By Kevin Stawicki
Law360 (November 10, 2020, 3:52 PM EST) — The Eleventh Circuit has shut down a bid by insurers to reconsider a panel’s holding that downstream health care providers can sue primary insurers for nonpayment under the private right of action in the Medicare Secondary Payer Act.
A three-judge panel on Monday denied the petition for the full appeals court to review the Sept. 4 ruling that revived several proposed class action suits and paved the way for billions of dollars in reimbursements for providers around the country.
Auto-Owners Insurance Co. and two other insurers urged the appeals court in September to undo the ruling that they said undermines U.S. Supreme Court precedent and “weaponizes the MSP Act to the point it operates in contravention to its very purposes.”
By ruling that the MSP Act allows any entity that allegedly experiences an injury — such as an inability to boost profits related to a Medicare recipient’s medical care — to pursue litigation, the Eleventh Circuit set a “dangerous precedent” that needs to be undone, the insurers said in their petition for rehearing.
“Downstream entities are not governed by the MSP Act, as are Medicare and [Medicare Advantage organizations]. Thus, any alleged ‘injury’ — a failure to maximize profit margins — is voluntarily assumed by the freely-negotiated, bargained-for terms of business contracts,” the insurers said. “Because their rights and obligations do not arise from the act, neither should their injuries or remedies.”
The panel reversed the dismissal of four suits brought by MSP Recovery Claims — an assignee of Medicare Advantage organizations and downstream entities like physician associations that provide health care to Medicare enrollees — and said the district court improperly construed the act to exclude claims by downstream actors.
In an amicus brief filed in October, the American Property Casualty Insurance Association and the Personal Insurance Federation of Florida backed the insurers involved in the case, saying the court’s decision threatened to unleash “turmoil” across the industry.
“The panel’s expansive interpretation of the act’s private right of action risks throwing the current MAO/primary payer market structure into turmoil, and will likely have a perverse ancillary effect on consumers,” the trade groups said in an amicus brief supporting the motion for rehearing.
The ruling also promises to benefit the “litigation vehicles” that brought the cases based on “cookie-cutter lawsuits under the act based on boilerplate, vague assignment agreements that supposedly confer standing upon them,” the trade groups said in support of a rehearing.
Under the Medicare Secondary Payer Act, when more than one insurer is liable for an insurance cost, private insurers are treated as primary payors and Medicare as a secondary payor. An MAO not reimbursed by a private insurer can sue for reimbursement under the statute.
The language of the statute “is easily read to cover downstream actors who have borne the cost of a conditional payment and thus have suffered damages,” visiting Judge John M. Walker Jr. of the Second Circuit wrote for the panel.
The consolidated case appealed four decisions in the Southern District of Florida dismissing MSP Recovery Claims’ class suits against Ace American Insurance Co., Auto-Owners Insurance Co., Travelers Casualty and Surety Co. and Liberty Mutual Fire Insurance Co.
John H. Ruiz, an attorney for MSP Recovery told Law360 on Tuesday that the case was an “enormous victory in our favor.”
“These insurance companies have no further recourse at the court of appeals and there’s no basis for them to appeal for the U.S. Supreme Court,” Ruiz said.
The ruling means that insurance companies across the country are now going to have to make payments when they fail to pay or reimburse secondary payers, Ruiz said.
“In effect it was an all out defeat of all the defenses that have been taken by the insurance companies,” he said.
Counsel and representatives for the insurers did not immediately respond to requests for comment.
Judges Adalberto Jordan and Jill Pryor of the Eleventh Circuit and Judge John M. Walker Jr. of the Second Circuit sat on the panel.
The trade groups are represented by Michael Menapace of Wiggin and Dana LLP.
MSP Recovery is represented by Francesco A. Zincone and J. Alfredo Armas of Armas Bertran Pieri, Frank Carlos Quesada and John H. Ruiz of MSP Recovery Law Firm and Andres Rivero and Alan H. Rolnick of Rivero Mestre LLP.
Ace American Insurance is represented by Nancy A. Copperthwaite, Valerie B. Greenberg and Ari H. Gerstin of Akerman LLP.
Auto-Owners Insurance Co. is represented by Lori M. McAllister of Dykema Gossett PLLC and Shannon McKenna, Francisco Ramos Jr. and Spencer H. Silverglate of Clarke Silverglate PA.
Travelers Casualty and Surety Co. is represented by Bryce L. Friedman of Simpson Thacher & Bartlett LLP and Laura E. Besvinick of Stroock & Stroock & Lavan LLP.
Liberty Mutual Fire Insurance Co. is represented by Anthony J. Russo, Mihaela Cabulea, David B. Krouk and Matthew J. Lavisky of Butler Weihmuller Katz Craig LLP.
The case is MSP Recovery Claims v. Ace American Insurance Co. et al., case numbers 18-12139, 18-12149, 18-13049 and 18-13312, in the U.S. Court of Appeals for the Eleventh Circuit.
–Additional reporting by Carolina Bolado. Editing by Orlando Lorenzo.
