In a win for out-of-network health care providers, the U.S. District Court for the Eastern District of Louisiana recently remanded a case to state court, holding that there was no federal question jurisdiction and that the plaintiff’s claims were not preempted by the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1002.
In Crescent City Surgical Centre v. United Healthcare of LA, Inc., 2019 WL 6112706 (E.D. La. Nov. 18, 2019), plaintiff Crescent City, a hospital that provided out-of-network care to patients insured by United Healthcare of Louisiana, Inc. (“United”), sued United in Louisiana state court. Crescent City alleged state law claims for breach of contract, violations of the Louisiana Unfair Trade Practices Act, detrimental reliance, fraud, and negligent misrepresentation.
United removed the matter to federal court, claiming Crescent City’s state law claims were preempted by ERISA (and thus federal question jurisdiction was present) and that removal was proper. In support of its position, United argued that Crescent City was suing in a derivative capacity on the individual claims of the patients. Specifically, United claimed the alleged underpayments were based on its decision, pursuant to its ERISA plan, that certain charges were not covered. Thus, it argued the claims could only be resolved through a determination of coverage, which is an ERISA-based dispute.
Crescent City, on the other hand, claimed it did not seek an adjudication of coverage for the patients, but rather the amounts United promised to pay it in the agreement between Crescent City and United.
The district court agreed with Crescent City, noting that its petition explicitly restricted its claims to state law claims based upon the alleged breach by United of its obligation to pay Crescent City under their agreement. It noted that the independent claims – based upon an alleged contract between Crescent City and United – were based on a legal duty independent of an ERISA plan. The Court thus concluded, under the holding in Aetna Health Inc. v. Davila, that Crescent City’s claims were not completely preempted by ERISA (citing 542 U.S. 200 (2004)).
In addressing the issue of ERISA preemption of third-party health care providers’ claims against out-of-network insurers, the district court noted that other “courts of this district have adopted an approach by which they consider ‘precisely … what rights the provider seeks to enforce and what it alleges has been breached.’” Notably, the Court also highlighted that the analysis of such issues should not focus on what claims Crescent City could have brought, but rather what claims it chose to assert. The Court also noted that, to the extent Crescent City was attempting to enforce derivative claims of its patients, Louisiana state courts are fully capable of limiting Crescent City’s potential recovery to the claims contained in the petition
Litigants (defendants in particular) in the managed care space have historically preferred to try ERISA cases in federal courts, as federal courts typically have more experience with, and are better equipped to handle, ERISA’s complex peculiarities. Contrarily, out-of-network health care providers, such as the plaintiff in Crescent City, frequently try to circumvent federal court and ERISA, which provides for limited discovery. While this ruling will be helpful to plaintiffs who wish to keep suits of this nature in state court, payors should rely on the well-established case law of the circuit courts and the Supreme Court to demonstrate that removal to federal court is proper in ERISA matters. See 29 U.S.C. § 1132(a); Aetna Health Inc. v. Davila, 542 U.S. 200, 207–08 (2004) (“[W]hen the federal statute completely preempts the state-law cause of action, a claim which comes within the scope of that same cause of action, even if pleaded in terms of state law, is in reality based on federal law: ERISA is one of these statutes.”)