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McCulloch Orthopaedic Surgical Services, PLLC v. Aetna Inc.

United States Court of Appeals, Second Circuit

May 18, 2017

McCulloch Orthopaedic Surgical Services, PLLC, a/k/a Dr. Kenneth E. McCulloch, Plaintiff-Appellant,
v.
Aetna Inc., dba Aetna Health and Life Insurance Co., et al., Defendants-Appellees.

          Argued: April 26, 2016

         Appeal from the United States District Court for the Southern District of New York. No. 15 Civ. 2007 - Katherine B. Forrest, Judge.

         We consider in this case whether the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq., completely preempts an "out-of-network" health care provider's promissory-estoppel claim against a health insurer where the provider (1) did not receive a valid assignment for payment under a health insurance plan and (2) received an independent promise from the insurer that he would be paid for certain medical services provided to the insured. We hold that ERISA does not completely preempt such a claim.

          Kenneth J. McCulloch, Law Office of Kenneth J. McCulloch, New York, NY, for Plaintiff- Appellant.

          Edward Wardell (Patricia A. Lee, on the brief), Connell Foley LLP, New York, NY, for Defendants- Appellees.

          Before: Walker, Calabresi, and Hall, Circuit Judges.

          John M. Walker, Jr., Circuit Judge

         We consider in this case whether the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq., completely preempts an "out-of-network" health care provider's promissory-estoppel claim against a health insurer where the provider (1) did not receive a valid assignment for payment under the health care plan and (2) received an independent promise from the insurer that he would be paid for certain medical services provided to the insured. We hold that ERISA does not completely preempt such a claim.

         BACKGROUND

         Plaintiff-appellant McCulloch Orthopaedic Surgical Services, PLLC, a/k/a Dr. Kenneth E. McCulloch ("McCulloch") filed this action against defendant-appellee Aetna Inc. and several of its wholly-owned subsidiaries[1] in New York State Supreme Court. McCulloch, an orthopedic surgeon, seeks reimbursement from Aetna for performing two knee surgeries on a patient who is a member of an Aetna-administered health care plan that is governed by ERISA. McCulloch is an "out-of-network" provider under this plan-he does not have a contract with Aetna and is not identified by Aetna as a participating physician who has agreed to abide by a set fee schedule.

         Before performing the patient's surgeries, McCulloch's office staff called a number listed on the patient's Aetna insurance card to obtain information about the patient's coverage. An Aetna representative informed McCulloch's staff that the patient was covered by a health care plan administered by Aetna, that the plan provided for payment to out-of-network physicians, and that the plan covered the surgical procedures that McCulloch would be providing for the patient. The Aetna representative stated that McCulloch would be reimbursed at seventy percent of the usual, customary, and reasonable ("UCR") rate for the knee surgeries and that this rate would be based on an industry-standard schedule.[2]

         Relying on Aetna's promise of reimbursement, McCulloch performed the two surgeries and billed Aetna at the UCR rate for a total of $66, 048. McCulloch then submitted a health insurance claim form to Aetna for each surgery (Centers for Medicare and Medicaid Services Form 1500). The claim form has two sections that concern the assignment of payment for medical benefits. First, in Box 13, the insured must authorize the "payment of medical benefits to the undersigned physician . . . for services described below." The parties do not dispute that the patient signed both of the completed forms submitted by McCulloch. Second, in Box 27, the form asks if the provider will "Accept Assignment?". The parties also do not dispute that McCulloch checked "yes" in response to this question on the forms.

         The patient's health care plan, however, has an anti-assignment provision, which states that:

         Coverage may be assigned only with the written consent of Aetna. To the extent allowed by law, Aetna will not accept an assignment to an out-of-network provider, including but not limited to, an assignment of:

■ The benefits due under this contract;
■ The right to receive payments due under this contract; or
■ Any claim you make for damages resulting from a breach or alleged breach, of the terms of this contract.

         Despite this provision, Aetna reimbursed McCulloch $842.51 for the first surgery and $14, 425 for the second surgery, for a total of $15, 267.51.

         On February 17, 2015, McCulloch sued Aetna in New York State court on a single cause of action: promissory estoppel. McCulloch alleged that Aetna had made a clear and unambiguous promise to reimburse him for seventy percent of the UCR rate for both knee surgeries ($46, 233.60), that he had reasonably and foreseeably relied on that promise, and that he had been injured as a result. McCulloch sought $30, 966.09-the difference between seventy percent of the UCR rate ...


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