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Billing Dispute Between Patient and Hospital Preempted by ERISA

Billing Dispute Between Patient and Hospital Preempted by ERISA

Southern v. WakeMed, No. 5:15-cv-35-FL (E.D.N.C. Apr. 21, 2015) (unreported)

ERISA and Life Insurance News
(September 14, 2015)

WakeMed, a hospital system, provided medical services to plaintiff Southern after Southern was struck by a car.  At the time of the accident, Southern was a participant in an employer-provided healthcare plan insured by Blue Cross Blue Shield of North Carolina.  In an amended complaint, Southern alleged that WakeMed improperly billed him for services and thus breached the terms of the plan and a separate Preferred Provider Agreement between WakeMed and Blue Cross.

After WakeMed removed the case to the federal court, Southern moved to remand to state court.  Southern argued the case was predicated on a mere billing dispute between him and the hospital system and was governed by state law.  The court denied Southern's motion, finding that the allegations in his amended complaint sought relief under a plan governed by ERISA and were therefore preempted by ERISA § 502(a), 29 U.S.C. § 1132(a).

The court found that Southern's breach of contract claim related to his plan and fell within the scope of § 502 because he sought to recoup health insurance benefits available to him.  His amended complaint alleged that WakeMed was bound by his plan, that WakeMed wrongfully attempted to collect payments from him in violation of the plan, and that WakeMed's failure to bill him consistent with the plan was a breach of contract.  Thus, "the rights guaranteed to Plaintiff by his 'Health Benefits Plan,' including the rates at which [he] is to be charged for treatment, are derived from rights and obligations established by [his] ERISA-governed healthcare plan."

Southern also argued that WakeMed could not be sued under ERISA § 502(a)(3) in light of Harris Trust & Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238 (2000), which addressed the universe of potential defendants that may be sued under § 502(a)(3).  The court rejected Southern's argument, finding that Harris Trust should not be construed to limit claims under § 502(a)(3) against non-fiduciaries – such as WakeMed – who had agreed to be bound by the terms of an ERISA-governed plan.

After the court denied Southern's motion to remand, Southern filed a notice of voluntary dismissal.

H. Sanders Carter
T (404) 962-1015
F (404) 962-1220
Andrea K. Cataland
T (404) 962-1045
F (404) 962-1255
Kenton J. Coppage
T (404) 962-1065
F (404) 962-1256

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