Serenity Point Recovery, Inc. v. Blue Cross Blue Shield of Michigan, 1:19-cv-00620

Background

Plaintiffs are Michigan substance-abuse treatment providers who sued Blue Cross Blue Shield of Michigan (BCBSM) as assignees/attorneys-in-fact for ~4,200 patient claims seeking unpaid ERISA benefits and changes to BCBSM claims processing.
Most disputed claims involved out-of-state Blue Cross/Blue Shield plans processed through the BlueCard program; plaintiffs allege BCBSM handled claims processing, preauthorizations, and representations to providers.
Patients allegedly executed durable powers of attorney and assignments of benefits authorizing providers to pursue appeals and litigation on their behalf.
BCBSM moved to dismiss arguing (1) it lacked ERISA standing for claims belonging to other BCBS "home" plans, (2) PPO Certificates include anti-assignment clauses invalidating providers’ derivative standing, and (3) plaintiffs failed to exhaust administrative remedies.
The court reviewed plan exemplars and BlueCard materials and concluded BCBSM acted as an ERISA fiduciary for at least some claims and had substantive claims-processing responsibilities as a host plan.
The court declined to enforce anti-assignment clauses against the providers (given course of dealing and assignment policy), and excused exhaustion for systemic claims-processing and fiduciary/statutory challenges; BCBSM’s motion to dismiss was denied in full.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether BCBSM is a proper ERISA defendant for claims processed as a "host" under BlueCard	BCBSM performed fiduciary acts (VOB, preauth, adjudication inputs) and thus can be sued; discovery needed to identify which plans are ERISA plans	BCBSM only processed claims for other BCBS "home" plans and lacked control/authority to adjudicate benefits, so it is not the proper ERISA defendant	BCBSM has fiduciary responsibility for some claims as host; dismissal on this ground denied
Whether provider assignments give plaintiffs derivative ERISA standing despite PPO anti-assignment clauses	Assignments and durable POAs are industry-standard and confer derivative standing; BCBSM’s conduct (direct dealing, payments, appeals) estops enforcement of anti-assignment clauses	PPO Certificates contain express anti-assignment language that voids assignments and defeats provider standing	Court refused to enforce anti-assignment provision here (course of dealing and assignment policy); providers retain derivative standing
Whether plaintiffs must exhaust plan administrative remedies before suit	Exhaustion is futile for systemic claims-processing methodology and statutory fiduciary violations; regulatory standards deem remedies exhausted if plan fails to provide reasonable procedures	Plaintiffs did not identify specific plan-level appeals for thousands of claims and did not follow formal BCBSM grievance steps	Court excused exhaustion as futile for systemic methodology/fiduciary/statutory claims and where administrative process was insufficient; dismissal denied

Key Cases Cited

Brown v. BlueCross BlueShield of Tennessee, Inc., 827 F.3d 543 (6th Cir. 2016) (providers obtain derivative ERISA standing via valid assignments)
Gore v. El Paso Energy Corp. Long Term Disability Plan, 477 F.3d 833 (6th Cir. 2007) (proper ERISA defendant is entity that controls plan administration)
DeLuca v. Blue Cross Blue Shield of Michigan, 628 F.3d 743 (6th Cir. 2010) (distinguishing fiduciary conduct from non-fiduciary business decisions)
N. Jersey Brain & Spine Ctr. v. Aetna, Inc., 801 F.3d 369 (3d Cir. 2015) (policy favoring assignment enforcement to facilitate provider payment and access to care)
Fallick v. Nationwide Mut. Ins. Co., 162 F.3d 410 (6th Cir. 1998) (exhaustion excused where administrative review would be futile)
Hill v. Blue Cross & Blue Shield of Mich., 409 F.3d 710 (6th Cir. 2005) (claims-processing practices can render exhaustion futile)
Hitchcock v. Cumberland Univ. 403(b) DC Plan, 851 F.3d 552 (6th Cir. 2017) (statutory ERISA violations need not be exhausted administratively)
Pegram v. Herdrich, 530 U.S. 211 (2000) (ERISA fiduciary-duty standards and purposes)