The U.S. Court of Appeals for the Ninth Circuit recently issued an opinion with critical implications for the healthcare industry. This court decision clarifies the expansive reach of the Employee Retirement Income Security Act's (ERISA) preemption of state law causes of action relating to preservice coverage communications between healthcare providers and health plan administrators. The case is Bristol SL Holdings Inc. v. Cigna Health and Life Insurance Co. et al., case number 23-55019, U.S. Court of Appeals for the Ninth Circuit.
Bristol sued Cigna as the successor-in-interest to Sure Haven, Inc., a for-profit substance abuse center that had gone bankrupt. Sure Haven had been out-of-network with Cigna, and Bristol claimed that Cigna failed to pay claims from 106 Sure Haven patients with Cigna health plan coverage. Before providing any services to these patients, Sure Haven contacted Cigna to verify the patients' benefits and obtain preauthorization for the requested services. Bristol claimed benefits under ERISA but asserted state law claims in the alternative.
The issue on appeal in Bristol was whether the company's state law claims, including promissory estoppel, breach of oral contract, and breach of implied contract based on agreements to pay normal and customary rates during pre-service communications between Sure Haven and Cigna were preempted by ERISA.
The Ninth Circuit ruled that ERISA preempts state law claims arising from preservice coverage communications between healthcare providers and health plan administrators, including those for verifying benefits and preauthorizing services. These communications were preempted under the "reference to" and "connection with" prongs of ERISA preemption analysis. The communications referenced the ERISA plans because determining reimbursement would require an inquiry into the plan terms. Furthermore, the communications connected with ERISA plans as preauthorization are central to the administration of those plans.
Finally, the Ninth Circuit distinguished its 1995 ruling in The Meadows v. Employers Health Insurance. In that case, the patient was not covered by an ERISA plan at the time of service.
Ultimately, the Ninth Circuit's ruling clarifies that ERISA preempts state law claims stemming from preservice communications between providers and plan administrators. These claims are preempted whether the provider attempts to bypass ERISA claims and brings them independently or as an alternative to an ERISA claim.
The Ninth Circuit decision also tracks the Second Circuit's 2023 decision in Park Avenue Podiatric v. Cigna Health and Life Insurance Co., where that Court found that ERISA preempted state law claims concerning preservice communications between plans and out-of-network providers.
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