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The 11th U.S. Circuit Court of Appeals on Oct. 25 cleared the way for two Alabama physician assistants (PAs) to pursue a class action against the state’s Blue Cross health insurance program. The plaintiffs charge that the insurer refuses to pay such assistants for rendering the same types of medical services as doctors who are paid under the program. Hobbs v. Blue Cross and Blue Shield of Alabama, No. 01-10019. Reversing an Alabama federal district court ruling, the 11th Circuit held that the PAs’ state law claims, which Blue Cross had removed to federal court, were not preempted by the Employee Retirement Income Security Act (ERISA) because the PAs — who are neither plan participants nor beneficiaries — never had standing to trigger ERISA’s “complete preemption rule.” The class certification issue had not been reached before the lower court’s dismissal. Attorney Royce A. Ray III of Mobile, Ala.’s Finkbohner Law Firm represented the PAs. He said that while not waiving the “lack of standing” finding, the real focus of the PAs’ argument was that under ERISA’s “savings clause,” the act does not preempt state laws regulating insurance. The U.S. Supreme Court had made this clear in Unum Life Insurance Co. v. Ward in 1999, Ray said. Richard Bearden of Birmingham, Ala.’s Massey, Stotser & Nichols, also represented the PAs. He said Blue Cross has fought this battle before, in non-ERISA contexts and with other types of medical practitioners such as dentists and nurses. The nonprofit insurer had won some of those cases, however, because of other laws exempting it from otherwise applicable state insurance regulations unless those regulations expressly mentioned the code provision under which the corporation was enacted. The statute governing PAs’ had cured this defect, Bearden explained. Leigh Anne Hodge of Birmingham, Ala.’s Balch & Bingham, which represented Blue Cross, said she was planning to petition for rehearing, based on both an internal opinion inconsistency and an inconsistency with Williams v. Best Buy Co., another 11th Circuit decision decided by the same three judges in that same week. At one point, Hodge explained, the circuit’s opinion says that the plaintiffs didn’t raise the standing issue until their appeal, but later the opinion indicates that the issue had been raised in the PAs’ remand motion. Hodge added that in Williams, in which a fact-based question of jurisdiction had similarly not been raised until the appeal, the case was sent back to the district court level for limited discovery. The court’s failure to do so in this case — and its holding, instead, that Blue Cross had failed to meet its burden of producing evidence of an assignment creating derivative standing — deprived Blue Cross of an opportunity to seek discovery on and challenge the lack of standing argument, Hodge said. Bearden said the amount of damages sought by the potential class would be developed in discovery. While not knowing the number of PAs affected, he said, “the company’s refusal to pay physician assistants is working a great hardship.”

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