ERISA Does Not Preempt Louisiana State Statute Requiring Insurers to Honor Healthcare Assignments
Last week the U.S. Court of Appeals for the Fifth Circuit issued a significant case involving a Louisiana statute requiring health insurers to honor assignments of health benefits from patients to their health care providers. First a little background on the dynamics at work with healthcare assignments.
Healthcare providers require patients to transfer to them, assign, the patient’s right to insurance benefits so the provider can receive payment from the insurer directly rather than have the insurer send the payment to the patient and hope the patient then pays the provider. These assignment clauses are invariably part of the paperwork patients sign before they ever get medical care.
However, payers like to have the ability to prohibit these assignments. Doing so puts pressure on the provider to negotiate a preferred provider contract directly with the payer. If it can ignore the assignment, a payer has more leverage over the provider to obtain discounts off the billed charges for medical services.
The State of Louisiana, like many states, has in place a statute requiring payers to honor assignments from patients and prohibiting payer’s attempts to put language disallowing them in their insurance policies. The Blue Cross affiliate for Louisiana brought suit alleging that ERISA preempted the Louisiana statute. The federal district court rejected this challenge and ruled that the state statute was not preempted by ERISA.
The Fifth Circuit affirmed the trial court’s ruling in Louisiana Health Service & Indemnity v. Rapides Healthcare System, 2006 U.S. App. LEXIS 21032. The court’s preemption analysis is thorough. Blue Cross argued that the state statute conflicted with the remedies Congress intended be in place for ERISA participants and beneficiaries, thus, requiring that the court strike it down. However, the Fifth Circuit rejected this argument because the patient’s assignment of rights under the ERISA plan to his or her healthcare provider doesn’t create any new rights or remedies. In addition, Blue Cross argued that ERISA expressly preempts the state statute because it “relates to” an ERISA plan. However, the lead opinion by Judge Higginbotham, in which Judge DeMoss joined, held that the state statute regulates an area traditionally subject to state interests and concerns, did not single out ERISA plans for disparate treatment and did not have a connection with those plans that was close enough to even get into the ERISA preemption arena.
In a concurring opinion, Judge Owen wrote that even if the statute did “relate to” an ERISA plans, it was left standing under ERISA’s insurance savings clause which directs that state laws regulating insurance are not preempted.
Bottom line: fully insured ERISA plans in the state of Louisiana may not prevent healthcare providers from asserting claims assigned to them by their patients.