The claims administrator of an employer-sponsored health plan abused its discretion when it rejected a health benefits claim because it: (1) denied it without an explanation or plausible support; (2) had a structural conflict of interest because it was also the insurer; and (3) violated ERISA regulations by merely reciting its policy without refuting the opinion of the participant’s care provider, the U.S. District Court for the District of Oregon recently found.
This case (Yox v. Providence Health Plan, 3:12-CV-01348-HZ (D.C. Ore., Dec. 31, 2013)) shows the importance of complete and ERISA-compliant communication to participants in determining whether a plan denial can be overturned in court.
The Facts
Kelly Yox was covered under her husband’s employer’s group health plan, which was administered and insured by Providence Health.
In March 2011, Yox went into a seizure, fell and broke her jaw. Dr. Brett Ueeck performed open reduction and internal fixation surgery to repair the jaw and two weeks later, he performed another procedure to treat an infection that developed at the surgery site.
Months later, in August 2011, Dr. Mohammed Saleh, a dentist, performed a series of fillings, extractions, restorations, bone grafts and mandibular adjustments on Yox. In a preauthorization request to the plan, Saleh said these were needed because of the jaw fracture.
In October 2011, Providence coverage refused to pay for the work performed by Dr. Saleh, calling them dental procedures outside the scope of health plan. On second appeal, Saleh and Yox said the newer work was a “direct, but late” consequence of the accident. The plan convened a grievance committee hearing in December 2011, then authorized payment for one tooth extraction and replacement implant, leaving most of the bill to the patient, saying her need for most of the work predated the accident.
The committee recommended that Yox go to the Oregon University’s dental school for an evaluation of her teeth before the fall. She did not, but her dentist sent the plan a letter describing her dental state before her accident.
In January 2012, the plan authorized payment for the one tooth and rejected payment for all other work performed by Dr. Saleh. In its final decision, it said Yox could appeal to an independent review organization, and enclosed a form setting out her “Grievance and Appeal Rights.” Later that month, Yox appealed to an IRO.
The IRO on Feb. 22, 2012, upheld the plan’s decision. Yox filed a motion for summary judgment with the court.
Court: Plaintiff Had Right to Sue
Because the plan had reserved itself discretionary authority in the plan document, the court would use an abuse-of-discretion, rather than a de novo, standard of review.
Yox said the court should review the denial with “additional skepticism” because Providence had a structural conflict of interest; that is, it both made claims decisions and acted as the funding source when paying claims. The court agreed to weigh the conflict of interest when seeing whether there was abuse of discretion.
Court: Plan Abused Discretion
Yox’ asserted that Providence improperly: (1) relied on file reviewers rather than accepting the conclusions of Yox’ doctors, or hiring its own expert examiner; (2) violated ERISA rules regarding full and fair review; and (3) failed to provide rational evidence supporting the denial.
Not only did Providence rely on a “paper only” review of the claim, it also failed to explain why it rejected Dr. Saleh’s opinion that the dental work was needed because of the trauma of the fall. By failing to rebut that opinion, it arbitrarily refused credible evidence, the court said.
Secondly, the plan’s review process failed to identify the specific medical policy on which it relied for the denial. And while Providence relied on medical experts, none of them had training or experience in dental reconstruction.
Then Providence failed to adequately inform Yox she had a right to bring a civil action, even though it said (in tiny script) that if she took the IRO path, she would be waiving her right to bring a civil action. That was not an affirmative notification of her rights to file suit in court under ERISA Section 502(a).
Finally, the plan’s denial letters merely recited its policy of covering no dental services, but did not explain why Saleh’s services were not medical or why they were medically unnecessary. Yox presented evidence from her dentist that many of her teeth had no problems before the accident, but the plan failed to consider it.
Taken together, the facts tilted toward an abuse-of-discretion finding. The court granted summary judgment for Yox and rejected the plan’s attempt to take the case to trial.
For more information on claims appeals procedures under ERISA, see Section 542 of the Employer’s Guide to Self-Insuring Health Benefits.