An appeal brought before the Texas Supreme Court could unleash a wave of legal action by out-of-network ER physicians pursuing insurers for underpayment of claims. Unlike in-network providers who negotiate reimbursement rates, out-of-network providers rely on the Texas Insurance Code to regulate insurers’ reimbursement rates. The Texas Insurance Code requires health plan administrators to pay out-of-network emergency-care providers at the “usual and customary rate.”
But does the Texas Insurance Code give private individuals the right to sue if they feel they are underpaid? A group of central Texas physicians argues that it does.
Can Texas ER Physicians Sue for Underpayment?
ACS Primary Care Physicians Southwest, Hill County Emergency Medical Associates, and four other out-of-network physician groups sued UnitedHealthcare Insurance (UHC) and its Texas affiliate in Texas state court in 2021 for allegedly paying too little for rendering emergency care to UHC’s insureds.
UnitedHealthcare removed the case to federal court and then filed a motion to dismiss the doctors’ claims. The district court dismissed some but not all the claims, ruling that the ER doctors did have a private cause of action.
UnitedHealthcare next asked the Fifth Circuit Court of Appeals for an interlocutory review – an appeal of the trial court’s decision while the case is still pending – on two questions of law:
- whether the Texas Insurance Code emergency-care statutes provide for an implied private right of action; and
- if so, whether ERISA preempts the claims brought under the emergency-care statutes.
The Fifth Circuit Texas referred these questions of law to the Supreme Court of Texas. Written appellate briefs on the case (No. 21-20168) were filed between April and June of this year. Oral arguments were heard on September 20. A decision is expected in the next 6 to 9 months.
Does the Texas Insurance Code Authorize Doctors to Bring a Private Cause of Action?
A private right of action is when a private individual or entity, as opposed to the state, government, or a public body, has the legal right to assert legal rights under the law. Consider this example: The Texas Transportation Code requires vehicle owners in Texas to register their vehicle each year with their county assessor-collector. Do you, as a private citizen, then have the right to sue a vehicle owner for driving around with expired registration? Not likely. The statute does not entitle you to roadways free of unregistered vehicles. You do not have a “private cause of action”. But every regulation has its own unique language.
The doctors assert that the emergency-care provisions of the Texas Insurance Code entitle doctors to “usual and customary” compensation for providing essential emergency care services. This entitlement, they argue, gives rise to a private cause of action. UHC acknowledged its duty to pay and has paid the doctors but has done so at “alarmingly low rates”, according to their written brief filed with the Texas Supreme Court.
Their position is bolstered by 2019 legislative amendments to the Texas Insurance Code requiring pre-suit arbitration for “out-of-network claims … for emergency care.” The doctors assert that these amendments, which provide that an out-of-network provider “may not file suit for an out-of-network claim … until the conclusion of the arbitration on the issue of the amount to be paid in the out-of-network claim dispute” confirms that the right of action exists.
UHC, on the other hand, argues that the emergency care statutes do not expressly grant emergency care providers the right to sue insurers and that any claims under that statute would be completely and expressly preempted by ERISA.
UHC has some court precedent on its side. Prior to the district court’s ruling in this case, two other federal district court decisions and one Texas intermediate court of appeals decision held that no private cause of action exists.
The ERISA Question
The other question of law before the Texas Supreme Court is whether the Employee Retirement Income Security Act (ERISA) preempts the “usual and customary rate” provisions in the Texas Insurance Code.
ERISA was enacted in 1974 to protect individuals participating in employer-provided retirement and health plans. The law requires employer-provided health plans to provide participants with plan information and gives participants the right to sue for benefits and breaches of fiduciary duty among other requirements.
ERISA also includes a conflict preemption clause that supersedes state laws that relate to employee benefit plans. This clause preempts state laws that attempt to interfere with the administration of the plan.
UHC holds that the interpretation of employer-paid health plans is governed by ERISA and that any dispute over the payment of benefits would need to be brought on behalf of ERISA plan beneficiaries.
The doctors argue that the emergency-care statutes of the Texas Insurance Code merely impose a rate regulation on insurers and do not attempt to regulate coverage or benefits. Additionally, the Texas Insurance Code does not apply exclusively to ERISA plans, but to all insurance plans and issuers, such as government or church-provided plans, Medicare, Medicaid, or private health insurance.
The Potential Impact of ACS Primary Care Physicians Southwest, P.A., et al. v. UnitedHealthcare Insurance Company
If the Texas Supreme Court rules that providers can sue insurers for underpayment of claims, ER physicians in Texas may have a legal right to pursue full payment on years of claims (dating back to 2019 when the Texas Insurance Code was altered to read “usual and customary”), costing insurers hundreds of thousands of dollars.
Texas employers could then face increased insurance costs as insurers pass along those additional expenses to customers and plan members.
If the Texas Supreme Court decides that ERISA does preempt the Texas Insurance Code, administrators of state-regulated plans may still be exposed to lawsuits for underpayment.