even by the unique beneficiary who likes to visit his or her dentist, because defendant's system already prevents such overutilization. The plan contracts explicitly limit coverage to "necessary" treatment; therefore, defendant may validly refuse to pay for unnecessary services.
It is likely that an injunction would lead to full-utilization of defendant's insurance coverage. In other words, beneficiaries who cannot afford to pre-pay would be able to assign their right to payment to plaintiffs, and thereby receive necessary treatment. Although defendant may have assumed less than full-utilization in calculating its premium structure, it cannot assert that any resulting financial loss should be measured against the beneficiaries' current hardship. Beneficiaries may reasonably expect defendant to produce a premium structure based upon full-utilization, rather than under-utilization, even though this may lead to a future increase in premiums.
C. Defendant's concerns about "overstated" fees and the loss of its direct payment structure do not tip the balance of hardships in its favor.
Defendant also alleges that an injunction would result in "overstated" charges for services. For example, a plaintiff non-participating dentist and a participating dentist both list the fee charged for a tooth filling at $ 100. If the co-payment is 20% of the fee charged, the participating dentist will receive $ 80 in direct payment, and will bill the patient for $ 20. Under this injunction the plaintiff dentist will also receive $ 80 in direct payment by virtue of the beneficiary's assignment of her right to payment. Unlike the participating dentist, however, he only intends to receive $ 80, by virtue of his co-payment waiver. Defendant reasons that the $ 100 charge is thereby overstated. Apparently, defendant would consider such a dentist entitled to only 80% of $ 80, or $ 64.
Plaintiffs' response is that co-payment waivers do not produce any harm to defendant. In the above example, both the non-participating plaintiff dentist and the participating dentist receive $ 80 from defendant. Despite the co-payment waiver, says plaintiff, defendant pays out the same amount to all dentists.
This dispute about the co-payment waivers underscores defendant's legitimate desire to differentiate between participating and non-participating dentists. Participating dentists submit to defendant's quality control. Defendant claims that direct payment is the only way it has found to compensate participating dentists for their cooperation. This injunction will essentially award direct payment to all dentists, and eliminate defendant's main method of enlisting participating dentists.
Defendant's valid concerns about "overstated" fees and the loss of its direct payment recruitment device may be addressed by other means, e.g., a fee schedule which sets coverage amounts for various services. This injunction neither forces defendant to pay plaintiffs any more than it pays participating dentists, nor prohibits other incentives for participating dentists. The Court finds that the balance of hardships tips toward plaintiffs, who stand in the shoes of those beneficiaries currently unable to obtain dental services.
III. The question of whether ERISA prohibits defendant's refusal to honor the assignments is serious enough to require further litigation.
Because the balance of harm tips decidedly in their favor, plaintiffs are held to a lower standard of likelihood of success on the merits: the Court must grant the request for preliminary injunction if it finds at an "irreducible minimum" that plaintiffs have raised questions serious enough to require litigation. Benda, 584 F.2d at 315.
Although the statute is silent on the issue, plaintiffs have certainly raised a serious question as to whether ERISA applies to defendant's "no assignment" policy. When ERISA does not specifically address an issue of employee benefit law, the Court has a duty to develop the law in accordance with ERISA's underlying policies. See Firestone Tire and Rubber Company, et al. v. Bruch, 489 U.S. 101, 109 S. Ct. 948, 954, 103 L. Ed. 2d 80 (1989) (courts are to develop a federal common law of rights and obligations under ERISA-regulated plans). No single sentence guides the Court's interpretation of the statute; the Court instead looks to "the provisions of the whole law, and to its object and policy." Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 51, 95 L. Ed. 2d 39, 107 S. Ct. 1549 (1987) (interpreting ERISA pre-emption clause).
ERISA governs two types of plans: employee pension benefit plans and employee welfare benefit plans. 29 U.S.C. §§ 1002(1), 1002(2), 1002(3). Defendant's dental insurance plans are "employee welfare benefit plans." Congress expressly stated that pension benefit plans may not be assigned or alienated, but did not address the question of assignment of welfare benefit plans. 29 U.S.C. § 1056(d)(1).
The issue of welfare benefit plan assignment has been partially addressed in earlier cases. The express bar on assignment of pension plans, and the lack of any mention of assignment of welfare plans, means that ERISA does not bar assignment of the right to payment for welfare plan services. Mackey v. Lanier Collection Agency, 486 U.S. 825, 100 L. Ed. 2d 836, 108 S. Ct. 2182 (1988); Misic v. Building Service Employees Health and Welfare Trust, 789 F.2d 1374 (9th Cir. 1986). In fact, the assignment of the right to payment for welfare plan services results in precisely the benefit that ERISA is designed to protect. Misic at 1377. Such assignments
"protect beneficiaries by making it unnecessary for health care providers to evaluate the solvency of patients before commencing medical treatment, and by eliminating the necessity for beneficiaries to pay potentially large medical bills and await compensation from the plan. Moreover, assignments permit a trust fund to obtain improved benefits for beneficiaries by bargaining with health care providers for better coverage and lower rates."
Misic at 1377; see also, Hermann Hospital v. MEBA Medical & Benefits Plan, 845 F.2d 1286, 1289 n. 13 (5th Cir. 1988) (if patients are unable to assign their rights to payment, health care providers may be discouraged from helping patients who cannot afford to pre-pay for services).
Defendant refuses to honor the assignments at issue, although they are good for beneficiaries and are not prohibited by ERISA. Does it necessarily follow that ERISA requires defendant to honor the assignments? The statute offers no express help on this issue, nor do the Mackey and Misic cases. The question is serious enough to require litigation, in light of ERISA's underlying policy to protect the interests of participants in employee benefit plans. See 29 U.S.C. 1001(b).
IV. Plaintiff is not required to post security for this preliminary injunction.
The party opposing a preliminary injunction may request the moving party to post security pursuant to Fed.R.Civ.P. 65(c). Because defendant did not make such a request, and because under Fed.R.Civ.P. 65(c) the amount of any bond rests within this Court's discretion, plaintiff will not be required to post security. See Clarkson, Co., Ltd. v. Shaheen, 544 F.2d 624, 632 (2nd Cir. 1976); Orantes-Hernandez v. Smith, 541 F. Supp. 351, 385 n. 42 (C.D.Cal. 1982) (the question whether and in what amount security should be posted is a matter left to the Court's discretion); Corrigan Dispatch Co. v. Casa Guzman, S.A., 569 F.2d 300, 303 (5th Cir. 1978) (trial court may elect to require no security at all).
The significant possibility that certain beneficiaries are currently unable to obtain dental treatment tips the balance of hardships in favor of plaintiffs. The question of whether ERISA prohibits defendant's no-assignment policy is serious enough to require litigation.
For the foregoing reasons, pending completion of trial in this matter or further order of this Court, defendant shall not refuse to honor any plan beneficiary's assignment of his or her right to payment to his or her treating dentist for any service rendered after December 31, 1990.
A status conference in this matter shall be held on February 26, 1991 at 2:30 P.M.