On appeal from the Superior Court of New Jersey, Law Division, Somerset County, SOM-L-511-00.
Before Judges Pressler, Wefing and Parrillo.
The opinion of the court was delivered by: Parrillo, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
This is an appeal by plaintiffs Paul Vessa, M.D., and his medical practice Somerset Orthopedic Associates, P.A., from the trial court's dismissal of their declaratory judgment action. The action was brought by plaintiffs under the New Jersey Declaratory Judgment Law, N.J.S.A. 2A:16-50 to -62, seeking to invalidate an anti-assignment provision in health care contracts issued by defendant Horizon Blue Cross and Blue Shield of New Jersey (Horizon) to subscriber-insureds prohibiting the assignment of benefit payments to non-participating physicians such as plaintiff Vessa. The trial court denied the relief sought, refusing to enforce assignments of benefit payments executed by Horizon's insureds in favor of plaintiffs. For the following reasons, we affirm.
Horizon is a non-profit health service corporation authorized and established under the Health Service Corporations Act, N.J.S.A. 17:48E-1 to -48. Horizon provides health benefits to its members, known as subscribers, under either individual or group health insurance plans. In addition to its Health Maintenance Organization (HMO) members, Horizon subscribers receive benefits under a variety of coverage options pursuant to benefit contracts that are either non-group (individual), employer-based, or government-based.*fn1 Generally, these benefit contracts provide that, upon payment of a periodic subscription premium by the subscriber or on his behalf, Horizon agrees to pay a certain amount for described health care services contracted for by the subscriber. The amount to be paid is determined by the terms of the insurance contract between Horizon and the subscriber.
Horizon provides health benefits to its subscribers through a network of registered medical providers, who have contractually agreed to participate in Horizon's program and render services to subscribers on a set-fee basis. The medical providers who enter into these contracts with Horizon are called "participating" providers. The contracts between Horizon and the participating providers require the providers to accept agreed-upon payments for specified services as payment in full, thus relieving the subscriber of any further financial burden and, in turn, require Horizon to pay each participating provider directly, this doubtlessly to encourage greater participation in the network. Thus, "[a] participating provider of health care services is one who agrees in writing to render health care services to or for persons covered by a contract or contracts issued by a health service corporation in return for which the health service corporation agrees to make payment directly to the participating provider." N.J.S.A. 17:48E-10(b).
Providers who have not entered into contracts with Horizon to accept agreed-upon payments as payment in full are "non- participating." Unlike participating providers to whom payment is made directly by Horizon on behalf of the subscriber – as provided in the Horizon-subscriber health benefits contract – when services are performed by a non-participating provider, payment may be made by Horizon directly to the subscriber – also as provided in the Horizon-subscriber health benefits contracts. All Horizon-subscriber insurance contracts contain an anti- assignment provision, allowing or requiring Horizon not to accept or honor assignments of benefits made to non-participating providers.*fn2 In other words, in all these contracts, Horizon has preserved its discretionary right to not accept assignment of benefits.*fn3
Plaintiff Vessa is a duly licensed physician in New Jersey and, through his medical practice Somerset Orthopedic Associates, P.A., provides health care services to patients, a number of whom are insured under individual or group health plans underwritten, funded, or administered by Horizon. Plaintiffs do not participate in the Horizon network of medical providers. Although they are "non-participating" providers, in an effort to collect payment directly from Horizon for services they provide to Horizon subscribers, plaintiffs have taken assignments of Horizon subscribers' benefits and submitted them to Horizon for payment. Horizon, relying on the anti-assignment clause in its subscriber contracts, refuses to pay plaintiffs directly, but instead sends payment to the subscriber. In their declaratory judgment suit, plaintiffs challenge the validity of this anti-assignment clause, arguing that it is contrary to the law of assignment in New Jersey.
To be sure, "the modern approach to contracts rejects traditional common-law restrictions on the alienability of contract rights in favor of free assignability of contracts." Rumbien v. Utica Mut. Ins. Co., 757 A.2d 526, 531 (Conn. 2000). See Restatement (Second) of Contracts § 317 comment c (1981) (observing that "the historic common-law rule that a chose in action could not be assigned has largely disappeared."). Thus, in New Jersey, all choses in action arising on contract are assignable. N.J.S.A. 2A:25-1; Kimball Intern. v. Northfield Metal Prods., 334 N.J. Super. 596, 612 (App. Div. 2000). It has been long held that any beneficial contract may be assigned, and courts of law will protect the rights of the assignee suing in the name of the assignor. Parsons v. Woodward, 22 N.J.L. 196, 205-06 (Sup. Ct. 1849).
