A recent New York State Court of Appeals decision, Aetna Health Plans v. Hanover Insurance Company (NY Slip Op 04658, June 14, 2016), creates yet another worry for doctors and patients with respect to medical billing and ultimate responsibility for those bills.

The issue presented is whether a health insurer that pays for medical treatment that should have been covered by the insured’s no-fault automobile insurance carrier may maintain a reimbursement claim against the no-fault insurer within the framework of the Comprehensive Motor Vehicle Reparations Act (New York Insurance Law section 5101).

The insured in this case, Luz Herrera, sustained personal injuries while operating a vehicle insured by defendant Hanover Insurance Company. At the time of the accident, Herrera had private health insurance through plaintiff Aetna. The Aetna plan was an ERISA-based plan, which means that any payments made by the plan are subject to a lien against any third party recovery.

Some of Herrera’s medical providers submitted bills to her Aetna health plan as opposed to the Hanover no-fault insurance policy. Aetna wrote to Hanover seeking reimbursement for medical bills erroneously paid by Aetna that should have been billed to the no-fault carrier. Simultaneously, Aetna filed a lien for reimbursement should Herrera be successful in resolving the personal injury case. Herrera herself sent bills that were erroneously paid by Aetna to Hanover demanding reimbursement. Hanover did not respond to either request.

Herrera demanded arbitration pursuant to her policy with Hanover, claiming that she was entitled to no-fault benefits based upon Aetna’s lien. The arbitrator ruled against Herrera, stating that she lacked standing because Aetna paid the bills and Aetna’s lien was unsatisfied at the time.

Initially, medical bills totaling over $19,000 were incorrectly submitted to Aetna. Herrera’s medical providers continue to submit additional medical bills to Aetna, incorrectly, totaling another $23,500. Herrera then assigned her rights against Hanover to Aetna. Aetna then commenced the action against Hanover seeking reimbursement for the amounts paid on Herrera’s behalf.

Aetna conceded that as a health insurer or plan, it was not a provider of health services as contemplated by the insurance regulations, which permit only an insured or providers of health services to receive direct no-fault payments. Because Aetna is not a healthcare provider, Herrera could not assign her rights.

The court concluded that because Aetna is not a healthcare provider under the no-fault statute, it was not entitled to direct payment of no-fault benefits. Furthermore, the court held that Aetna was “not in privity of contract with Hanover and had not shown that it was an intended third-party beneficiary of Hanover’s contract with Herrera.” Finally, the court determined that Aetna could not sustain a cause of action under subrogation principles because there was no authority permitting a health insurer to bring a subrogation action against the no-fault insurer for sums the health insurer was contractually obligated to pay its insured.  Judge Stein aptly points out in her concurring opinion that Aetna should have denied and not paid the benefits.

The decision does not go into any detail with respect to whether Herrera satisfied the lien out of any third party recovery relating to her personal injury case. This decision, however, raises interesting questions. Assuming Herrera was successful in her personal injury case, she would be contractually obligated to repay Aetna based upon the lien. Does she now have a claim against her no-fault carrier for reimbursement or does she have a claim against her medical providers for incorrectly billing her health insurance plan? Judge Stein asked a similar question in her concurrence. Does Aetna now have a cause of action against the providers who incorrectly and improperly billed Aetna as opposed to the no-fault carrier?

In any event, the medical providers, due to a mistake in billing practices, may be exposed to litigation. Doctors, healthcare providers, and medical billers are therefore cautioned to obtain the appropriate information from the patient when it comes to submitting bills to the proper insurance carrier or health plan. It would appear that even an honest mistake could expose the medical provider to otherwise unnecessary litigation.