An employee welfare benefit plan governed by the Employee Retirement Income Security Act (ERISA) had specific Level of Care Guidelines for Residential Treatment Facilities for Children and Adolescents (“Level of Care Guidelines”). These provided:
The goal of Residential treatment is for stabilization of those symptoms that led to the admission and to facilitate a successful transition back to the community. In addition residential treatment is a level of care where the expectation is that improvement to a substantially better level of functioning can occur through the active participation of the client in the recommended treatment. This is not identical to placement in a therapeutic group home, where the structure of the program manages behaviors without an expectation that the client actively cooperates with the recommended treatment. This level of care is not meant primarily for the purpose of maintenance of gains made earlier in treatment.
The plan also provided Guidelines for Continued Stay at the residential level of care with the following mandatory elements:
1. The child/adolescent continues to meet all basic elements of medical necessity.
2. The child/adolescent (and family as appropriate) has participated in the development of an individualized treatment plan, which includes consideration of all applicable and appropriate treatment modalities, realistic and achievable treatment goals, and a discharge plan with specific timelines for expected implementation and completion. Despite active participation by the participant, the treatment plan implemented has not led to enough improvement in the child/adolescent's condition such that he/she cannot yet safely move to and sustain improvement in a less restrictive level of care as evidenced by:
• the child/adolescent continues to suffer from symptoms and/or behaviors that led to this admission; OR
• the child/adolescent has developed new symptoms and/or behaviors that require this intensity of service for safe and effective treatment; AND
• the facility is able to show that they are actively working to identify a comprehensive plan to support the child/adolescent's transition to a community setting.
3. The child/adolescent and family continue to participate in active weekly face-to-face (or an approved alternate schedule) family therapy. Multifamily group is not a substitute for individual family therapy.
A covered participant in an employee welfare benefit plan sought coverage from the plan for his daughter’s mental health residential treatment. The daughter was reportedly suffering from an eating disorder, suicidal ideation, self-injurious behavior, obsessive-compulsive disorder, and borderline personality disorder.
The designated claim administrator for the Mental Health and Substance Abuse Program under the plan approved coverage for the initial period of the daughter's stay at the residential treatment facility. However, after 25 days of residential treatment, the claim administrator denied further coverage for continued residential treatment. The claim administrator based its denial on information provided by the residential treatment facility. Specifically, the claim administer considered that the daughter was medically and psychologically stable, had not engaged in self-harming, was at 90% of her ideal body weight, and was not exhibiting suicidal ideation.
The father appealed the denial of coverage after 25 days of residential treatment. The plan administrator subjected the denial of coverage to three internal peer reviews conducted by three different doctors under its employ. Each doctor communicated with the daughter’s treating therapist to assess whether the Level of Care Guidelines were met. Each doctor determined that the guidelines were not met and the requested services were not covered.
Following the plan’s appeals process, the father requested a review of the plan administrator's second level appeal decision by an Independent Review Organization (IRO). The appeal was conducted by an IRO, which was chosen at random and had no affiliation with the plan administrator. The IRO considered the records from the administrator's file regarding the daughter as well as documentation and letters from her parents. The IRO agreed with the administrator's denial of coverage and agreed that the daughter did not meet the medical necessity criteria of the Level of Care Guidelines for residential treatment from 25 days after admission to the residential facility through her discharge.
The father sued the employee welfare benefit plan and the designated claim administrator. The complaint alleged that the plan and its administrator acted arbitrarily and capriciously in denying benefits and denying all subsequent appeals and that in doing so they violated ERISA, its supporting regulations, federal common law of ERISA, and Pennsylvania common law regulating the construction and interpretation of insurance contracts. The plan and the administrator filed motions for summary judgment.
The United States District Court for the Eastern District of Pennsylvania granted the motion for summary judgment in favor of the employee welfare benefit plan and designated claim administrator. The court held that the plan administrator's decision was not arbitrary and capricious.
The decision of the administrator to deny coverage for the participant's daughter to stay in residential treatment for mental health issues was not arbitrary and capricious. As of the date of the denial of coverage, her admission symptoms had improved, and while she was still experiencing symptoms of depression and her eating disorder, she could obtain further treatment at a lower level of care than twenty-four hour residential treatment. The court reasoned that the daughter’s status at the time of the denial of coverage was such that she had achieved the goals of residential treatment as described in the Level of Care Guidelines, specifically, that the symptoms that led to her admission had stabilized. The court also noted that she no longer met the requirements for coverage of the Guidelines for Continued Stay in residential treatment. She no longer met the first factor because residential stay treatment was no longer clinically appropriate, in terms of type, frequency, extent, site, and duration and not more costly than an alternative service or sequence of services at least as likely to produce equivalent therapeutic or diagnostic results. She no longer met the second factor because her residential treatment up to that point had led to enough improvement that she could safely move to and sustain the improvement in a less restrictive level of care than residential treatment.
It was not arbitrary and capricious for the administrator to determine, in light of the plan language, the relevant level of care guideline provisions, and the daughter's condition, that she could receive appropriate treatment as a lower level of care than the residential treatment she had been receiving. At each level of review following the initial denial of coverage, the plan language and level of care guidelines were weighed against her condition and symptoms as of the date of denial. Each appeal from the administrator's decision to deny coverage was followed by a new peer review with the daughter's treating physicians and therapists. Each review referenced specific medical evidence regarding her symptoms and improvement, as well as the pertinent language in the Level of Care Guidelines, in concluding that her continued stay at the residential mental health facility was not medically necessary beyond 25 days after admission. Finally, the administrator submitted the case to an independent review organization, which agreed that the administrator's denial of continued residential treatment was proper.
The United States District Court for the Eastern District of Pennsylvania granted the motion for summary judgment in favor of the employee welfare benefit plan and designated claim administrator.
See: Hurst v. Siemens Corp. Group Ins., 2014 WL 4230458 (E.D.Pa., August 27, 2014) (not designated for publication).
See also Medical Law Perspectives, June 2013 Report: Independent Medical Evaluations: Legal Risks and Responsibilities