DEMARIA -V- HORIZON HEALTHCARE SERVICES, INC.

Filing 19

OPINION. Signed by Judge William J. Martini on 11/9/12. (gh, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
ALPHONSE A. DEMARIA, D.C., T.
LEONARD PROBE, D.C. and JAMES
PROODIAN, D.C., on their own behalf and on
behalf of all others similarly situated,

Civ. No. 2:11-cv-7298 (WJM)

OPINION

Plaintiffs,
v.
HORIZON HEALTHCARE SERVICES,
INC. d/b/a HORIZON BLUE CROSS BLUE
SHIELD OF NEW JERSEY; and HORIZON
HEALTHCARE OF NEW JERSEY, INC.
d/b/a HORIZON HMO,
Defendants.

WILLIAM J. MARTINI, U.S.D.J.:
Plaintiffs Alphonse A. Demaria, Leonard Probe and James Proodian have brought
this putative class action on behalf of themselves and all other similarly-situated
chiropractic physicians. This matter comes before the Court on Defendants’ motion to
dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim
upon which relief may be granted. For the reasons set forth below, Defendants’ motion is
GRANTED.
I.

BACKGROUND 1

Defendants Horizon Healthcare Services, Inc. and Horizon Healthcare of New
Jersey, Inc. (collectively “Horizon”) underwrite and/or administer the health insurance
benefits of more than 3.6 million persons in New Jersey (“Plan Participants”) through
various employer-sponsored, individual and governmental health insurance coverage
plans (“Plans”). Through these Plans, Horizon provides reimbursement for certain health
care services rendered to Plan Participants (“Covered Services”), subject to the terms set
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The following assumes the facts in Plaintiffs’ Complaint as true.
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forth in each individual Plan. Many of these Plans are governed by ERISA. Other plans
are ERISA-exempt.
Plaintiffs are chiropractors who would regularly provide four types of chiropractic
treatments to Plan Participants. Namely: (1) evaluation and management services
(“E/M”); (2) chiropractic manipulative therapy (“CMT”); (3) passive adjunctive
modalities (“passive modalities”); and (4) active therapeutic procedures (“active
therapies”). In the course of providing those services to Plan Participants, all three
Plaintiffs assert that “as a matter of course,” they would obtain written assignments
(“Assignments”) from Plan Participants which entitled Plaintiffs to any claims for
reimbursement which would otherwise be payable to the Plan Participants. (Compl. ¶ 9.)
Pursuant to these Assignments, the Plan Participants also remained personally liable to
Plaintiffs for any non-Covered Services. (Id.) Plaintiffs, however, have not provided
copies of any of these purported Assignments, nor have they set forth the exact language
contained in these writings.
Plaintiffs would thereafter seek reimbursement from Horizon for those services. 2
Plaintiffs allege that from at least March 2004 until April 15, 2010, Horizon systemically
and improperly denied their insurance benefit claims for E/M services, passive
modalities, and active therapies, and only provided benefits for the CMT services.
Horizon’s proffered reasons for denying those reimbursement claims, included, among
others:
“THIS PROVIDER WAS NOT CERTIFIED/ELIGIBLE TO BE PAID FOR THIS
PROCEDURE/SERVICE ON THIS DATE OF SERVICE”; “B106 THIS SERVICE IS
NOT A COVERED BENEFIT WHEN BILLED BY THIS TYPE OF PROVIDER”;
“F027 PROVIDER TYPE/SPECIALTY CANNOT PERFORM THIS TYPE OF
SERVICE”; “52 THE REFERRING/PRESCRIBING/RENDERING PROVIDER IS
NOT ELIGIBLE TO REFER/ PRESCRIBE/ORDER/PERFORM THE SERVICE
BILLED”; “97 PAYMENT IS INCLUDED IN THE ALLOWANCE FOR ANOTHER
SERVICE/PROCEDURE”; “X800 REIMBURSEMENT FOR THESE SERVICES IS
INCLUDED IN THE REIMBURSEMENT FOR THE CHIROPRACTIC
MANIPULATIVE TREATMENT.” (Id. ¶ 92.)
Horizon later took the position that it “bundled” reimbursement for all four
services into a “global fee” for CMT. And on October 7, 2009, the New Jersey
Department of Banking and Insurance (“DOBI”) held that Horizon’s bundling practices
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Plaintiff DeMaria was a Horizon “Participating Provider,” meaning that when he treated Plan Participants in
certain – and heretofore unspecified – Horizon Plans, he agreed to accept payments directly from Horizon for
Covered Services as payment in full. Plaintiffs Proodian and Probe were “Non-Participating Providers” who, under
at least some of the Plans, were entitled to be reimbursed by Horizon, but also retained the right to “balance bill”
Plan Participants for the difference between their submitted charges and any reimbursement paid to them by Horizon
for Covered Services.
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violated New Jersey’s Unfair Claim Settlement Practices Act, N.J.S.A. § 17B:30-13.1.
The DOBI therefore ordered Horizon to begin “to individually evaluate whether E/M
[services, passive modalities, and active therapies] billed by chiropractors are
significantly separable from CMT or other services provided by chiropractors.” (Id. ¶
15.) Plaintiffs concede that Horizon was in compliance with the DOBI’s order by April
15, 2010, but nonetheless now seek relief from Horizon for its past pattern of improperly
processing reimbursement claims for chiropractic treatments.
On December 16, 2011, Plaintiffs commenced this action in district court. Counts
One and Two of the Complaint allege violations of § 502(a) of the Employment
Retirement Security Income Act of 1974 (“ERISA”), 29 U.S.C. §§ 1132(a)(1)(B) and
(a)(3). The Court has original jurisdiction over claims arising under ERISA. 29 U.S.C. §
1132(e); Metropolitan Life Ins. v. Taylor, 481 U.S. 58 (1987). The remaining counts in
the Complaint allege various violations of New Jersey state law, over which Plaintiffs
assert that the Court should exercise supplemental jurisdiction. (Compl. ¶ 23 (citing 28
U.S.C. § 1367).)
Presently, Horizon moves for dismissal of Plaintiffs’ Complaint pursuant to
Federal Rule of Civil Procedure 12(b)(6), asserting, among other things, that the Court
should dismiss Counts One and Two because Plaintiffs have not demonstrated that they
have standing to assert claims against Horizon for its alleged § 502(a) ERISA violations.
II.

