Employee benefit claimants’ entitlement to a full and fair review of claim denials prior to judicial intervention is embedded in the Employee Retirement Income Security Act.[1] Regulations promulgated by the U.S. Department of Labor flesh out the specifics as to what constitutes such a review.[2]
When claim administrators fall short of those standards, they face consequences, as the U.S. Court of Appeals for the Tenth Circuit explained on May 15 in D.K. v. United Behavioral Health.[3]
The message the Tenth Circuit’s ruling sends to insurers is important because it clearly establishes that health benefit administrators are required to acknowledge and address the evidence submitted by claimants. A decision will not be upheld simply because it is supported by a doctor’s opinion. Instead, insurers must engage with the opinions of the treating doctors and explain their basis for any disagreement.
This story mentions suicide. If you are experiencing thoughts of suicide, the Suicide and Crisis Lifeline is available 24 hours a day at 988 or online at 988lifeline.org
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The case involved a claim for health insurance benefits brought by the parents of a middle schooler, A.K., whose longstanding suicidal ideation and numerous suicide attempts necessitated frequent emergency room visits and in-patient hospitalizations. In an effort to help A.K. stabilize, her doctors recommended extended residential treatment.
Although United Behavioral Health initially covered the recommended residential treatment, it cut off benefits after three months even though A.K.’s symptoms had not stabilized, and she remained at risk of suicide. A.K.’s parents submitted numerous appeals and provided United with extensive medical evidence; however, United maintained its denial.
The plaintiffs then brought suit against United, claiming a denial of their right to a full and fair review. Both the U.S. District Court for the District of Utah and the Tenth Circuit sided with the plaintiffs, finding the claim denial was arbitrary and capricious due to United’s failure to address the treating doctors’ opinions in support of ongoing insurance coverage, and due to United’s failure to support the denials with an adequate explanation.
The Tenth Circuit also determined that an award of benefits, rather than a remand to allow United to re-evaluate the claim, was an appropriate remedy.
Although the Tenth Circuit explained that United had discretionary authority to determine A.K.’s eligibility for benefits, it upheld the district court’s finding that the denial was arbitrary and capricious. Under Tenth Circuit precedent, a court’s deferential review of an ERISA-governed benefit determination looks at whether the decision
(1) was the result of a reasoned and principled process, (2) is consistent with any prior interpretations by the plan administrator, (3) is reasonable in light of any external standards, and (4) is consistent with the purposes of the plan.[4]
A determination is considered inconsistent with the plan’s purpose if the decision maker fails “to consistently apply the terms of an ERISA plan” or provides “an interpretation inconsistent with the plan’s unambiguous language.”[5]
The court found United’s failure to reconcile its decision with the treating doctors’ opinions was arbitrary and capricious because it denied the plaintiffs a full and fair review, overruling United’s argument that health benefit claim standards were not as stringent as the requirements for disability benefit claims.
While the court acknowledged the U.S. Supreme Court ‘s 2003 ruling in Black & Decker Disability Plan v. Nord,[6] which found that the opinions of treating doctors were not automatically entitled to deference, that same decision also held that benefit plans may not arbitrarily refuse to credit such opinions when they constitute reliable evidence.
The court further observed that claim reviewers “cannot shut their eyes to readily available information … [that may] confirm the beneficiary’s theory of entitlement.”[7]
The Tenth Circuit determined that despite the plaintiffs’ submission of well-supported opinions from A.K.’s doctors explaining her treatment needs and their rationale for seeking ongoing residential treatment, “United effectively ‘shut its eyes’ to readily available medical information.”
The Tenth Circuit also found United liable for not complying with the ERISA regulation that mandates an explanation of the basis for disagreeing with or not following the views expressed by treating doctors.[8] Although the court recognized the regulation applied specifically to disability claims, the Tenth Circuit cited the preamble to those regulations that described them as consistent with ERISA’s overall requirements.
The reviewing court also relied on ERISA’s broad fiduciary obligations to conclude:
Administrators may not shirk their broad fiduciary responsibilities by pointing to a lack of specified minimum standards in a narrow area.
Thus, the court held United was not relieved of its obligation to address the medical opinions supporting coverage and was required to conduct a meaningful dialogue with the plaintiff.
Despite the parents’ efforts to get United’s reviewers to address the treating doctors’ opinions, the insurer’s denial letters did not even mention the letters that had been submitted from the treating doctors or address their content. Even when the plaintiffs pointed out in their request for external review that the treating doctors’ opinions had not been considered, the reviewer merely reiterated the rationale from the prior denials.
