U.S. District Court Denies Motion to Dismiss Insurer’s Claims of Overpayment Resulting From Provider’s Waiver of Out-of-Pocket Expenses

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In Connecticut General Life Insurance Co. v. Roseland Ambulatory Ctr., LLC, No. 2:12-cv-05941, (D.N.J. Sept. 23, 2013), the United States District Court denied a healthcare provider’s motion to dismiss a claim of overpayments due to the provider’s routine waiver of the patient’s cost-sharing obligations.  The insurance company alleged that the defendant, an out-of-network ambulatory center, submitted 990 claims for services as an assignee of the patients’ healthcare benefits over a three-year period during which the provider received over five million dollars from the insurance company.  The insurer also alleged that the provider waived the cost-sharing obligations that the patients were required to pay.  These allegations demonstrated that the provider was willing to accept the amount that the insurance company paid for the claim.  As a result, the insurance company had overpaid by the amount of applicable deductibles and co-insurance which should have been paid by the patients.  The District Court found that the insurance company sufficiently pled a claim for fraudulent misstatements of its billed charges.

Interestingly, the insurance company also alleged a claim for relief under ERISA, 29 U.S.C. §1132(a)(3), seeking to recoup its overpayments.  The insurance company alleged that an equitable lien by agreement existed for the return of the overpayments to the provider.  The provider sought to dismiss this claim on the grounds that ERISA does not provide for this type of relief.  The District Court rejected the provider’s argument relying on Funk v. CIGNA Group Insurance, 648 F.3d 182 (3d Cir. 2011), wherein the insurer was able to recoup an overpayment of long-term disability benefits from a participant.

The District Court’s decision demonstrates the burgeoning relief available under ERISA based on equitable liens by agreement.  Although claims for fraudulent overpayments are not preempted by ERISA, the District Court’s recognition of the ability to enforce equitable liens by agreement as an available remedy makes concerns of ERISA preemption less likely in these disputes.