Saturday, May 22, 2010

Blue Cross Thinks Chiropractors Are a Pain in the [...]!!!

The United States District Court for the Northern District of Illinois ruled on May 17, 2010 that a group of chiropractors can go forward with their claim that Blue Cross Blue Shield Association entities violated the Employee Retirement Income Security Act ("ERISA") by devising an alleged scheme in which the entities paid the chiropractors and then turned around and asked the chiropractors for reimbursement. See Pennsylvania Chiropractic Ass'n v. Blue Cross Blue Shield Ass'n, N.D. Ill., No. 09 C 5619, 5/17/10). The lawsuit was filed against dozens of Blue Cross entities by numerous chiropractors and associations that represent chiropractors. The plaintiffs alleged that the Blue Cross entities violated ERISA through a scheme in which they would initially reimburse the chiropractors for services provided to individuals insured by Blue Cross plans, and then sometime afterward the Blue Cross entities would make a “false or fraudulent” determination that the payments were made in error. Blue Cross would then allegedly demand repayment from the chiropractors and if the chiropractors refused, Blue Cross would force recoupment by withholding payment on other unrelated claims for services that the chiropractors provided to other Blue Cross insureds, the plaintiffs alleged. The plaintiffs asserted that the Blue Cross entities' repayment requests and forced recoupments violated ERISA.

In denying the Blue Cross entities' motion to dismiss ERISA claims (the plaintiffs also brought RICO claims, which were dismissed), the District Court rejected several challenges Blue Cross made to the chiropractors' ability to support an ERISA claim. Briefly summarizing, the District Court rejected Blue Cross's contention that the Blue Cross entities were plan administrators and thus were not proper defendants under ERISA. The District Court rejected the Blue Cross entities' contention that they were not proper defendants because the U.S. Court of Appeals for the Seventh Circuit has held that plans, and not plan administrators, are proper defendants. The District Court said that the Seventh Circuit has not been so strict as to rule that plan administrators are never the proper defendant in an ERISA action. Instead, the Seventh Circuit has said plan administrators can be sued if they are “closely intertwined” with the plan. The District Court found that in this case, the chiropractors had sufficiently alleged that Blue Cross was “closely intertwined” with the plans because it had the sole authority to make the decisions about repayment and recoupment.

The District Court also rejected the Blue Cross entities' assertion that the ERISA claims should be dismissed because the chiropractors' complaint did not identify even a single ERISA plan, a single plan participant, or a single plan provision that was violated by the Blue Cross companies. According to the District Court, this argument would have carried more weight had it not been for the fact that the chiropractors' complaint alleged that they did not identify an ERISA plan, participant, or plan provision because the Blue Cross entities had refused to tell them which patients and plans were affected by the repayment demands. The chiropractors claimed the Blue Cross entities did this “in an effort to frustrate any attempt to appeal the determination.” Finally, as relevant here, the District Court was not persuaded by the Blue Cross companies' contention that the court lacked subject matter jurisdiction over the chiropractors' ERISA claims to the extent that the chiropractors had obtained assignments of rights from their patients that were not permitted under Blue Cross' ERISA plans. To support this argument, the Blue Cross companies cited to language in their ERISA plans and contracts that prohibit plan participants from assigning their benefits to medical providers. The District Court said that while this bar on assignment of benefits might later defeat some of the chiropractors' claims, it would not divest the court of jurisdiction of the ERISA claims.