In a recent
decision, a federal district court in California remanded a
case back to state court after finding that a hospital's state
law claims against an insurance company were not controlled by the
federal Employee Retirement Income Security Act (ERISA) or
otherwise by federal Medicare law.
In this case, the hospital contracted with the insurance company
to provide care for authorized enrollees at a discounted services
rate. The hospital brought suit against the insurance company,
alleging that the insurance company did not pay amounts due to the
hospital in situations in which Medicare was the primary payer for
services and the insurance company was the secondary payer. The
insurance company removed the case to federal court on grounds that
the claims involved matters under ERISA and questions of federal
Medicare law. The federal court held that ERISA does not apply and
Medicare does not affect the hospital's claims against the
insurance company. As such, the contract claims should be decided
in a state court.
The following are the three key takeaways from the California
district court's decision:
ERISA May Not Apply to Contract Disputes Between
Hospitals and Insurers. In this case, the court found that
the hospital's claims against the insurance company arose from
the terms of the agreement between the hospital and the insurance
company. Because the insurance company's obligation to the
hospital is based on a contract and not based on ERISA, the
obligation exists whether or not an ERISA plan does.
Even if Some of the Patients are Covered by ERISA, the
Contract Claims May Fall Outside the Terms of ERISA Plans.
The insurance company argued that because the hospital is
attempting to recover for the treatment of patients and some of
those patients are covered by ERISA, the federal law controls the
hospital's claims. However, the court rejected the insurance
company's argument and held that, because the hospital's
contract claims could not be brought by patient-assignors, these
were not claims for benefits under terms of ERISA plans.
Even if Medicare is the Primary Payer, Contract
Disputes between Hospitals and Secondary Payer Insurers May Not
Fall Under Medicare Provisions. The insurance company
argued that Medicare law prevents the hospital from prevailing on
its state law claims and, therefore, a federal court must resolve
the Medicare issue. Even though Medicare is mentioned in the
hospital's complaint, the court found that the hospital's
contract claims do not require resolution of any Medicare issues.
The court held that "no provision of Medicare constitutes an
essential element of the state law claims" and, therefore, a
state court, rather than a federal court, should have jurisdiction
over the hospital's state law claims.
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