Third Circuit Vacates Dismissal of Hospitals’ ERISA Underpayment Claims Under MRC-1 and MRC-2 Plans, Affirms Dismissal of R&C and Fiduciary-Duty Claims

In Hudson Hospital OPCO, LLC v. Cigna Health and Life Insurance Company, No. 24-2830, 2026 WL 2511311 (3d Cir. Aug. 26, 2026), three New Jersey hospitals—Christ Hospital, Bayonne Medical Center, and Hoboken University Medical Center (the “Hospitals”)—brought ERISA claims against Cigna Health and Life Insurance Company and Connecticut General Life Insurance Company (collectively, “Cigna”), alleging that Cigna underpaid them for out-of-network healthcare services provided to Cigna subscribers from March 2016 through May 2021. The Hospitals asserted claims for failure to pay benefits due under the plans and for breach of ERISA fiduciary duties, along with several state-law claims. The District Court dismissed the second amended complaint with prejudice, and the Hospitals appealed. The Third Circuit affirmed in part, vacated in part, and remanded.

The plans specified out-of-network reimbursement under one of three methodologies: MRC-1, MRC-2, or R&C. The Hospitals alleged that under both the MRC-1 and MRC-2 methods, reimbursement was required at the lesser of the provider’s normal charges or the 80th to 90th percentile of the FAIR Health database, and that their normal charges, reflected in their publicly available Chargemasters and billed to Cigna, were consistent with other hospitals’ charges in the area and therefore did not exceed the 80th percentile. For thousands of claims, the Hospitals alleged, Cigna reimbursed them below the required amounts.

Addressing standing first, the court considered Cigna’s argument that anti-assignment provisions in at least 36 plans barred the Hospitals’ suit. As to 29 plans containing anti-assignment provisions (the “Carve-Out Plans”), the court agreed with the Hospitals that a separate provision permitting subscribers to authorize Cigna to pay benefits to a provider functioned as a specific carve-out to the general anti-assignment rule. Applying the principle that specific provisions control over general ones, and that assignment of the right to payment carries the right to sue for non-payment, the court held that the Carve-Out Plans’ anti-assignment provisions did not bar the Hospitals’ suit. As to seven other plans containing anti-assignment provisions without the payment carve-out, the court directed the District Court to consider standing in the first instance on remand.

On the merits of the benefits claim, the court held that the District Court erred by rejecting the Hospitals’ allegation that their Chargemaster rates constituted their normal charges. On a motion to dismiss, the court was obligated to accept the Hospitals’ allegations as true, and the allegation that the Hospitals billed Cigna their normal charges—corroborated by their publicly available Chargemasters—sufficed to establish their normal charges at the pleading stage. The same applied to the allegations that the MRC-1 and MRC-2 plans used the FAIR Health database and that Cigna never developed the Medicare-based schedule contemplated by the first MRC-2 approach. The Hospitals therefore stated a claim for underpayment under the MRC-1 and MRC-2 plans.

The court reached a different conclusion on the R&C plans. The Hospitals conceded that the reimbursement language varied across R&C plans, and unlike their MRC allegations, they did not allege what percentile of the FAIR Health database Cigna used to set R&C rates. Because some R&C plans afforded Cigna substantial discretion in setting rates, the court could not reasonably infer that the Hospitals were routinely underpaid on R&C claims, and it affirmed the dismissal of the benefits claim as to those plans.

Finally, the court affirmed the dismissal of the fiduciary-duty claim on standing grounds. The Hospitals challenged Cigna’s “cost-containment program,” under which Cigna paid itself and its business partners fees based on a percentage of the “savings” achieved by underpaying claims, and sought disgorgement of those fees. The court held that the Hospitals failed to establish a concrete injury because the complaint did not show that the Hospitals had any right to the cost-containment fees, which Cigna paid itself pursuant to agreements with the plans, or a right to be paid more than the amounts they had negotiated with Cigna. Because it resolved the fiduciary-duty claim for lack of standing, the court did not reach Cigna’s argument that it was not a plan fiduciary.

The Third Circuit affirmed the dismissal of the ERISA fiduciary-duty claim and of the benefits claim as to the R&C plans, vacated the dismissal of the benefits claim as to the MRC-1 and MRC-2 plans, and remanded for further proceedings.