Surgicore, Inc. v. Principal Life Insurance Co., 48 UCC. Rep. Serv. 2d 736 (N.D. Ill. 2002) (Not reported n F. Supp. 2d)

II. Background

The following facts are taken from the Amended Complaint. Surgicore is an Illinois corporation that is engaged in the business of providing out-patient surgical facility and services to patients and their referring doctors. Principal is an Iowa corporation authorized by the State of Illinois to issue individual and group health insurance policies to individuals and employers in the State of Illinois. In the Amended Complaint, Surgicore identifies five patients for whom it provided surgical facility services, and each of these patients allegedly was a participant of one of Principal's Health Benefits Plans, referred hereinafter generically as the 'Plan.' Surgicore alleges that, in consideration for medical services, each patient assigned his or her benefits under the Plan to Surgicore. In support, Surgicore has attached copies of the purported assignment agreements (the 'Agreements') executed by each Plan Participant to its Amended Complaint. The Agreements are identical and state:

AUTHORIZATION TO RELEASE INFORMATION ASSIGNMENT OF BENEFITS

I hereby authorize the release of any medical information necessary to process insurance claims. I also hereby authorize payment directly to Surgicore, Inc. for the insurance benefits otherwise payable to me. I understand I am financially responsible for charges not covered by this authorization.

For each patient, Principal denied all or part of each claim, and there remains a total balance due of $22,133.35. Surgicore exhausted Principal's appeal process and filed suit in Illinois state court, which was then removed by Principal to this Court; Surgicore subsequently amended its complaint. Relying on the Agreements, Surgicore claims in Counts I through V that it is entitled to benefits under the respective Plans as an assignee under 29 U.S.C. § 1132(a)(1)(B). Counts VI through X are also based on these Agreements and are brought under Illinois statute, 810 ILCS 5/9-607(d) [sic; UCC Revised § 9-309(5) would appear to be intended-Ed.], to recover a 'Security Interest in a Healthcare Receivable' from the Plans as an assignee pursuant to Illinois law.

III. Discussion

Principal moves to dismiss Surgicore's Amended Complaint. First, Principal argues that the Agreements upon which Surgicore relies are not valid and enforceable assignments under the law and Surgicore therefore lacks standing to seek benefits under ERISA and the Illinois statute. In the alternative, Principal argues that this Court should dismiss Surgicore's state law claims in Counts VI through X because these claims are completely preempted by ERISA. In the other alternative, Principal argues that, at a minimum, this Court should dismiss Surgicore's claims in Counts II and IV against Principal relative to the Smith and McPherson Plan Participants because Principal is not the Plan or a fiduciary for the Plans at issue in these Counts, and is therefore not a proper defendant to those claims. This Court addresses each argument in turn.

A. Surgicore's Standing as an Assignee

. . . . . .

B. Preemption of State Law Claims

Principal seeks dismissal of Surgicore's claims (Counts VI through X) that, as assignee, it is entitled to enforce the rights to recover 'health care insurance receivables' under the Plans from Principal pursuant to newly amended Illinois statute 810 ILCS 5/9-607(d) [sic; UCC Revised § 9-309(5) would appear to be intended-Ed.]. 'Health-care-insurance receivable' is defined as 'an interest in or claim under a policy of insurance which is a right to payment of a monetary obligation for health-care goods or services provided.' 801 ILCS 5/9-102(46). Surgicore argues that the primary effect of this statute on this issue is that, when an individual assigns a right to payment under an insurance policy to the person who provided health-care goods or services, the provider has no need to file a financing statement against the individual. Thus, the question is whether this statute, as it pertains to healthcare receivables from an employee welfare benefit plan, is preempted by ERISA. This Court finds that it is.

It is well established that employee welfare benefit plans are governed by ERISA; state law causes of action that 'relate to' employee welfare benefit plans are therefore preempted by ERISA. 29 U.S.C. § 1144(a); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987); Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58 (1987). A law 'relates to' an employee benefit plan if it (1) has a connection with or (2) reference to such a plan. California Div. of Labor Standards Enforcement v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 324 (1997) (citations omitted). Where a state law 'acts immediately and exclusively upon ERISA plans . . . . or where the existence of ERISA plans is essential to the law's operation . . . . that 'reference' will result in preemption.' Id.

Here, the Illinois law upon which Surgicore relies has a 'connection with' the ERISA plans at issue, and therefore, the ERISA preemption provision applies. Article 9 governs secured transactions generally, and the text of the statute does not specifically refer to ERISA plans. As Surgicore concedes in its response brief, however, the Article 9 provision as applied in this particular issue 'was intended only to concern the healthcare provider's ' right to payment' in order to legislate direct payment of insurance proceeds from the insurance companies to healthcare providers for the patient's convenience and benefit.' Resp. Br. at 6 (emphasis added). [FN3] Because the state law at issue seeks to shift control over benefit distribution, the law 'interferes with the administration of [a plan].' DeBartolo, 2002 WL 338878, at *3 (citations omitted); see also Egelhoff v. Egelhoff, 532 U . S. 141, 148 (2001) (stating that payment of benefits is a 'central matter of plan administration'). Thus, ERISA preempts these state law claims and this Court GRANTS Principal's motion to dismiss Counts VI through X of the Amended Complaint.

FN3 In support, Surgicore cites 29 U.S.C. § 1144(b)(2)(A) for the proposition that 'state regulation of insurance is not preempted.' The Supreme Court in Pilot Life, however, specifically noted that ERISA's 'deemer clause'

(§ 1144(b)(2)(B)) provides that no employee benefit plan shall be deemed to be an insurance company for purposes of any state law 'purporting to regulate insurance.' 481 U.S. at 45; see also Met. Life Ins. Co., 481 U.S. at 733.

C. Counts II and IV

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III. Conclusion

For the foregoing reasons, this Court GRANTS Principal's motion to dismiss the state law claims in the Amended Complaint, Counts VI through X, and DENIES the motion to dismiss the ERISA claims, Counts I through V.

2002 WL 1052034 (N.D.Ill.)