Out-of-network (OON) laboratories and pathologists who have been underpaid by insurers now may have some recourse. Two recent court rulings appear to clear the way for OON providers to sue insurers in federal court.
As insurers increasingly narrow their networks, more and more providers find themselves on the outside looking in, fighting to receive appropriate payment for the services they provide. For years now, insurers have tried to limit payment to providers and discourage out-of-network utilization through higher patient deductibles and co-pays. Insurers have even threatened to revoke the in-network status of physicians who refer to OON providers. In one of the most recent examples, United Healthcare has started capping what is paid out of network in certain areas, including Missouri, Florida, Arizona, and Texas.
In November, the Federal Court of Appeals for the Ninth Circuit ruled that under the Employee Retirement Income Security Act (ERISA), out-of-network providers had the right to sue UnitedHealth on behalf of patients. More recently, on March 11, the Fifth Circuit Court of Appeals ruled against Cigna in a decision that is consistent with the ruling against United.
The rulings give OON providers the right to sue for ERISA violations in federal court and allow OON patients the right to both ERISA discounts and PPO discounts.
ERISA is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry, providing protections for individuals in these plans.
In the most recent case, North Cypress Medical Center in Houston sued Cigna for failing to comply with plan terms and underpaying for services. Cigna countersued, saying that North Cypress, as an out-of-network provider, did not charge patients the full coinsurance amount, but billed Cigna as if it had.
Essentially, North Cypress would collect a substantially reduced amount from the patient in exchange for prompt payment. Cigna was concerned when it learned of North Cypress’ prompt pay discount, believing the program would undermine its own incentives designed to encourage providers to join Cigna’s network and to encourage patients to seek care within that network. Cigna subsequently began reimbursing North Cypress at drastically reduced rates based on the lower rates the patients were paying.
The Fifth Circuit ruled that the hospital has a right to sue Cigna under ERISA and outlined legal steps under the law to determine if an ERISA plan truly requires full deductible collection and balance billing.
In what appears to be good news for OON providers, the ruling seems to signal a shift toward providers in disputes over out-of-network reimbursement.
Still, providers who decide to waive all or part of the cost-sharing amount owed by OON patients may want to consult legal counsel before implementing such a policy.