LEGAL STANDARD

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) may be
granted only if, accepting all well-pleaded allegations in the Complaint as true and
viewing them in the light most favorable to the Plaintiffs, the Court finds that Plaintiffs’
claims have facial plausibility. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct.
1955, 1965 (2007). This means that the Complaint contains sufficient factual allegations
to raise a right to relief above the speculative level. Id. at 1965; Phillips v. County of
Allegheny, 515 F.3d 224, 234 (3d Cir. 2008). See also Ashcroft v. Iqbal, 556 U.S. 662,
129 S.Ct. 1937, 1950 (2009) (“While legal conclusions can provide the framework of a
complaint, they must be supported by factual allegations.”).
Presently, Horizon moves for dismissal of Counts One and Two pursuant to Rule
12(b)(6) because the Assignments alleged by Plaintiffs do not demonstrate statutory
standing for Plaintiffs to assert their ERISA claims. 3 And when, as here, standing is
challenged on a motion to dismiss, the burden falls on the proponent of the claim to
establish that it has standing to sue. See Franco v. Connecticut General Life Ins. Co., 818
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The Court reviews a motion to dismiss for lack of statutory standing under Federal Rule of Civil Procedure
12(b)(6). Franco v. Connecticut General Life Ins. Co., 818 F.Supp.2d 792, 809 (2011) (distinguishing Rule 12(b)(6)
dismissal for failure to meet statutory prerequisites to bring suit from Rule 12(b)(1) dismissal for lack of injury in
fact) (citing Maio v. Aetna, Inc., 221 F.3d 472, 482 n. 7 (3d Cir. 2000).
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F.Supp.2d 792, 810-811 (D.N.J. 2011) (citing Lujan v. Defenders of Wildlife, 504 U.S.
555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)). Thus, here, the burden falls on
Plaintiffs to establish that they have standing to sue under ERISA § 502(a).
III.

