Not So Fast!: Second Circuit Remanded Out-Of-Network Medical Provider’s Suit Against ERISA Plan

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On June 9, 2025, the Second Circuit affirmed the principle that an out-of-network medical provider may not sue for medical benefits allegedly due to its patient under an ERISA-governed plan but remanded to provide the patient an opportunity to move to be substituted as the real party in interest.[1]

ERISA’s Comprehensive Scope

Congress established the Employee Retirement Income Security Act of 1974 (“ERISA”) to serve as a comprehensive framework governing employer-sponsored health, welfare, and retirement benefits offered to eligible employees and qualifying dependents. According to a 2024 fact sheet issued by the U.S. Department of Labor, there are approximately 2.6 million ERISA health plans, 801,000 private pension plans, and 514,000 other welfare benefit plans that collectively cover 156 million workers, retirees, and dependents.[2]

ERISA also provides an avenue for a participant or beneficiary of an ERISA-governed health plan to challenge a denial or adverse benefit determination. Typically, such a challenge is brought pursuant to Section 502(a)(1)(B), 29 USC §1132(a)(1)(B), which permits “a participant or beneficiary . . . to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.”

Litigation can arise over allegations of improper claims handling or amounts of reimbursement. And in the context of medical claims, it is not uncommon to see claims brought by out-of-network healthcare providers whose expectations of reimbursement from their patients’ insurers/health plans are not governed by contract.

The Decision

The Second Circuit’s most recent opinion in Karkare arose from one such out-of-network provider’s dissatisfaction with the amount of reimbursement received from his patient’s ERISA-governed plan. The claims administrator reimbursed the practice, an out-of-network provider, based on the plan’s “customary charge” and denied the provider’s appeal.

Karkare, a physician affiliated with the medical practice, obtained a power of attorney from the patient and sued the patient’s ERISA-governed plan, alleging that the plan had violated its obligations under ERISA Section 502(a)(1)(B).

The district court ordered that Karkare show cause why the case should not be dismissed for Karkare’s failure to provide proof of an assignment of benefits. Karkare responded that his power of attorney to bring claims in place of the patient was sufficient and no assignment was necessary.

The district court disagreed, dismissed the complaint for lack of standing, and denied Karkare’s motion for reconsideration.

Karkare appealed to the Second Circuit and argued that he had Article III standing as the patient’s attorney-in-fact.

The Second Circuit reaffirmed that ERISA Section 502(a)(1)(B) must be “narrowly construed” and limited to “participants and beneficiaries.”[3] A physician may only bring a Section 502(a) claim, therefore, if the ERISA-governed plan does not contain a prohibition of assignments and the physician has, in fact, obtained a valid assignment from the patient.[4]

Because Karkare never obtained a valid assignment, the Second Circuit concluded that Karkare lacked Article III standing. He could not, in his own right, show an “injury in fact” with a sufficient “causal connection between the injury and the conduct complained of” and a “likelihood that the injury will be redressed by a favorable decision.”[5]  The medical practice, not Karkare, was the entity entitled to the alleged underpayments. And although Karkare alleged that he was bringing suit in a representative capacity, the power of attorney did not “transfer an ownership interest in [the patient’s] claim” and the allegations of the complaint made plain that Karkare was attempting to act on his own (or the medical practice’s) behalf and not on behalf of the patient.[6] 

The Second Circuit affirmed the district court’s dismissal for lack of subject matter jurisdiction based on Karkare’s lack of Article III standing.[7] But the court concluded that the patient would have standing to maintain a Section 502(a) claim and, therefore, remanded to allow the patient “to move to be substituted into the action or to otherwise submit an amended complaint that properly asserts the ERISA claim on behalf of” the patient as may be permitted under Federal Rule of Civil Procedure 17(a)(3).[8]

Ultimately, the Second Circuit concluded that the lack of Article III standing in this case amounted to a “defective jurisdictional allegation” that could be cured through an amended pleading that substituted in the real party in interest—the patient.

The Karkare decision serves as a reminder that in addressing a provider suit, consideration should be given to whether the claims implicate the ERISA plan participant or beneficiary’s right to benefits and, if so, whether they are properly asserted in a representative capacity.

_{[1] Karkare v. Int’l Ass’n of Bridge, 2025 WL 1618132 (2d Cir. 2025).}

_{[2] https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/ebsa-monetary-results#:~:text=approximately%202.6%20million%20health%20plans,estimated%20$14%20trillion%20in%20assets.}

_{[3] Karkare, 2025 WL 1618132 at *2 (quoting Rojas v. Cigna Health & Life Ins. Co., 793 F.3d 253, 256 (2d Cir. 2015)).}

_{[4] Karkare, 2025 WL 1618132 at *2 (citing Am. Psych. Ass’n v. Anthem Health Plans, Inc. 821 F.3d 352, 359 (2d Cir. 2016); McCulloch Orthopaedic Surgical Servs., PLLC v. Aetna Inc., 857 F.3d 141, 147-48 (2d Cir. 2017)).}

_{[5] Karkare, 2025 WL 1618132 at *3 (cleaned up). The Second Circuit also distinguished Karkare’s power of attorney with an assignment of benefits claim.}

_{[6] Id., 2025 WL 1618132 at *4.}

_{[7] Id.}

_{[8] Id. at *4. Fed. R. Civ. P. 17(a)(3) (a “court may not dismiss an action for failure to prosecute in the name of the real party in interest” until after a “reasonable time has been allowed for the real party in interest to ratify, join, or be substituted into the action”).}