More fallout from the recent Fifth Circuit Court of Appeals decision against Cigna: wide ranging implications for out of network provider reimbursement paradigm on a nationwide scale; 3rd party “re-pricing negotiation” agreements and (Non PPO) discounts would be preempted by ERISA if: “[t]he contracts by their terms are subject to the underlying ERISA plans”
In a recent federal appeals court decision, the court ruled against CIGNA and in favor of Out-Of-Network (OON) providers. All Out of network providers should be aware of the practical implications of this appellate court opinion; namely, that it allows out-of-network providers the right to sue, under ERISA, for all eligible payments under the plan terms, regardless of any third party cost containment or negotiation agreements (Non-PPO Discount Agreements) which are usually negotiated by intermediary companies on behalf of Cigna.
According to the appellate court’s ruling, Third Party “re-pricing negotiation” agreements and discounts will be preempted by ERISA if: “[t]he contracts by their terms are subject to the underlying ERISA plans”.
Even after re-pricing discounts have been negotiated, OON providers, with valid and complete assignments, have the right to seek all eligible payments according to the plan terms. The profound impact of this appellate court ruling may fundamentally change the nation’s healthcare landscape and existing managed-care model.
Case Info:
North Cypress Medical Center Operating Company, Limited; North Cypress Medical Center Operating Company GP, LLC, v. CIGNA Healthcare; Connecticut General Life Insurance Company; CIGNA Healthcare of Texas, Incorporated, Case No. 12-20695, in the United States Court of Appeals for the 5th Circuit, filed on March 10, 2015.
Related case info:
Spinedex Physical Therapy USA, et al v. United Healthcare of Arizona, et al, Case No. 12-17604, in the United States Court of Appeals for the Ninth Circuit, filed on Nov. 5, 2014.
In its decision, the Fifth Circuit identifies Third Party “re-pricing negotiation” agreements and (Non-PPO) discounts relation to ERISA plans, as “[t]he contracts by their terms are subject to the underlying ERISA plans”.
The Court sheds some light on the issue:
“We turn next to the grant of summary judgment against North Cypress’s state contract law claims. According to the hospital, Cigna breached the terms of the “Discount Agreements”—contracts between North Cypress and Cigna requiring Cigna to pay a negotiated amount for specific insurance claims. The contracts by their terms are subject to the underlying ERISA plans.”
according to court documents.
OON providers typically receive “re-pricing” and discount requests every day, with little or no options-Until now. The fifth circuit decision has clarified OON provider’s ERISA legal standing to sue; and managed care contracting or re-pricing discount agreements cannot substitute or replace ERISA claim regulations.
The Fifth Circuit first addressed the district court’s ruling that ERISA did not preempt:
“The district court first addressed whether the Discount Agreement claims were preempted by ERISA, which “supersede[s] any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” This provision is “intended to ensure that employee benefit plan regulation would be ‘exclusively a federal concern,’” and as such, the Supreme Court has commented that the preemption provision is “conspicuous for its breadth” and is “deliberately expansive.” Nonetheless, the district court found that the contract law claims were not preempted because North Cypress could not bring the claims under ERISA….The court went on to rule on the merits, finding no breach because Cigna was entitled to reduce payment under the terms of the “Discount Agreement” contracts.”
according to court documents.
The Fifth Circuit vacated the district court’s non ERISA preemption decision and found for North Cypress’ ERISA legal standing to sue, and remanded for ERISA preemption consideration for (Non-PPO) Discount Agreement contracts:
“In holding that North Cypress has standing to bring ERISA claims, we removed the foundation of the district court’s preemption ruling. The parties have not briefed the issue of whether the Discount Agreement claims nonetheless survive un-preempted. Accordingly, we vacate the grant of summary judgment and remand so that the district court may consider the question of preemption in light of our ruling on standing.”
according to court documents.
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