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Texas District Court Rules That Providers Must Exhaust Patient’s Administrative Remedies to Preserve ERISA Standing

Written by: Brittany H. Cone, Esq. and Jordan Johnson, Esq.

In Mission Toxicology, LLC v. UnitedHealthcare Insurance Company, the Western District of Texas ruled against several lab companies seeking enforcement of the right to payment under ERISA for lab services provided at certain Texas hospitals. In this case, a third-party biller, contracted with the hospital, submitted the lab service claims and appealed denials using the provider administrative appeal process. Using valid assignments of benefits from the applicable patients, the lab companies asserted ERISA standing and claimed they filed claims and exhausted administrative remedies through the third-party biller. In response, UnitedHealthcare argued that the lab companies failed to exhaust administrative remedies, as required by the insurance plans, because they could not “piggy-back” on the third-party biller’s appeals because the third-party biller was acting on behalf of the hospitals, not the lab companies.

The Court ultimately ruled in favor of UnitedHealthcare and dismissed the lab companies’ ERISA claim. In doing so, the Court declined to address whether a lab provider can “piggy-back” on the claims and appeals submitted by a third-party biller acting on behalf of a hospital. Rather, the Court found that because the appeals were pursued via the provider process, rather than the patient/beneficiary process, the hospitals were pursuing payment for claims on their own behalf. As such, neither the hospital nor the labs exhausted administrative remedies on the patients’ behalf such that ERISA standing can be asserted via the patients’ assignments of benefits.

This decision makes it increasingly difficult for providers to obtain standing under ERISA to enforce the right to payment for services provided or otherwise contest the legality of a health insurer’s claim adjudication process.