kelley wrote.
Brian Hufford, a Zuckerman Spaeder LLP attorney who represented the Pennsylvania chiropractors, developed that legal hypothesis and successfully convinced Kelley to use it as grounds for the providers to sue.
"This decision is not only an important victory for PCA and its members, it is a significant step toward reforming recoupment practices nationwide," Hufford said in a media release.
The IBC case started in 2009, when a number of chiropractic associations sued the Blue Cross and Blue Shield Association and several Blues companies, including IBC, for alleged violations of ERISA and the Racketeer Influenced and Corrupt Organizations Act.
The RICO allegations were dismissed and a number of ERISA claims were settled between the chiropractors and most of the Blues plans – except for an ongoing dispute between the Pennsylvania Chiropractic Association (PCA) and Independence Blue Cross.
At issue were IBC recovery practices for overpayments, stemming from computer glitches in 2006 and 2007, to PCA members who weren't authorized to provide capitated services. IBC started withholding payments for non-capitated services, eventually recouping $1.3 million from 472 PCA members, through a process the PCA maintained was unfair.
In February 2007, not long after the overpayments were discovered, IBC informed all its participating providers that it "may have erroneously reimbursed some providers" for capitated services. In August, the company sent another letter to the 472 PCA members, about a third of the chiropractors in its network, identifying them as providers paid incorrectly for physical therapy services that should have been capitated, and specifying repayment options, with future claims adjustments being the default.
However, the PCA argued that the letter did not include any detail of the services in question and that later, repeated attempts to appeal the decisions went nowhere – and the court largely agreed.
"The evidence presented at trial establishes that IBC does not provide providers facing recoupment information about a review of an adverse benefit determination, including the outcome of the review and the evidence that IBC considered in reaching its decision," wrote Kelley, the presiding judge.
At the time of the trial, IBC was changing its recovery and appeal policies as the result of a settlement in another lawsuit, including giving providers 45 to 60 days' notice on statements of remittance of any pending recoupment and a third level of appeal with external review. Those terms will likely apply only to the providers from that lawsuit, though, which prompted Kelley to intervene.
Kelley has ordered the IBC to change its notice and appeals processes, subject to a review by the court and the chiropractors in late April.
IBC is reviewing an appeal, said Karen Godlewski, IBC's public relations manager.
"We are disappointed in the court's decision and disagree with the court's finding that these chiropractors can bring suit under ERISA," Godlewiski wrote in an email to Healthcare Payer News', Healthcare Finance News' sister publication. "Although disagreements can take place between chiropractors and insurers over reimbursement, we believe there are appropriate avenues and guidelines for resolving such disputes, as outlined in IBC's provider claim payment manuals. If those procedures do not provide the desired solution, a contract suit can be brought under Pennsylvania state law but not ERISA."
Along with being the first case in which a court has viewed in-network providers as beneficiaries under ERISA, this case is also the first to see a healthcare association winning ERISA claims at trial.
Zuckerman Spaeder represented the other chiropractors in the suit that led to a settlement with several Blues companies, and is currently involved in ongoing litigation disputing similar payment issues against UnitedHealthcare, Aetna and other insurers.