Our blog series on best practices in administering benefit claims has thus far stressed the importance of knowing and reading the plan document and summary plan description.  This week, we take a look at a plan term that has been the subject of frequent dispute in health and welfare benefits claim litigation—interpretation of plan provisions prohibiting a participant’s right to assign benefits to healthcare providers.

Out-of-network medical providers commonly require patients to sign documents that purport to assign their rights to plan benefits to the provider.  If this assignment works (if it’s valid), it would allow the medical provider to “step into the shoes” of the patient and challenge the amount a plan pays to the provider.  This would give the provider direct rights against the plan, including through a plan administrative claim and, if necessary, litigation.

Under ERISA, group health plans are allowed to prohibit benefit assignments and, for a variety of reasons, many plans do so.  With a valid anti-assignment provision, plans have successfully defeated claims brought by out-of-network providers seeking additional plan reimbursements.

Anti-assignment provisions must be drafted carefully and clearly so they will accurately reflect the plan sponsor’s intentions.  Some of the issues to consider include:  Will the plan prohibit all benefit assignments? Will it prohibit only the assignment of payment of benefits?  Will it only prohibit the provider from commencing action in court?  Will it require that providers and participants get the plan administrator’s consent before the assignment is valid?  Plan sponsors generally have wide latitude to limit, or prohibit altogether, the assignment of benefits.

In considering anti-assignment provisions, there are two other points to remember:

First, ERISA allows participants to designate authorized representatives to act on their behalf through the claims process.  This could mean that a provider, an attorney, or any other individual could be appointed to act on behalf of the participant.  Unlike a properly designated assignee, however, an authorized representative does not step into the shoes of the participant and does not acquire rights independent of the participant.  A plan may provide for reasonable procedures that participants must follow in designating authorized representatives, which may facilitate benefit claim administration.

Second, many health plans will have “direct payment” provisions whereby the plan will pay out-of-network benefits directly to a provider as a convenience to the participant.  A properly drafted anti-assignment clause will distinguish between a permissible direct payment arrangement from a prohibited assignment of benefits.  This is an important and difficult provision to draft, and counsel should be consulted on this point.

Next week, we’ll discuss the importance of knowing and understanding the applicable law and regulations on benefit claim and appeal procedures.

Photo of Russell Hirschhorn Russell Hirschhorn

Russell L. Hirschhorn, co-head of the ERISA Litigation Group, represents plan fiduciaries, trustees, sponsors and service providers on the full range of ERISA and state law benefit and fiduciary issues. From single plaintiff litigation and arbitration to complex class action litigation, he provides…

Russell L. Hirschhorn, co-head of the ERISA Litigation Group, represents plan fiduciaries, trustees, sponsors and service providers on the full range of ERISA and state law benefit and fiduciary issues. From single plaintiff litigation and arbitration to complex class action litigation, he provides practical guidance, develops unique litigation defense strategies and, when appropriate, mediates successful resolutions.

Russell represents clients across a wide array of publicly-held, multi-national companies and privately owned companies across a multitude of industries including, banking, finance and investments, pharmaceuticals, retail products and construction, to name just a few. In addition, he also counsels benefit plan clients on a host of compliance and federal and state government agency enforcement matters, including complex and lengthy investigations and audits by the U.S. Departments of Justice and Labor.

Russell is management co-chair of the American Bar Association Employee Benefits Committee as well as management co-chair of the Trial Institutes Committee of the American Bar Association’s Labor and Employment Law. He also writes on cutting-edge ERISA litigation issues, serving as a contributing author and a past chapter editor to Employee Benefits Law (BNA Third Edition).

Deeply dedicated to pro bono work, Russell was a principal drafter of several amicus briefs for the Innocence Project, a legal non-profit committed to exonerating wrongly convicted people. Russell has been recognized on several occasions for his commitment to pro bono work including by President George W. Bush in receiving the U.S. President’s Volunteer Service Award.

Photo of Malerie Bulot Malerie Bulot

Malerie L. Bulot is an associate in the Labor & Employment Law Department and a member of the Employee Benefits & Executive Compensation Group. She counsels clients on a myriad of issues related to employee retirement and health plans.  Malerie assists single employer…

Malerie L. Bulot is an associate in the Labor & Employment Law Department and a member of the Employee Benefits & Executive Compensation Group. She counsels clients on a myriad of issues related to employee retirement and health plans.  Malerie assists single employer and multiemployer plans with legal compliance, plan administration, and design and qualification.

Malerie received her J.D. and diploma in comparative law, magna cum laude, from Louisiana State University Paul M. Hebert Law Center, where she was a senior editor of the Louisiana Law Review and Order of the Coif. While at LSU, she served as a judicial extern to United States District Judge Shelly D. Dick, Middle District of Louisiana.