In response to the COVID-19 pandemic, federal lawmakers over the last two-plus years have enacted an array of legislation including the No Surprises Act (NSA), the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief and Economic Security Act (CARES). The plaintiffs’ bar of the Employee Retirement Income Security Act (ERISA, first passed in 1974) is not far behind, focusing on issues arising from the changing health care legal landscape. As a result, pandemic-related litigation trends involving ERISA health plans are beginning to emerge.
Rise in Out-of-Network Care During the Pandemic
As COVID-19 began to spread in early 2020, the nation’s emergency rooms filled up, and elective services were often put on hold or canceled altogether. This shift had a profound impact, given that emergency services often involved patients seeking care from the nearest facility, even if it was out of their network—a distinct change from elective services, for which patients typically choose cheaper in-network providers that have negotiated discounts with their health plans. Because no contractual relationship exists between payors and out-of-network providers, the latter may bill patients for up to the full sticker price of their services.
This often meant that shortly after discharge from an already harrowing trip to the emergency room (or a longer inpatient hospital stay) for a mysterious new ailment that seemed to be taking over the world, patients were sent a “surprise” out-of-network bill for the full cost of their emergency care—frequently thousands, even tens or hundreds of thousands, of dollars.
Congress passed the No Surprises Act in late 2020 to prevent patients from getting unexpected bills and to ensure more predictability for the amounts that out-of-network providers would be paid for emergency claims. Among other provisions, the law established an independent dispute resolution (IDR) arbitration process to determine appropriate reimbursement; however, the NSA did not take effect until January 2022, meaning it has had no impact on most pandemic-related out-of-network emergency claims thus far. Medical associations are already challenging as unacceptably payor-friendly the NSA and its regulations, which use an insurer’s median in-network rate as the presumptive starting point for the IDR process. Uncertainties abound, which makes this a breeding ground for litigation.
Out-of-Network Provider Litigation
Against the backdrop of this increased focus on out-of-network care, providers have ramped up challenges to reimbursements from ERISA health plans for their out-of-network services. Such challenges include:
State common-law claims for additional payment. In the absence of any state or federal laws or regulations dictating specific reimbursements out-of-network providers may receive, providers have turned to common-law theories such as unjust enrichment, quantum meruit or implied contract for additional payment. ERISA plans can raise dismissal arguments based on ERISA preemption, and lower courts’ interpretation of the Supreme Court’s decision in Rutledge v. Pharmaceutical Care Management (2020) will be a key area to monitor.
Although not directly on point, the Supremes Court’s 10-page opinion has been interpreted by some trial courts as narrowing the scope of ERISA preemption, and more cases will surely make their way through the courts to challenge and clarify Rutledge’s scope. On the merits, many states’ common-law doctrines will present points of attack for health plans. For example, implied contract theories will often require plaintiffs to allege specific promises for reimbursement beyond merely that an out-of-network provider’s services will be “covered” by the plan.
Unjust enrichment or quantum meruit claims frequently require proof of a direct benefit conferred by the provider to the health plan itself rather than to the covered patient. As the volume of out-of-network provider/payor disputes increases due to the pandemic, how courts rule on these issues will affect the types of claims brought.
RICO and antitrust claims. Because many payors contract with third-party vendors to process out-of-network claims and contain costs, providers have leveled claims under the Racketeer Influenced and Corrupt Organizations Act (RICO) as well as antitrust claims against payors and vendors. Although individual circumstances will dictate the available defenses, defendants can often attack these civil RICO claims for failure to adequately plead predicate acts with the particularity required by Federal Rule of Civil Procedure 9(b), while complex antitrust claims typically present a variety of angles of attack, including on antitrust standing grounds and weak horizontal or per se price-fixing allegations.
COVID-19-Related Litigation Against ERISA Health Plans
Beyond the burgeoning phenomenon of out-of-network care, pandemic-era changes in health care–related legislation have led to other COVID-19-specific claims against ERISA health plans.
COVID-19 testing cases. Congress passed the FCCRA and CARES Act in March 2020. These require health plans to cover the costs of COVID-19 testing, giving providers an incentive to make testing available amid a public-health emergency. Some providers, however, have imposed very high charges, particularly out of network, for COVID-19 testing.
Under the CARES Act, if a health plan or insurer does not have a negotiated rate with a COVID-19 testing provider—when the provider is out of network with the payor, that is—then the payor may be required to reimburse the provider at the posted cash price for COVID-19 testing on that provider’s website, or at a negotiated rate with the provider that is lower than the cash price. When payors balk at these charges, providers have begun to initiate litigation against health plans to recover for allegedly underpaid testing services. While individual factual scenarios will ultimately influence the parties’ claims and defenses, the few decisions issued so far by courts have held that the FCCRA and CARES Act do not confer a private cause of action upon plaintiffs, presenting a strong dismissal case for ERISA health plans.
Against the backdrop of this increased focus on out-of-network care, providers have ramped up challenges to reimbursements from ERISA health plans for their out-of-network services."
Telehealth coverage cases. Another emerging area of COVID-19 policy-related litigation is over coverage of telehealth services. While these had traditionally been reimbursed at lower amounts than standard in-office visits, the Centers for Medicare and Medicaid Services (CMS) during the pandemic increased the amount it would pay for telehealth services. This change has led some telehealth providers to commence actions again payors. Although this scenario is novel to the pandemic, where providers bring traditional ERISA causes of actions seeking additional payment of benefits, health plans can evaluate the specific allegations and the relevant plan language to tailor their ERISA defenses accordingly.
Looking Ahead
Given the novel theories of liability and increased focus on out-of-network care the pandemic has engendered, it’s important to carefully monitor case filings and court decisions in these areas to be prepared to defend against new types of ERISA claims relating to health plans that may be brought by creative plaintiffs’ counsel. Indeed, given the World Health Organization’s late-July declaration of a public-health emergency related to monkeypox, careful evaluation of the ever-shifting health care landscape will be key to counseling clients in the industry.
Theodore Becker is Co-Chair of McDermott’s ERISA Litigation Team and a Fellow of the American College of Employee Benefits Counsel. He focuses his practice on litigation under ERISA and related federal and state actions, and defense of government investigations and audits relating to employee benefit, health and welfare, and retirement plans brought by the US Department of Labor, the Internal Revenue Service and the US Department of Justice. He is a leading voice and nationally recognized practitioner in this complex practice area.
John J. Song is a litigator who represents clients in general commercial matters, as well as class actions and other complex litigations spanning federal and state courts, arbitration proceedings and appeals across the country. His matters have spanned a variety of industries, with a focus on healthcare, consumer products and private equity.
