As is often the case, congressional silence whispers sweet nothings in the ears of both parties.
Unconvinced by the whispers of health insurers, the 5th Circuit has affirmed a district ruling that Louisiana law relating to assignment of healthcare benefits is not preempted by ERISA. [Louisiana Health Service & Indemnity Co. v. Rapides Healthcare System, 04-31114]
Louisiana state law requires an insurance company to honor assignments of healthcare benefit claims made by patients to hospitals. A provision under the insurer’s agreement with “participating providers” allowed direct payment to a healthcare provider; but payments for services from a “nonparticipating provider” were made solely to the patient, regardless of any assignment to the healthcare provider. When hospitals took noncompliance with the state’s assignment statute up with the Louisiana Department of Insurance, the insurers went to court seeking a declaration that the state law was preempted to the extent applicable to ERISA employee welfare benefit plans.
The appellate court first disagreed with the district court on weight given to language in the healthcare plans stating that assignments were not to be honored “except as required by law.” The insurers contested the district court conclusion that that plan provision required compliance with the state assignment law, arguing that plan provision to be trumped by another stating “except when preempted by federal law.” The appellate court disagreed with both sides, instructing –
Neither policy provision displaces the preemption analysis in this case. ERISA plans must always conform to state law, but only state law that is valid and not preempted by ERISA. The presence of the phrase “except as [sic] preempted by [federal] law” serves no additional purpose, as all state laws are potentially subject to ERISA’s preemptive force. The two provisions do not forestall determination of the preemption question.
Turning to the central issue of ERISA preemption, the court rejected the insurer’s contention that the state’s assignment statute conflicts with ERISA’s exclusive enforcement scheme, pointing out –
ERISA is silent on the assignability of employee welfare benefits; it neither prohibits nor mandates recognition of assignments.
Moreover, the state’s assignment statute does not create additional enforcement mechanisms that duplicate otherwise applicable ERISA duties. To insurer concerns that compliance with the assignment statute poses risks of double recovery through liability to a hospital after a patient had already been paid, the court responded that assignments simply ought not be ignored, observing –
Failure to follow the law cannot create preemption concerns.
As to the issue of whether the state assignment law is preempted because it “relate[s] to” employee benefit plans, the court heard from the opposing parties two contrasting interpretations of the whisperings gleaned from congressional silence regarding assignment of employee welfare benefits: from the insurers, that the issue is to be left to free negotiations of the contracting parties; from the hospitals, that ERISA is not to preclude state law on the issue. On this debate the 5th Circuit parted company with the 8th and 10th Circuits to side with the hospitals, rejecting insurer arguments that the assignment law imposes a set of rules requiring benefit payments in contravention of plan documents and impermissibly interferes with nationally uniform plan administrator. Viewing contrary precedent as uninformed by the “starting assumption that Congress did not intended [sic] to preempt state law in an area of traditional state regulation,” the court stood convinced that Louisiana’s assignment statute has no impermissible connection with ERISA plans.
Congressional silence cannot dictate our conclusion in this case, but we consider what Congress did in order to determine what Congress intended to preclude the states from doing.