DISCUSSION
a. ERISA Standing

Under § 502(a) of ERISA:
(a) . . . A civil action may be brought -(1) by a participant or beneficiary . . .
(B) to recover benefits due to him under the terms of his plan, to
enforce his rights under the terms of the plan, or to clarify his rights
to future benefits under the terms of the plan [or]; . . .
(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or
practice which violates any provision of this subchapter or the terms of the
plan, or (B) to obtain other appropriate equitable relief (i) to redress such
violations or (ii) to enforce any provisions of this subchapter or the terms of
the plan . . .
29 U.S.C. §§ 1132(a).
Thus, Plaintiffs will only have standing to sue under ERISA § 502(a) if their
Complaint sets forth sufficient facts demonstrating that they are Plan “participants” or
“beneficiaries.” 4 Those terms, generally, refer to individuals entitled to receive benefits
under an employee benefit plan, and not to the healthcare providers who treat those
individuals. Pascack Valley Hosp., Inc. v. Local 464A UFCW Welfare Reimbursement
Plan, 388 F.3d 393, 399–400 (3d Cir. 2004). And in spite of this general rule, Plaintiffs
assert that the Assignments they received from Plan Participants are nonetheless
sufficient to confer ERISA standing. Although the Third Circuit has not definitively
ruled on whether a healthcare provider may obtain ERISA § 502(a) standing through an
assignment, many other circuit courts have expressly held that providers may have
standing to assert an ERISA § 502(a) claim “where a beneficiary or participant has
assigned to the provider that individual’s right to benefits under the plan.” Id. at 401 n. 7.
In Franco v. Connecticut General Life Ins. Co., 818 F.Supp.2d 792 (D.N.J. 2011),
Judge Chesler reviewed recent District of New Jersey cases that have considered
precisely what a healthcare provider must present to the court to establish that an
assignment has conferred him with statutory standing to assert a § 502(a) ERISA claim.
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Although § 1132(a)(3) also confers standing on “fiduciaries,” for purposes of this motion, Plaintiffs’ only colorable
basis for § 502(a) ERISA standing is as “participants” or “beneficiaries.” See 29 U.S.C. § 1002(21)(A) (defining
“fiduciary”).
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Those cases include: North Jersey Ctr. for Surgery v. Horizon BCBS of New Jersey Inc.,
No. 07-4812, 2008 WL 4371754 (D.N.J. Sept. 18, 2008) (vague references to a purported
assignment failed to establish that there was a complete assignment of health insurance
benefits for purposes of ERISA § 502(a) standing because the court must be satisfied that
the alleged assignment encompasses the plan participants’ rights to receive the full
benefits of their plan (within the scope of ERISA), and not simply the right to
reimbursement of medical expenses (beyond the scope of ERISA)); Cooper Hosp. Univ.
Med. Ctr. v. Seafarers Health and Benefits Plan, No. 05–5941, 2007 WL 2793372, at *3
(D.N.J. Sept. 25, 2007) (no ERISA jurisdiction where applicable assignment’s language
allowed the provider hospital to receive payments directly from the patient’s health
benefits insurer but did not support an ‘unequivocal assignment of all of [the patient’s]
rights under [the ERISA] plan”); Cmty. Med. Ctr. V. Local 464A UFCW Welfare
Reimbursement Fund, 143 Fed.Appx. 433, at 435 (3d Cir. 2005) (observing in dicta that a
court could not be satisfied that a provider has standing to pursue a claim under ERISA §
502(a) as an assignee without knowing the term or parameters of the purported
assignments).
In short, and as demonstrated in Franco, the scope of the “assignment of benefits”
is critical to determining whether a provider has standing to sue under ERISA. Franco at
809 (2011). Thus, presently, Plaintiffs will meet their burden of establishing ERISA
standing if their Complaint contains specific factual allegations to render plausible their
claim that the Assignments they received from the Plan Participants conferred them with
the right to receive the full benefits of that Plan. Id. However, vague references to a
common practice and purported assignment will not satisfy this burden, in which case,
dismissal of Counts One and Two will be proper.
b. For Substantially the Same Reasons Set Forth in Franco v.
Connecticut General Life Insurance Company, the Court Will
Dismiss Counts One and Two
In Franco, a group of healthcare providers who treated persons insured under
Defendant CIGNA’s healthcare plans (“Provider Plaintiffs”) filed a putative class action
in district court against CIGNA for its systematic underpayment for those services. The
Provider Plaintiffs alleged that they would obtain assignments from patients which
authorized them to receive reimbursement directly from CIGNA for services rendered,
but which also allowed the Provider Plaintiffs to balance bill the patient for any amount
