Employees covered by employer sponsored health insurance plans often encounter the situation where a doctor or medical staff recommends a procedure, and advises the employee the procedure is covered by insurance, only for you–the employee–to get a denial of claim for benefits letter from the insurer afterwards. Countless of these individuals feel that the denial is the hospital’s problem; after all, the hospital staff told you the procedure was covered. And if the hospital wants to be paid, it can fight the insurer. Many individuals wait to contact a lawyer until they are faced with lawsuits by the hospital for unpaid bills. If you wait until then, often there is little any lawyer can do to help.
Several recent cases display just how ERISA governs this three-way battle between the participant, the insurer, and the medical service provider. In IHC Health Services, Inc. v. Fiesta Palms, LLC, No. 2:10-cv-1156 (D. Utah May 24, 2011), the medical service provider tried suing the employer sponsoring a health insurance plan for unpaid bills in state court. The employer transferred the case to federal court arguing the dispute was preempted by ERISA, because it relates to an employee benefit plan. Not surprisingly, the medical service provider will be unable to recover anything in federal court under ERISA because ERISA provides no remedy for medical service providers. Instead, the enforcement statute of ERISA, § 502, details exactly who can bring a lawsuit, and a medical service provider did not make the list.
Also, in Lightfoot v. Principal Life Insurance Co., No. CIV-11-130-M (W.D. Okla. May 24, 2011), a father paid the medical expenses of his son after the employer-sponsored health insurer refused to pay for a procedure. Afterwards, the father sued the insurer under ERISA claiming benefits due, apparently under a theory of subrogation. The court there held only a participant or beneficiary can bring a lawsuit under ERISA § 502(a)(1)(B) for benefits due, and that what the father sought was not within the scope of “other appropriate equitable relief” authorized in a lawsuit brought under § 502(a)(3).
To sum up, if you accept medical services and your plan will not pay for the treatment, it is not the hospital’s problem. IT’S YOUR PROBLEM! And you need to do something about it right away. Hospitals will often wait years to sue you for a breach of contract for nonpayment because they want to ensure the statute of limitations on any medical malpractice claim has already run (breach of contract generally has a much longer statute of limitations). And by the time the hospital sues you, you have waited too long to appeal the insurer’s claim denial. As soon as you get a notice of claim denial from the insurer, call an ERISA lawyer. Otherwise, you could be stuck with the bill for years to come.