Managed Care Outlook 2025

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The recent Ninth Circuit decision, Bristol SL Holdings, Inc. v. Cigna Health & Life Insurance Co., 103 F.4th 597 (9th Cir. 2024), provides a strong ERISA preemption defense for managed care organizations (MCOs) facing off against out-of-network (OON) providers who seek additional reimbursement beyond plan terms. This decision emphasizes that ERISA preemption is broad enough to enforce plan payment rates and methodologies, thereby limiting OON providers’ ability to vary payment terms based on verification or authorization calls to MCOs.

Background

MCOs routinely face state-law claims by OON providers seeking to recover additional reimbursement based on statements made during preservice verification of benefit (VOB) and authorization calls. Historically, courts have ruled that these types of claims are not preempted by ERISA as they involve “independent” obligations unrelated to an ERISA plan. However, the Ninth Circuit’s Bristol decision on May 31, 2024 changed this landscape.

The Ninth Circuit’s opinion limited, if not foreclosed, OON providers’ ability to seek reimbursement beyond plan terms based on VOB and authorization communications. In the published opinion, the Ninth Circuit held that ERISA preempts a medical provider’s state-law claims based on the failure to pay the amount that the insurer said would be paid during VOB and authorization calls.

The holding in Bristol

Bristol, the successor-in-interest of a defunct OON drug rehabilitation and mental health treatment center, brought derivative state-law breach of contract and promissory estoppel claims against Cigna. Bristol aimed to recover reimbursements Cigna withheld after discovering the provider had been engaging in fee-forgiving, i.e., waiving member copayments and deductibles – a practice prohibited under the terms of the ERISA plans it administered. Bristol argued that a contract was created when Cigna indicated that it would reimburse the provider at a percentage of the usual and customary (UCR) rate during VOB and authorization calls. Bristol claimed Cigna breached the alleged contract by refusing to pay because of the provider’s alleged fee-forgiving. After a lengthy procedural history, the district court granted summary judgment to Cigna, holding that ERISA preempted Bristol’s state-law breach-of-contract claims.

Bristol appealed, arguing that the VOB and authorization calls to Cigna established independent contractual obligations between Cigna and the provider, unrelated to the ERISA plans at issue. The Ninth Circuit rejected this argument and affirmed the lower court’s opinion. It held that Bristol’s state-law claims were preempted, as they had a “reference to” and an “impermissible connection” with the ERISA plans Cigna administered.

The appeals court found that the state-law claims had a “reference to” an ERISA plan because Bristol’s calls to Cigna were meant to determine whether reimbursement is available under the ERISA plans that Cigna administered. It noted that by attempting to secure payment for plan-covered services through state contract law, Bristol sought a remedy it could not obtain under ERISA.

Key takeaways
  • Federal appeals court declines to enforce state law holding plan to promises allegedly made in benefit calls, finding instead that ERISA governs the claim
  • The Bristol decision bars providers from using state-law claims to challenge or circumvent the reimbursement rules and practices of ERISA plans and MCOs
  • The decision has been followed by several district courts in the Ninth Circuit that have dismissed various state-law claims by out-of-network and in-network providers on the basis of ERISA preemption
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