Third Circuit Deals a Big Blow to Mandatory Arbitration of ERISA Claims Brought by Providers
A recent decision of the US Court of Appeals for the Third Circuit deals a one-two punch in favor of providers seeking to assert ERISA claims based on assignments of benefits from their patients. The decision,CardioNet, Inc. v. Cigna Health Corp., 13-2496, 2014 WL 1778149 (3d Cir. May 6, 2014), is sure to become an important precedent for provider ERISA suits within the Third Circuit and beyond.
The CardioNet decision breaks new ground in two major respects. First, it represents the first time the Third Circuit has held "that health care providers may obtain standing to sue by assignment from a plan participant." Id. at *9 n.10. While The Third Circuit had previously, in Pascack Valley Hosp., Inc. v. Local 464 A UFCW Welfare Reimbursement Plan, 388 F.3d 393, 400 n.7 (3d Cir. 2004), recognized that a majority of its sister circuits endorsed the concept of provider standing through assignment, the Court had declined, until now, to adopt that position itself. Numerous district court cases have presumed the Third Circuit would rule this way if the question were ever squarely before it. Now we know that presumption was accurate.
Perhaps more importantly, however, CardioNet also creates significant new law regarding the enforceability of arbitration clauses contained in participating provider agreements. The defendant, Cigna, sought to apply the arbitration clause to CardioNet's ERISA claim for benefits. The Third Circuit, however, construed the arbitration clause narrowly and held that it applied only to operation of the provider agreement, not a claim for coverage under the terms of the applicable health plan. 2014 WL 1778149, at *9. Moreover, the Third Circuit went on to state that even if the dispute did fall within the scope of the arbitration clause, the fact that CardioNet was derivatively bringing its claims on behalf of its patients meant that the arbitration clause did not apply. Id. at *10.
Prior to this decision, defendants had been very successful in dismissing ERISA claims brought by in-network providers where the provider agreement included an arbitration clause. It appears that tactic will no longer be viable in the Third Circuit. And, when paired with new US Department of Labor regulations that limit mandatory arbitration of adverse benefit determinations, 29 C.F.R. § 2560.503-1(c), the CardioNet decision may mean that mandatory arbitration of provider ERISA claims will be a thing of the past.