In a case of first impression, the Superior Court of New Jersey in Atlantic Plastic & Hand Surgery, P.A. v. Ralling held that a parent who is the named insurance policyholder is not liable for unreimbursed medical expenses incurred by an emancipated child who is a covered “adult child” dependent pursuant to the Patient Protection and Affordable Care Act (ACA) and may not be considered a guarantor under the Statute of Frauds without the requisite written instrument. This decision was made in a summary judgment ruling on November 16, 2021, with the opinion approved for publication on December 9, 2022.
Section 300gg-14 of the ACA requires that individual and group insurance plans that provide “dependent coverage of children . . . continue to make such coverage available for an adult child until the child turns 26 years of age.” Before the ACA, many health plans and insurers could, and did, remove young adults from their parents’ policies because of their age, leaving many college graduates and others with no insurance. Since its enactment in March 2010, there has been limited judicial consideration of this section of the ACA. The implementing federal regulation makes it clear that an insurer may not define eligibility for dependency by factors other than the relationship between the child and the subscriber.
The pertinent facts of Atlantic were that in October 2017, 24-year-old William Ralling sustained significant facial, elbow, and hand injuries in a skateboarding accident. He was taken to the emergency room at Riverview Hospital. His mother joined him and was present for the examination by Dr. Risin, a surgeon with Atlantic Plastic & Hand Surgery, P.A. Dr. Risin informed William and his mother that he was an out-of-network provider in their health insurance plan. During the conversation, the mother commented that they had insurance and that Dr. Risin should take care of William. In the ensuing litigation, Dr. Risin took the position that he understood that comment to be a guarantee of payment by the parent for any unreimbursed expenses.
Atlantic submitted a claim with the insurer for $50,626.38 as its usual and customary charges for the services rendered to William. The insurer, however, only paid $1,423.29 with a check payable to the parent policyholder, which was forwarded to the medical practice. After attempts to negotiate a resolution for the remaining balance of $49,202.47, a lawsuit was commenced against William and his parents. The complaint set forth theories of breach of contract, book account, unjust enrichment, and quantum meruit.
The defendants contended that to the extent that the mother’s comments in the emergency room constituted a guarantee of William’s unreimbursed medical expenses, such a claim was barred by the Statute of Frauds. The court described the issue of whether a family member’s oral guaranty of payment can be enforceable where the promisor has no pecuniary interest as also being a question of first impression. The opinion provides an extended review and analysis of the Statute of Frauds going back to its modeling after the English Parliament in 1677 and its evolution through case law and statutory amendments. It found that the presence of some pecuniary interest on the part of the putative guarantor—triggering the “leading object” exception—was a recurring requirement in the statutes and case law. The court found that the only thing William’s mother had to gain was the non-financial parental benefit of a child receiving care for facial injuries. Thus, the court concluded that the oral promise supported by familial bonds does not satisfy the Statute of Frauds’ exception to the requirement of a writing and, accordingly, the claim was unenforceable.
Turning to the other issue of first impression concerning policyholder liability, the court began its analysis with the observation that as of his 18th birthday, William was an adult. It also observed that there was no dispute that William was emancipated and had the ability to contract for care in his own right. In a footnote, the court declined to “wade into the waters” of what result would occur where a child’s parents were not married, the child was not emancipated, or where the parental obligation to provide for the child’s basic necessities was apportioned by a court through an order or a consensual agreement between the parents.
The court recognized that the pertinent provision of the ACA “imposes no obligation on a policyholder, but merely mandates that the insurer make the specified coverage available.” Also, the ACA is silent as to the imposition of financial obligations on parental policyholders for unreimbursed medical expenses provided to an adult child at the request of and with the parents’ approval. In the absence of a viable guaranty, the court held that there was no authority supporting the theory of liability against the parents. It noted that Atlantic cited no supporting authority, and the court’s own research did not find any. In fact, the only published opinion that could be found was the New York Supreme Court’s 2019 decision in Westchester County Health Care Corp. v. Ceus, which in construing the ACA similarly rejected the providers’ claims of an obligation on the parental policyholder.
The grant of summary judgment as to the Atlantic complaint was only as to the parents. Summary judgment in favor of William was denied. Following arbitration proceedings, the case against William was settled.