Tex. Gen. Hosp., LP v. United Healthcare Servs., Inc. — June 2016 (Summary)

BREACH OF CONTRACT; INSURANCE COMPANY LITIGATION

Tex. Gen. Hosp., LP v. United Healthcare Servs., Inc.
Civil Action No. 3:15-CV-02096-M (N.D. Tex. June 28, 2016)

The U.S. District Court for the Northern District of Texas granted in part and denied in part an insurance company’s motion to dismiss claims brought by a for-profit hospital for the insurance company’s failure to pay in full the amount billed for out-of-network services provided to its subscribers. The court dismissed the hospital’s claim for breach of fiduciary duty under ERISA, but denied the insurance company’s motions to dismiss ERISA claims for recovery of benefits, claims for denial of a full and fair review, and various state claims.

The hospital provided medical service to the insurance company’s subscribers after receiving coverage verification and pre-certification that the services would be covered by the insurance plan.  As a result, the hospital billed the insurance company nearly $140 million, of which the insurance company reimbursed approximately $30 million.

The hospital argued that it had derivative standing to assert ERISA claims for breach of fiduciary duty because it “stepped into the shoes of beneficiaries” when patients registered at the hospital. The insurance company responded that the assignments of benefits payable for care do not provide standing to sue for anything other than plan benefits. The court agreed with the insurance company, holding that the assignments to the hospital did not include any right to pursue non-benefit ERISA claims, and dismissed this claim.

As for the claim for recovery of benefits under ERISA, the insurance company argued that the hospital had not specifically identified the provisions of the ERISA plans that it had allegedly breached, and that the hospital had not exhausted its administrative remedies. The court disagreed and found that the hospital had given adequate notice as to which provisions were breached. Also, the court held that the hospital’s exhaustion of administrative remedies should be excused because the insurance company allegedly failed to provide meaningful access to administrative remedies and the hospital’s efforts to access such remedies were futile.

The insurance company argued that the claim for denial of a full and fair review violating ERISA should be dismissed because that relevant section of ERISA provides no private right of action. The court held that it did not give rise to a private right of action for compensatory relief, but since the hospital was not seeking monetary relief on that count, it declined to dismiss the claim.