constrain health care costs and deserve judicial recognition. To understand how invalidating the anti-assignment clauses might undercut these cost constraints requires a brief elaboration.
It is easy to see how health costs might be constrained by a contract, such as the one between Blue Cross and Washington Hospital, in which the hospital agrees to ceilings on the amount charged patients under the Blue Cross plan, agrees to accept payment by Blue Cross as full payment without billing the patient for any balance, and submits to other cost constraints. Patients under such group policies are given a strong incentive to utilize participating hospitals, where the insurer will pay for the entire cost of covered services (apart from any initial deductibles) instead of the lesser reimbursement available for use of non-participating hospitals. The participating hospital gets the benefit of an increased flow of patients, and rapid, certain and direct payments from the insurer. The insurer can attract subscribers with the promise of 100 percent coverage and, at the same time, can reduce its costs through the reimbursement schedule and any other cost constraints accepted by the participating hospital.
This mechanism depends on the willingness of hospitals to participate by subjecting themselves to the constraints already described. A hospital would have far less reason to participate if non-participating hospitals could garner the same advantages without subjecting themselves to the constraints. Under the contracts between insurer and the participating hospital, the participating hospital may recover the hospital charges directly from the insurer without the delay and risk involved in seeking reimbursement from patients. If a patient could obtain care from a non-participating hospital and assign it the patient's right to be reimbursed under a group policy, in the teeth of an anti-assignment clause, this direct payment inducement to become a participating hospital would be weakened or eliminated.
The state courts that have upheld the anti-assignment clauses in group health policies, see supra at note 3, appear to accept this rationale or something akin to it. Indeed, Washington Hospital expressly states it "agrees with [Blue Cross] that its anti-assignment clause encourages plan participation which in turn facilitates its cost-containment policy." Plaintiff's Opposition at 19. The existing state authorities, their straight-forward rationale, the absence of conflicting authorities, and Washington Hospital's own concession are enough to suggest that this Court should accept the anti-assignment clause as valid against non-participating hospitals.
Washington Hospital nevertheless attempts to distinguish this case by arguing that it is a participating hospital, claiming as Spalding's assignee an amount no greater than it would be entitled to if it sued in its own right under its contract with Blue Cross. No one has suggested that the Blue Cross defense of non-coverage is affected by Washington Hospital's desire to sue as assignee under the policy rather than in its own right under its contract with Blue Cross. On reading the briefs, the mystery posed was why Washington Hospital insisted on using the indirect route of suing as assignee.
The motive of Blue Cross in resisting the assignment also presented a puzzle. Blue Cross has argued that if Washington Hospital prevails in suing as assignee, the incentive for Washington Hospital to remain as a participating hospital could be diminished or eliminated and that other participating or non-participating hospitals might similarly find that their incentive to participate has been diminished or eliminated. It is not altogether easy to understand why this should be so if Washington Hospital could sue as assignee only as long as it remained a participating hospital and could collect as assignee no more than it could collect as a participating hospital suing in its own right under its own contract with Blue Cross. What Blue Cross may fear is that a decision invalidating the anti-assignment clause in the circumstances of this case might be stretched to embrace other cases where it might improve the hospital's chance or level of recovery.
At oral argument, some light was shed on more immediate motivations. Pressed as to why it preferred to sue as assignee, Washington Hospital avowed at the oral argument that the clearest advantage to it from suing under ERISA was the prospect of attorneys' fees provided to prevailing litigants suing under that statute.
Washington Hospital also suggested that the standard of judicial review under ERISA might be more favorable to it on the coverage issue, but this Court has found no reason to believe that this is so. Finally, ERISA supplies plaintiffs with a federal forum, whereas a contract claim between Blue Cross and Washington Hospital would otherwise be heard in Superior Court.
Thus, in the end, the issue posed in this case is a narrow one and neither side has offered conclusive arguments. Washington Hospital has distinguished the state cases without offering any clear policy argument for overriding the anti-assignment clause. Blue Cross' concern with maintaining incentives for participating hospitals is valid, but that concern ought not be threatened by a holding that invalidated the anti-assignment clause only where the assignee was a participating hospital. There is no showing that this case directly involves the interest of the subscriber under ERISA or the broader interests in health care availability and cost containment. The case is difficult to decide in part because so little public policy weight appears to rest on either side of the scale.
What is decisive for the Court is the context of Washington Hospital's claim. Blue Cross and Washington Hospital have, as sophisticated bargainers, negotiated an elaborate agreement governing the terms on which Blue Cross would reimburse Washington Hospital for providing care for Blue Cross subscribers. Nowhere in that agreement is there a provision for attorneys' fees for litigation resolving disputed claims between the parties. If the parties wish to contract on this issue, nothing could be easier. Yet the only demonstrated effect of invalidating the anti-assignment clause, aside from inadvertently providing a federal forum to assignees, is to insert a potential opportunity for attorneys' fees into this carefully constructed contractual relationship. That kind of tinkering with the balance struck by the parties is not a result toward which public policy should aim.
The Court has been given no reason to think that Congress had the present problem of assignees in mind when it provided in ERISA that "participants" and "beneficiaries" might collect attorneys' fees. If a hospital holding a valid assignment seeks attorneys' fees as a "participant" or "beneficiary," the outcome may well turn on the accident of legislative drafting rather than on any very clear policy choice by Congress. However this may be, ERISA does not on its face appear to embody any policy in favor of attorneys' fees for assignees so strong as to invalidate the anti-assignment clause. Without a valid assignment, Washington Hospital has no claim under ERISA.
In sum, Blue Cross has explicitly reserved its right to refuse to honor assignments of subscriber claims under the group health policy involved in this case. That reservation has not been shown to be contrary to public policy when applied to participating hospital assignees such as Washington Hospital. Since Washington Hospital has claimed against Blue Cross solely on the ground that Washington Hospital is an assignee of Spalding, its suit must fail.
In accordance with this Memorandum Opinion, an Order will be entered granting defendant's motion for summary judgment and dismissing this case.
ORDER March 11, 1991, Filed
Upon consideration of defendant's motion for summary judgment, the opposition and reply memoranda thereto, and the other pleadings and papers filed in this case, and for the reasons set forth in the Court's Memorandum Opinion of this date, it is hereby
ORDERED that defendant's motion for summary judgment is GRANTED. Accordingly, judgment is hereby entered in favor of defendant Group Hospitalization & Medical Services, Inc., and this case is dismissed.
IT IS SO ORDERED.
DATED: March 8, 1991