Out-of-network (OON) laboratories and pathologists who have been underpaid by insurers now may
have some recourse. Two recent court rulings appear to clear the way for OON providers to sue insurers
in federal court.
As insurers increasingly narrow their networks, more and more providers find themselves on the outside
looking in, fighting to receive appropriate payment for the services they provide. For years now, insurers
have tried to limit payment to providers and discourage out-of-network utilization through higher
patient deductibles and co-pays. Insurers have even threatened to revoke the in-network status of
physicians who refer to OON providers. In one of the most recent examples, United Healthcare has
started capping what is paid out of network in certain areas, including Missouri, Florida, Arizona, and
Texas.
In November, the Federal Court of Appeals for the Ninth Circuit ruled that under the Employee
Retirement Income Security Act (ERISA), out-of-network providers had the right to sue UnitedHealth on
behalf of patients. More recently, on March 11, the Fifth Circuit Court of Appeals ruled against Cigna in a
decision that is consistent with the ruling against United.
The rulings give OON providers the right to sue for ERISA violations in federal court and allow OON
patients the right to both ERISA discounts and PPO discounts.
ERISA is a federal law that sets minimum standards for most voluntarily established pension and health
plans in private industry, providing protections for individuals in these plans.
In the most recent case, North Cypress Medical Center in Houston sued Cigna for failing to comply with
plan terms and underpaying for services. Cigna countersued, saying that North Cypress, as an out-of-network provider, did not charge patients the full coinsurance amount, but billed Cigna as if it had.
Essentially, North Cypress would collect a substantially reduced amount from the patient in exchange
for prompt payment. Cigna was concerned when it learned of North Cypress' prompt pay discount,
believing the program would undermine its own incentives designed to encourage providers to join
Cigna's network and to encourage patients to seek care within that network. Cigna subsequently began
reimbursing North Cypress at drastically reduced rates based on the lower rates the patients were
paying.
The Fifth Circuit ruled that the hospital has a right to sue Cigna under ERISA and outlined legal steps
under the law to determine if an ERISA plan truly requires full deductible collection and balance billing.
In what appears to be good news for OON providers, the ruling seems to signal a shift toward providers
in disputes over out-of-network reimbursement.
Still, providers who decide to waive all or part of the cost-sharing amount owed by OON patients may
want to consult legal counsel before implementing such a policy.
Mick Raich owns Vachette Pathology and works with pathologists, laboratories and hospitals nationwide in the area of strategic management and revenue cycle management. Mick can be reached at 866-407-0763 or 517-403-0763 or via e-mail at mraich@vachettepathology.com or visit www.vachettepathology.com.
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