Michigan Federal Court Denies United Healthcare Preemption Bid in Pricing Case

On Thursday, in the Eastern District of Michigan, Judge Stephen J. Murphy denied United Healthcare a motion to dismiss an action on grounds of preemption brought against the defendant by a group of hospitals providing emergency medical services who alleged the defendant paid less than market rate for the medical services rendered to customers of the insurance company.

The plaintiffs argued that the defendant had an implied contract with the hospitals to pay “reasonable market value” for the emergency medical services rendered. The hospitals sought damages equal to the “reasonable market value” of the services rendered minus the amount the defendant already paid for said services — plus 12 percent interest — under the Michigan Prompt Pay Act (MPPA). The defendant proffered that its plans were covered by the Employment Retirement Income Security Act (ERISA) and thus preempted the plaintiffs’ recovery under MPPA. Specifically, the defendant pointed to language from precedential case law saying that “ERISA preempts state law claims that relate to any (covered) benefit plan…unless a provider has a valid assignment of benefits from a patient,” to argue that — absent patients of the plaintiffs assigning their right to sue to the hospitals — only the patients can recover aforementioned damages under MPPA. 

The court disagreed with the defendant. The opinion explained that while the defendant correctly stated the law, it left out an important exception: “ERISA stops short of preempting state law claims that implicate the rate of payment for medical services already provided to patients.” In other words, the court held, ERISA failed to bar the plaintiffs from proceeding with a claim for damages in the present case, as the hospitals were not arguing the defendant underpaid according to the monetary rate of medical services via an ERISA provider/plan agreement — developed prior to patients receiving treatment — but more so underpaid according to the “reasonable market value of medical services” generally. 

The court concluded by ruling that “(b)ecause (the plaintiffs) did not claim that the alleged implied contract covered payments owed under any ERISA plan, the claim therefore “does not stem from a ERISA plan…thus (the plaintiffs) have met their burden to show that ERISA does not preempt their (MPPA) claims.” 

Ultimately, however, the plaintiffs lost their MPPA claims as the court determined that the legislature intended for MPPA to contain no private right to sue. The plaintiffs are represented by Miller, Canfield, Paddock & Stone