Over the past couple years, more and more of my clients with self-funded plans have received letters from out-of-network providers appealing denied claims. The letters are usually 20 to 30 pages long, not very specific, and make various accusations against the plan and its fiduciaries.
Most of the letters follow a standard approach. They start by alleging breaches of fiduciary duty, they request all sorts of plan documents, and they request additional appeals to which the participant may or may not be entitled. The biggest problem is that these letters are never very specific in exactly what they want. Instead, they make vague accusations, and hope some or all will stick.
These letters often cite irrelevant cases and make accusations that have no relevancy to the appeal at issue. However, buried amongst the many nonsensical accusations are usually a few points that may require the plan administrator to respond to comply with ERISA’s claim procedures, and may also require the plan administrator to provide requested documents. If a plan fiduciary is required to provide documents and does not, it could subject the plan fiduciaries to significant penalties under ERISA.
One of the most effective ways to deal with such letters is to make sure that your self-funded health plan has a strong anti-assignment provision. Although ERISA does not prohibit a plan participant from assigning benefits to a provider, case law holds that anti-assignment provisions in a plan that prohibit a participant from assigning their right to payment of benefits are enforceable. Including an anti-assignment provision in a plan may prevent a provider who has received an assignment from stepping into the shoes of the participant and being able to sue the plan under ERISA. It also means that a plan may not have to respond to the provider’s nuisance letter, unless the provider has been appointed as the participant’s authorized representative under Section 503 of ERISA.
Participants May Revoke Authorized Representative Appointments
Under Section 503 of ERISA, a participant may appoint an authorized representative to assist him or her with claims and appeals. However, a participant may also revoke a prior appointment. Some participants may sign an authorized representative form before receiving care from an out-of-network provider, not even realizing what they have signed. Some participants, upon discovering their out-of-network provider is harassing their employer and its self-funded plan, may decide to revoke the appointment because they are not on board with the allegations being made by the provider in the participant’s name. I have also heard of cases where out-of-network providers have forged authorized representative appointments, so before relying on such a form, plan administrators should confirm that a participant’s signature is valid.
Some of the providers that are sending these nuisance letters are bad actors. Many of them engage in fee forgiveness. However, there is always the possibility that a letter could be a valid complaint. Even if a plan has a valid anti-assignment provision, and the provider is not an authorized representative under ERISA Section 503, the plan administrator should still review the letter to determine if the out-of-network provider is alleging anything that could require the attention of plan fiduciaries. This may require some due diligence.
Although including an anti-assignment provision in your plan can help, before doing so you should check with your third party administrator. Some third party administrators honor assignments and some do not.
Also, upon receipt of these letters, consider providing a copy to the participant. Many participants are unaware of these letters and may not want to cooperate with the out-of-network provider. Some may even wish to revoke a prior Section 503 appointment.