UC Davis Medical Center v. The Chefs Warehouse, Inc. Employee Benefit Plan, 2:23-cv-00676

Background

The Regents of the University of California, on behalf of UC Davis Medical Center, sued The Chefs’ Warehouse, Inc. Employee Benefit Plan, alleging that the plan underpaid benefits due for Patient A’s cancer treatment, leaving her with substantial balance billing.
Patient A participated in a self-insured employee benefit plan, which did not include any hospitals in its provider network, though it included individual physicians.
The plan uses reference-based pricing, paying the greater of 112% of a hospital’s cost or the Medicare rate plus 20% for out-of-network hospital services.
After the plan paid approximately $74,500 of a $397,519.31 bill, the hospital claimed the remainder was subject to the ACA's annual maximum out-of-pocket limitation, which should cap Patient A’s personal liability.
The hospital asserted claims under ERISA section 502(a)(1)(B) and ACA section 2707(b), contending that the balance owed exceeded lawful patient cost-sharing limits.
The court previously granted leave to amend after dismissing the initial complaint; now, the plan moved to dismiss the amended complaint for failure to state a claim.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the hospital is a "non-network provider" under the ACA cost-sharing statute	The hospital is not a non-network provider if no true network exists, so balance billing counts towards out-of-pocket limits	The hospital is a non-network provider; its charges do not count toward ACA out-of-pocket max	Hospital is a non-network provider; balance billing excluded from cost-share cap
Whether the plan's reference-based pricing method undermines its establishment of a provider network	Reference-based pricing, without reasonable access, means no real provider network exists under ACA guidance	No legal requirement for self-funded plans to ensure network adequacy; plan can exclude hospitals	ACA and ERISA do not require network adequacy for self-insured plans
Applicability of ACA agency FAQs in interpreting cost-sharing and network concepts	FAQs support the view that reference pricing without adequate access means a network has not been created	FAQs are guidance, not binding; they confirm balance billing is excluded for non-network providers	FAQs are not sufficiently persuasive to override plain statutory language
Whether the hospital pleaded a plausible claim for additional benefits under ERISA/ACA	Hospital pled plan owes benefits above the annual cost-share cap since balance billing was wrongly excluded	Plan followed its terms and ACA, which excludes balance billing from limits on cost-sharing	Dismissed; plan owes no additional benefits; leave to amend denied

Key Cases Cited

Ashcroft v. Iqbal, 556 U.S. 662 (Rule 12(b)(6) plausibility standard for complaints)
Robinson v. Shell Oil Co., 519 U.S. 337 (statutory interpretation relies on context and ordinary meaning)
Gozlon-Peretz v. United States, 498 U.S. 395 (Congressional silence on an issue is presumed intentional)
Lamie v. United States Trustee, 540 U.S. 526 (courts may not rewrite statutes to fill perceived gaps)
Baker Botts L.L.P. v. ASARCO LLC, 576 U.S. 121 (courts must apply statutes as written, even if results are harsh)