The list of the federal courts of appeals enforcing unambiguous anti-assignment provisions in ERISA health benefit plans continues to grow: almost exactly one year ago, the Third Circuit joined its sister circuits in holding “that anti-assignment clauses in ERISA-governed health insurance plans as a general matter are enforceable.” As the Third Circuit opinion noted, every circuit court to address the issue – seven to date (the First, Second, Third, Fifth, Ninth, Tenth, and Eleventh) – has reached this same conclusion of law.
This very issue was recently addressed by the Eastern District of New York in Long Island Neurological Assocs., P.C. v. Highmark Blue Shield, 2019 U.S. Dist. LEXIS 46176 (E.D.N.Y. Mar. 20, 2019). But, in that case, the court concluded the otherwise unambiguous anti-assignment provision at issue was unenforceable. The problem was not that the district court went against precedent. The problem was the document in which the anti-assignment provision appeared. It was not in a formal plan document, nor in a Summary Plan Description or a Statement of Material Modification. It was contained in the Administrative Services Agreement (“ASA”) between the plan insurer and the plan sponsor. The court determined that, for purposes of enforcing a provision against plan participants, the provision must appear in a “plan document.” The court explained, “For ERISA-purposes, a plan document is one which a plan participant could read to determine his or her rights or obligations under the plan.” Because the ASA at issue was not a document designed to inform participants of their rights and obligations, and as, apparently, there was no language in the formal plan document that arguably incorporated the ASA by reference, the court held the anti-assignment provision was unenforceable.
This decision demonstrates the importance of keeping the formal plan document properly updated, as opposed to attempting to utilize ancillary documents to modify controlling plan terms. To be sure, the use of ancillary documents to establish the terms of a plan can be appropriate, but only if the formal plan document expressly anticipates and authorizes the expansion of plan terms through incorporation of other documents, such as summary plan descriptions or insurance policies, or, possibly, administrative services agreements. It appears there were no such provisions in the plan at issue in Long Island Neurological Assocs., P.C. v. Highmark Blue Shield. As a result, an otherwise proper anti-assignment provision was ruled ineffective.