Reported / Citable
Background
Before an out-of-network surgery at La Peer Surgery Center, staff called Aetna to verify benefits under the patient’s employer-sponsored WSP health plan. According to Healthcare Ally Management of California, Aetna represented that the plan would pay the balance after the patient’s share using a usual, customary, and reasonable rate. The provider later received substantially less and assigned its collection claims to Healthcare Ally.
Healthcare Ally sued WSP and Aetna under ERISA and California law, including negligent misrepresentation and promissory estoppel. The Central District of California dismissed the state claims as preempted, concluding that they related to the ERISA plan. The appeal required the Ninth Circuit to distinguish an independent duty to speak accurately to a provider from an effort to alter benefits owed under the plan.
The Court’s Holding
The Ninth Circuit revived the negligent-misrepresentation claim. ERISA expressly preempts state laws that have an impermissible connection with an employee-benefit plan, but not every claim mentioning plan terms crosses that line. The alleged duty not to misstate coverage to a third-party provider arose under generally applicable California tort law and did not govern the plan’s relationship with its participant.
A damages award would address the provider’s reliance on Aetna’s representation, not increase benefits owed to the patient or change plan administration for members. The court distinguished precedent barring a provider’s oral-contract theory where the promised payment effectively displaced plan rules governing the insurer-member relationship. It nevertheless affirmed dismissal of promissory estoppel under that precedent and remanded only the negligent-misrepresentation theory.
Key Takeaways
- ERISA does not automatically preempt a provider’s state-law claim merely because benefit verification requires reference to plan terms.
- The key question is whether the claim regulates an ERISA relationship or enforces an independent duty to a third party.
- Negligent misrepresentation may survive where damages flow from provider reliance and do not alter participant benefits.
- Contract-like and estoppel theories remain vulnerable when they effectively supplant the written plan.
Why It Matters
Providers should preserve recordings, call reference numbers, scripts, and written verifications before rendering expensive out-of-network care. Administrators should train verification staff to distinguish information from guarantees and document qualifications. For litigators, careful pleading matters: the same conversation may support a nonpreempted accuracy-based tort theory but not an enforceable promise to pay outside the plan.