A boy was a derivative beneficiary of a group health insurance plan governed by the Employee Retirement Income Security Act (ERISA) furnished by his father’s employer. The terms of the plan were set out in a subscriber certificate. The subscriber certificate made clear that coverage under the plan was subject to a determination of medical necessity made by a claims administrator. The subscriber certificate specified that the plan covered treatment for psychiatric illnesses, including biologically based conditions (e.g., autism) and, for children until age nineteen, for non-biologically based conditions (e.g., behavioral problems), but did not cover residential, custodial, or medically unnecessary services, such as those performed in educational, vocational, or recreational settings. The subscriber certificate stipulated that only the least intensive type of setting required for treatment of a condition would receive approval. Any non-emergency inpatient course of treatment required approval before the patient was admitted to the facility.
The document called the premium account agreement defined the relationship between the employer and the claims administrator. The document stated that the plan administrator was the fiduciary to whom the employer had granted full discretionary authority and that all determinations of the claims administrator would be conclusive and binding on all persons unless it could be shown that a particular determination was arbitrary and capricious.
The boy experienced a number of mental health issues beginning in early childhood. His condition intensified in severity in the summer between his freshman and sophomore years in high school. He became physically aggressive toward his parents and attended weekly mental health therapy sessions. Although enrolled in an intensive outpatient educational facility, he continued to exhibit aggressive behavior that led to multiple arrests. His problems escalated because he steadfastly refused to take medications despite a court order requiring him to do so.
Concerned about the apparent inadequacy of his care, his mother enrolled him (at her own expense and without prior approval) in a wilderness therapy program based in Utah, which specialized in neurodevelopmental disorders. The boy remained there for three months. His psychological evaluators there diagnosed him as having Asperger’s Syndrome, anxiety disorder, and attention deficit and hyperactivity disorder. Noticing some improvement, they recommended that he continue therapy in a longer-term setting.
On the advice of a consultant and without prior approval, the mother enrolled the boy in a private school treatment center in Utah that the plan administrator insisted was “out of network” (that is, not in a contractual relationship with the plan administrator). While at the private school treatment center, the boy’s aggressive and emotionally erratic behavior continued.
The boy’s father’s employer submitted claims to the claims administrator for three sets of psychiatric evaluations and consultation services in connection with the boy’s admission to the private school treatment center. The claims administrator informed the employer that the private school treatment center was a non-covered provider but that it would cover the three sets of evaluations as a one-time exception. The private school treatment center itself submitted claims seeking reimbursement for principally residential services rendered to boy dating back to his admission.
In an informal process, the claims administrator denied the room and board claims because the services were not medically necessary and the submitted documentation did not support the need for an inpatient admission. In an explanatory letter, the claims administrator advised the boy’s father that its denial of benefits was based largely upon an evaluation conducted by a psychiatrist-reviewer, who relied upon a nationally recognized set of criteria used to assess the level of care for mental health patients. Given the psychiatrist-reviewer’s evaluation, the claims administrator concluded that the boy’s clinical condition did not meet the medical necessity criteria required for an acute residential psychiatric stay.
The boy’s mother contested the denial of coverage through the claims administrator’s internal review process. In support of her appeal, she furnished documentation from the boy’s psychotherapists, evaluators, and educators in addition to police reports and juvenile court records. Collectively, these materials described his difficulties involving physical and verbal aggression, emotional volatility, lack of impulse control, and thinking errors. This pattern of conduct, the mother maintained, posed a danger to her son and to others.
A second psychiatrist-reviewer scrutinized the administrative record and recommended that the claims administrator uphold the denial of benefits. He cited the absence of any medical necessity for the placement and reiterated the conclusions of the first psychiatrist-reviewer. The claims administrator denied the internal appeal in a letter to the woman.
The woman sued her group health insurance plan under ERISA to challenge the decision of the claims administrator partially denying her claim for benefits. The complaint claimed that the claims administrator committed serious procedural violations by not engaging in dialogue with her, answering her questions, or taking materials into account that she submitted in the course of the internal review.
The United States District Court for the District of Massachusetts granted the claims administrator’s motion for summary judgment and upheld the partial denial.
The First Circuit United States Court of Appeals affirmed the district court’s finding that the plan administrator did not commit procedural violations, vacated the district court’s application of the arbitrary and capricious standard to the plan administrator’s decision to deny benefits, and remanded. The court held that the woman received a sufficiently definite explanation of the claims administrator’s reasons for denying benefits; the letter from the claims administrator ended with an outline of the relevant internal appeal procedures and, thus, substantially complied with that aspect of the ERISA notice requirements; the claims administrator’s mere act of upholding a denial of benefits could not mechanically be equated with overlooking medical evidence that tended to support a different outcome; and de novo review applied to the plan administrator’s decision to deny benefits.