Although contract rights are generally freely assignable, the rule is not absolute. Where a contract uses specific and express language sufficiently manifesting an intention to prohibit the power of assignment without the consent of one or more of the contracting parties, courts generally uphold these contractual anti-assignment clauses. Owen v. CNA Insurance/Continental Cas. Co., 167 N.J. 450, 460-61 (2001)*fn4; Garden State Bldgs. v. First Fidelity Bank, 305 N.J. Super. 510, 522 (App. Div. 1997). See also Bel-Ray Co. v. Chemrite (Pty) Ltd., 181 F.3d 435, 442 (3d Cir. 1999). And although the free assignment of choses in action may be a valuable goal of public policy, it will not override competing, superior public interests. See, e.g., N.J.S.A. 34:11-4.14 (generally prohibiting assignment of wages); N.J.S.A. 34:15-29 (precluding assignment of workmen's compensation claims or awards); Cureton v. Joma Plumbing & Heating Co., 38 N.J. 326, 333 (1962) (to the same effect); N.J.S.A. 43:21-15(c) (precluding assignment of unemployment benefits); Village of Ridgewood v. Shell Oil, 289 N.J. Super. 181, 195 (App. Div. 1996) (holding that a tort claim cannot be assigned prior to judgment); Caldwell v. Ogden Sea Transp., 618 F.2d 1037, 1048 (4th Cir. 1980) (observing that the public policy underlying the prohibition against assignment of prejudgment tort claims is "to protect unscrupulous strangers to an occurrence from preying on the deprived circumstances of an injured person."); Parkway Ins. Co. v. N.J. Neck & Back, 330 N.J. Super. 172, 183-88 (Law Div. 1998) (holding that limitations imposed by N.J.S.A. 39:6A-4(e) on assignment of medical expense benefits without the written consent of the insurer in insurer's auto insurance policies are enforceable against medical provider assignees because they advance the public policy of cost reduction.). See also Parrish Chiropractic Ctrs., P.C. v. Progressive Cas. Ins. Co., 874 P.2d 1049 (Colo. 1994) (to the same effect).
With specific reference to the matter at hand, the validity of anti-assignment clauses in group health care contracts has been upheld almost uniformly in the courts of other states. See St. Francis Reg'l Med. Ctr. v. Blue Cross Blue Shield of Kan., 810 F. Supp. 1209 (D. Kan. 1992); Parrish v. Rocky Mountain Hosp. & Med. Servs. Co., 754 P.2d 1180, 1182 (Colo. Ct. App. 1988); Kent General Hosp., Inc. v. Blue Cross & Blue Shield of Del., 442 A.2d 1368 (Del. 1982); Augusta Med. Complex v. Blue Cross of Kan., 634 P.2d 1123 (Kan. 1981); Obstetricians-Gynecologists, P.C. v. Blue Cross & Blue Shield of Neb., 361 N.W.2d 550 (Neb. 1985); Kassab v. Medical Serv. Ass'n. of Pa., 39 Pa. D. & Pa. C.2d 723 (1966), aff'd, 230 A.2d 205 (Pa. 1967); Riddle Mem'l Hosp. v. Blue Cross of Greater Philadelphia, 63 Pa. Del. Cty. 361 (Pa. Common Pleas 1976); cf. Davidowitz v. Delta Dental Plan of Cal., Inc., 946 F.2d 1476, 1478-81 (9th Cir. 1991) (holding that ERISA welfare payments are not assignable in the face of an anti-assignment clause in the health benefit plan); Washington Hosp. Ctr. Corp. v. Group Hosp. and Med. Servs., Inc., 758 F. Supp. 750, 753-55 (D. D.C. 1991) (same); but see American Med. Int'l v. Arkansas Blue Cross & Blue Shield, 773 S.W.2d 831 (Ark. 1989) (striking down anti-assignment clause in group health care policy in view of statute that states that "all . . . contracts, in writing, for the payment of money or property, or for both money and property, shall be assignable"); Toranto v. Blue Cross and Blue Shield of Texas, 993 S.W.2d 648, 649 (Tex. 1999).
In holding that these anti-assignment clauses are enforceable against assignments to out-of-network medical providers of the insured's right to receive benefits under the policy, these cases conclude that such clauses "are valuable tools in persuading health [care] providers to keep their costs down" and as such override the general policy favoring the free alienability of choses in action. Rocky Mountain Hosp., supra, 754 P.2d at 1182; see also St. Francis, supra, 810 F. Supp. at 1218-20; Kent General Hosp., supra, 442 A.2d at 1371-72; Obstetricians-Gynecologists, supra, 361 N.W.2d at 555-56. In other words, the anti-assignment clause has been deemed to advance the overarching public interest in limiting health care costs for, if the patient could assign his or her rights to payment to outside medical providers, it would undercut the pre- arranged costs with in-network providers that are relied upon by non-profit health services corporations in deciding the premium amount. See generally Rocky Mountain Hosp., supra, 754 P.2d at 1182; Kent General Hosp., supra, 442 A.2d at 1371-72; Augusta Med. Complex, supra, 634 P.2d at 1126-27; Obstetricians-Gynecologists, supra, 361 N.W.2d at 556. Accordingly, these cases have held that the purported assignment of benefits to a non-participating medical provider, in the face of an anti- assignment clause in a group health care policy, is void and unenforceable against the insurer as contrary to public policy.
In assessing the validity of anti-assignment provisions in a contract, New Jersey has adopted the standard advocated by the Restatement (Second) of Contracts. See Owen, supra, 167 N.J. at 467. Section 317 recognizes the validity of assignments, but specifically identifies ...