U.S. Court in New Jersey sides with physician in claims case against insurer

August 26, 2008

The U.S. District Court for the District of New Jersey held August 8 that the plaintiff-physician?s payment claims against an insurer were not completely preempted under the Employee Retirement Income Security Act (ERISA) and thus remanded the case back to state court.

This material originally appeared in the August 22, 2008, issue of Health Lawyers Weekly, a publication of the American Health Lawyers Association (www.healthlawyers.org).

The U.S. District Court for the District of New Jersey held August 8 that the plaintiff-physician’s payment claims against an insurer were not completely preempted under the Employee Retirement Income Security Act (ERISA) and thus remanded the case back to state court.

Plaintiff Stephanie Vaimakis is a bariatric and advanced laparoscopic general surgeon who in 2004 entered into a Consultant Physician Agreement (Agreement) and became a participating or "in-network" provider of medical services to individuals insured under healthcare plans managed by Defendant United Healthcare/Oxford.

On April 4, 2005, Vaimakis withdrew as a participating physician from United, but continued to provide medical services to United subscribers as an "out-of-network" provider.

Vaimakis eventually filed suit in state court against United alleging that for all medical procedures performed post-April 4, 2005, United did not pay her "out-of-network" billing rate but instead continued to pay her at the lower "in-network" rates. Vaimakis’ suit seeks payment from October 4, 2005 through June 4, 2007, for United's failure to pay her full fees.

United removed Vaimakis’ complaint to federal court alleging that the vast majority of the patients that Vaimakis rendered services to and is seeking payment for were participants in ERISA plans and thus her claims are completely preempted by ERISA.

In evaluating whether plaintiff’s complaint is preempted by ERISA, the court first looked at whether plaintiff could have brought her claims under ERISA § 502(a).

The court explained that in order to assert a claim under § 502(a), it must be shown that Vaimakis received valid assignments from individuals that receive benefits under an ERISA-governed plan.

Here, however, the court found “nothing in the record to suggest that Vaimakis received valid assignments from any individual subject to an ERISA plan.”

Further, the court found that under the second prong of the ERISA preemption analysis, United also failed to show that no independent legal duty existed as a basis for plaintiff’s claims.

The court found that it was in dispute when Vaimakis' "in-network" status officially ended and therefore “the resolution of this case first turns to the Agreement and not an ERISA plan.”

Accordingly, the court found United failed to carry its burden of showing plaintiff’s claims were completely preempted by ERISA and granted plaintiff’s motion to remand the case.

Vaimakis v. United Healthcare/Oxford, No. 07-5184 (D.N.J. Aug. 8, 2008).