The woman received a sufficiently definite explanation of the claims administrator’s reasons for denying benefits. The letter from the claims administrator stated “your child’s clinical condition does not meet the medical necessity criteria required for an acute residential psychiatric stay in the area of symptoms/behaviors.” The court found this was a clear and concise communication of the reasons it was denying payment for some services, even in the absence of a discussion directly engaging with the plan’s medical necessity criteria.
The letter from the claims administrator ended with an outline of the relevant internal appeal procedures and, thus, substantially complied with that aspect of the ERISA notice requirements. Although an ERISA claims administrator must give particular reasons for the denial of benefits under a group health insurance plan, it need not spell out the interpretive process that generated the reason for the denial. The record showed the woman developed an effective claim and was able to navigate the claims administrator’s internal review process.
The claims administrator’s mere act of upholding a denial of benefits could not mechanically be equated with overlooking medical evidence that tended to support a different outcome. The claims administrator was not obliged to accept unquestioningly the pronouncements of the boy’s psychotherapists. Even though a participant under a group health insurance plan is entitled to have the claims administrator engage in a meaningful dialogue and clearly communicate the reasons for its actions, ERISA does not create any obligation for claims administrators to respond exhaustively to each and every list of questions a participant propounds.
De novo review applied to the plan administrator’s decision to deny benefits. A challenge to a denial of benefits under a group health insurance plan is to be reviewed de novo unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan. Such authority must be expressly provided for and notice of that reservation must appropriately be given to plan participants. The subscriber certificate’s statement that the claims administrator “decides which health care services and supplies that you receive (or you are planning to receive) are medically necessary and appropriate for coverage” was not sufficiently clear to give notice to the woman that the claims administrator enjoyed discretion in interpreting and applying plan provisions. Thus, the default rule applied for the claims administrator’s decision to be subject to de novo review. Any terms that concern the relationship between the ERISA claims administrator and the beneficiaries cannot be held against the beneficiaries where the terms appear in a contract between the employer and the claims administrator that was never seasonably disseminated to the beneficiaries against whom enforcement is sought.
The First Circuit United States Court of Appeals affirmed the district court’s finding that the plan administrator did not commit procedural violations, vacated the district court’s application of the arbitrary and capricious standard to the plan administrator’s decision to deny benefits, and remanded.
See: Stephanie C. v. Blue Cross Blue Shield of Massachusetts HMO Blue, Inc., 2016 WL 629058 (C.A.1 (Mass.), Feb. 17, 2016) (not designated for publication).
For medical journal articles about residential mental healthcare see:
Preyde M, Watkins H, Csuzdi N, et al. Nonsuicidal selfinjury and suicidal behaviour in children and adolescents accessing residential or intensive homebased mental health services. J Can Acad Child Adolesc Psychiatry. 2012 Nov;21(4):27081. PMID: 23133461.
Dinwiddie GY, Gaskin DJ, Chan KS, et al. Residential segregation, geographic proximity and type of services used: evidence for racial/ethnic disparities in mental health. Soc Sci Med. 2013 Mar;80:6775. doi: 10.1016/j.socscimed.2012.11.024. PMID: 23312305.
Stewart SL, Hirdes JP. Identifying mental health symptoms in children and youth in residential and inpatient care settings. Healthc Manage Forum. 2015 Jul;28(4):1506. doi: 10.1177/0840470415581240. PMID: 26015486.
For law articles discussing residential mental healthcare see:
David Chorney, A Mental Health System in Crisis and Innovative Laws to Assuage the Problem, 10 J. Health & Biomedical L. 215 (2014).
Megan Lagreca, Treating a Chronic Case of Discrimination: The Ninth Circuit’s Prescription for Mental Health Patents’ Rights in Harlick v. Blue Shield, 58 Vill. L. Rev. 269 (2013).
Stacey A. Tovino, A Proposal for Comprehensive and Specific Essential Mental Health and Substance Use Disorder Benefits, 38 Am. J.L. & Med. 471 (2012).
For news articles regarding inpatient mental health care see:
Carolyn Gusoff, Parents Fight To Save LI’s Only Inpatient Mental Health Facility For Children, CBS Local (September 20, 2013).
Tonya Strickland, SLO County lacks inpatient mental health care facilities for seniors, children and the privately insured, The San Luis Obispo Tribune (October 12, 2015).
Thomas Brennan, Inpatient mental health care improved aboard Camp Lejeune, Jacksonville Daily News (April 14, 2014).