disallowed by CIGNA. 5 Id. at 805. The Provider Plaintiffs further alleged that CIGNA
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In Franco, the only Provider Plaintiffs who received assignments and the right to balance bill were NonParticipating Providers. The Court wishes to make clear that in this action, the Complaint alleges that all three
Plaintiffs received assignments and the right to balance bill for, at the very least, non-Covered Services, and that as
alleged, Horizon improperly and systematically denied reimbursement for E/M services, passive modalities, and
active therapies, because, among other reasons, they were non-Covered Services. In other words, as a practical
matter, Plaintiffs allege that Horizon both implicitly and, at times, explicitly, denied reimbursement for these three
treatments as non-Covered Services. Thus, although Plaintiff DeMaria was a Participating Provider who was
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improperly reimbursed them for healthcare services rendered. In response, CIGNA filed
a motion to dismiss Plaintiff Providers’ complaint for failure to state a claim. As part of
that motion, CIGNA challenged the statutory standing of the Provider Plaintiffs to assert
ERISA claims.
In ruling that dismissal of the Provider Plaintiff’s ERISA claims for lack of
standing was proper, the Franco Court noted that the Provider Plaintiffs’ pleading
“provide[d] only the most conclusory assertions that various Provider Plaintiffs obtained
an assignment of ‘benefits’ from their patients.” Id. at 810. (“Simply asserting that
CIGNA subscribers have assigned their CIGNA plan benefits fails to plausibly establish
that each Provider Plaintiff has obtained at least one actual assignment of a patient’s right
to assert a claim for benefits and pursue litigation under ERISA. Provider Plaintiffs . . .
fail to plead facts (for example, actual assignment language) to support their legal
conclusion that a valid assignment of the proper breadth was given by patients.” Id.
Similarly, in the current matter, Plaintiffs, who seek to represent a class of
similarly situated healthcare providers, vaguely assert that they obtained Assignments
from Plan Participants which entitle them to any claims for reimbursement which would
otherwise be payable to the Plan Participants under the terms of each Plan. Moreover,
pursuant to these Assignments, the Plan Participants remained personally liable to
Plaintiffs for any non-Covered Services. On these facts, and as was the case in Franco,
the Court finds that: “At best, the allegations provide only the most ambiguous and
conclusory information about what the purported assignments entail. At worst for
[Plaintiffs], they indicate that the assignments were limited to a patient’s assigning his or
her right to receive reimbursement from [Horizon] for the covered portion of the service
bill, which in no way can be construed as tantamount to assigning the right enforce his or
her rights under the plan. The Court cannot conclude, based on the information supplied
in the Complaint[], that the assignments encompass a [Plan Participant’s] claim to
benefits, such that any of the [Plaintiffs] can legally be deemed a ‘participant or
beneficiary’ of his or her patient’s ERISA health plan. Simply put, [Plaintiffs] have not
met their burden of demonstrating that they have derivative standing to sue under
ERISA.” Id. at 811-12.
Accordingly, the Court will GRANT Horizon’s motion to dismiss Counts One and
Two of the Complaint based on Plaintiffs’ failure to demonstrate standing to bring claims
under § 502(a) of ERISA. At this time, the Court declines to exercise supplemental
jurisdiction over the remaining state law claims. 28 U.S.C. § 1367(c)(3) (“the district
court[ ] may decline to exercise supplemental jurisdiction [if] the district court has
dismissed all claims over which it has original jurisdiction.”); Glaziers and Glassworkers
precluded from billing Plan Participants above their negotiated rate for Covered Services, for at least some of the
Plans, he could also balance bill for non-Covered Services. Accordingly, for purposes of this motion, as currently
pled, Plaintiffs have failed to make any meaningful distinction between the Participating and Non-Participating
Provider Plaintiffs.
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Union Local 252 Annuity Fund v. Newbridge Sec., Inc., 823 F.Supp. 1191, 1193
(E.D.Pa.1993) (declining to exercise supplemental jurisdiction over state law claims
where ERISA claims dismissed on 12(b)(6) motion). Accordingly, the Court will dismiss
this matter in its entirety, without prejudice.
IV.

CONCLUSION

For the reasons stated above, Defendants’ motion to dismiss is GRANTED, and
this matter is dismissed without prejudice. An appropriate order follows.

/s/William J. Martini
WILLIAM J. MARTINI, U.S.D.J.
Date: November 9, 2012.

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