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Ninth Circuit Holds State Law Claims Against Cigna Are Preempted by ERISA Where Cigna Denied Reimbursement of Health Claims Due to Provider’s Fee-Forgiving Practice

In Bristol SL Holdings, Inc. v. Cigna Health & Life Ins. Co., No. 23-55019, __F.4th__, 2024 WL 2789835 (9th Cir. May 31, 2024) (Before: Thomas, Bress, and Johnstone, Circuit Judges), Plaintiff-Appellant Bristol SL Holdings, Inc., the successor-in-interest of Sure Haven, Inc. (a defunct for-profit drug rehabilitation and mental health treatment center), brought state law claims against Cigna Health and Life Insurance Company for non-payment of claims that Cigna authorized in pre-authorization calls to verify out-of-network coverage. The district court granted summary judgment to Cigna and Bristol appealed. The Ninth Circuit held that ERISA preempts the state law claims because Bristol’s claims had “reference to” an ERISA plan, and additionally, they have a “connection with” an ERISA plan. For these reasons, the court affirmed the dismissal of the state law claims.

The court described the question in this case as “whether ERISA preempts state law contract claims based on an out-of-network provider’s calls to a plan administrator seeking to verify plan coverage and obtain preauthorization for medical services, where there is no dispute that the patients and their treatment were covered under the plans but where payment was later rejected based on fee-forgiving, which the plans prohibited.”

The court explained that ERISA preempts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” governed by ERISA. 29 U.S.C. § 1144(a). There are two categories of state claw claims that “relate to” an ERISA plan. Those are claims that have a “reference to” an ERISA plan and claims that have an impermissible “connection with” an ERISA plan.

The court began by analyzing Bristol’s claims under the “reference to” category of ERISA express preemption. The court found that the circumstances supporting the state law claims—Sure Haven’s calls to Cigna to verify out-of-network coverage— concerned whether reimbursement was available under the ERISA plans. When Cigna refused to reimburse Sure Haven, it did so based on the fee-forgiving term in the ERISA plans that no longer permitted payment. The court found that Bristol was seeking to obtain through state law what it could not obtain through ERISA. The court found further confirmation of ERISA preemption by the fact that Bristol brought a parallel claim for ERISA benefits as the plan participants’ assignee. Because the terms of Cigna’s ERISA plans are central to the state law claims, the court held that the state law contract claims are preempted due to their impermissible reference to ERISA plans.

The court found the same result applied when analyzing Bristol’s claims under the “connection with” test, which is that a claim has an impermissible connection with an ERISA plan if it governs a central matter of plan administration or interferes with nationally uniform plan administration, or if it bears on an ERISA-regulated relationship. The court found that Bristol’s claims would unduly intrude on a central matter of plan administration, “namely, Cigna’s overarching system of verifying out-of-network coverage and authorizing treatment by phone, while later conditioning reimbursement on whether a medical provider has secured the proper financial contributions from plan participants.” The court further explained that Bristol’s theory of state contract law liability is at odds with the way ERISA plans operate since reimbursement under a plan is ultimately contingent on information beyond the initial verification and preauthorization communications. Permitting the claims would also interfere with nationally uniform plan administration because providers could use state contract law to bind insurers to telephone representations rather than ERISA plan terms. For these reasons, Bristol’s claims are also preempted under the “connection with” test.

Lastly, the court distinguished The Meadows v. Employers Health Insurance, 47 F.3d 1006 (9th Cir. 1995) from the facts in this case. The Meadows involved a claim for reimbursement of treatment where the plan administrator verified there was coverage only to later claim there was no coverage based on the plaintiff’s termination of employment. In that case there was no ERISA preemption because neither the treatment center nor the plaintiffs had any existing ties to the ERISA plan. ERISA preemption does not apply when state laws are triggered by the complete lack of any ERISA plan. Here, the plan participants were covered by ERISA plans. The court also distinguished other circuit decisions which permitted state law claims to proceed when an administrator approved coverage only to later say that the ERISA plan did not provide the sought-after coverage. In the present case, there is no evidence that the patients were ineligible for coverage at the time Sure Haven placed the verification calls or that Cigna misrepresented coverage. Cigna denied reimbursement because it determined that Sure Haven engaged in fee-forgiving, in violation of plan terms.


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*Please note that this blog is a summary of a reported legal decision and does not constitute legal advice. This blog has not been updated to note any subsequent change in status, including whether a decision is reconsidered or vacated. The case above was handled by other law firms, but if you have questions about how the developing law impacts your ERISA benefit claim, the attorneys at Roberts Disability Law, P.C. may be able to advise you so please contact us.

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