The court thus found United’s determinations deficient because they lacked “any analysis, let alone a reasoned analysis,” and because they failed to indicate that any consideration was given to the treating doctors’ warnings about A.K.’s need for ongoing residential treatment due to a risk of relapse.
Finally, the Tenth Circuit upheld the district court’s award of benefits. Although the court observed that a remand would be appropriate under some circumstances, an outright award of benefits is warranted when the record clearly shows an entitlement to benefits.
Applying that standard, the court held:
Considering the administrator’s clear and repeated procedural errors in denying this claim, it would be contrary to ERISA fiduciary principles to mandate a remand and provide an additional “bite at the apple.”
There is much to unpack in this ruling. Distilled to its core, the Tenth Circuit’s citation to the U.S. Court of Appeals for the Ninth Circuit ‘s 1997 ruling in Booton v. Lockheed Medical Plan sums upeverything that went wrong with United’s review.[9]
Boot on, which also involved health insurance coverage that had been denied, quoted one of the greatest movie lines of all time from “Cool Hand Luke”— “What we got here is a failure to communicate.” Communication failure was the problem in D.K. as well.[10] Reports from multiple treating doctors unequivocally established the need for further care, yet United’s denials failed to engage with those opinions and explain why they were rejected.
In recent years there have been several major journalistic exposes of mental health treatment denials by large insurers, but this opinion goes further by telling insurance companies that saying “no” isn’t going to cut it.[11]
In reaching that conclusion, the court clarified that even where the Department of Labor’s regulations are denominated as applying to disability benefit claims, the policy behind the regulations makes the duty to provide an explanation applicable to all claims. Thus, when an insurer denies coverage for treatment, it owes the claimant an explanation that addresses the evidence submitted.
Insurers must also offer specific reasons based on plan language and the claim record that justify rejection of the claimant’s evidence. That obligation is derived from the ERISA statute, the claim regulations, ERISA’s fiduciary duties and basic common sense.
United’s behavior in this case rendered the plaintiffs’ appeals pointless. Had United adequately explained why it disagreed with the treating doctors and the plaintiffs still disagreed, they could have a massed additional responsive evidence. A meaningful dialogue between the parties could have potentially changed the claim determination and would have avoided the delay of litigation.
The court’s refusal to remand also sent a sharp message to United and other insurers that if they fail to fulfill their duty to fully and fairly adjudicate claims, there will be no second chance to dig up new evidence.[12] Instead, they will face the consequences of their actions and will be required to pay for the benefits they denied.
As the D.K. ruling shows, when insurers deny benefits that are critically needed by seriously ill patients, they better have a good reason for doing so. The Tenth Circuit imposed a level of accountability on insurers that was long overdue.
Mark DeBofsky is a shareholder at DeBofsky Law Ltd.
This article was first published by Law 360 on May 31, 2023.
[1] 29 U.S.C. § 1133 mandates that employee benefit plans must “afford a reasonable opportunity “for claimants to receive “a full and fair review by the appropriate named fiduciary of the decision denying the claim.”
[2] 29 C.F.R. § 2560.503-1.
[3] D.K. v. United Behavioral Health, 2023 U.S. App. LEXIS 11794, 2023 WL 3443353 (10th Cir. May 15, 2023).
[4] Citing Flinders v. Workforce Stabilization Plan of Phillips Petroleum Co., 491 F.3d 1180, 1193(10th Cir. 2007).
[5] Citing Tracy O. v. Anthem Blue Cross Life & Health Ins., 807 F. App’x 845, 854 (10th Cir.2020).
[6] Black & Decker Disability Plan v. Nord, 538 U.S. 822, 831, 123 S. Ct. 1965, 155 L. Ed. 2d1034 (2003).
[7] Citing Gaither v. Aetna Life Ins. Co., 394 F.3d 792, 807 (10th Cir. 2004).
[8] 29 C.F.R. § 2560.503-1(g)(1)(vii)(A)(i).
[9] Booton v. Lockheed Medical Benefit Plan, 110 F.3d 1461 (9th Cir. 1997).
[10] Cool Hand Luke (Warner Bros. 1967).
[11] See, e.g., “Denied” by Scott Pelley (60 Minutes, December 14, 2014), available at https://www.cbsnews.com/news/mental-illness-health-care-insurance-60-minutes/; Rucker, Millerand Armstrong, “How
Cigna Saves Millions by Having Its Doctors Reject Claims Without Reading Them,” ( Pro Publica, March 25, 2023), available at https://www.propublica.org/article/cigna-pxdx-medical-health-insurance-rejection-claims.
[12] Dabertin v. HCR Manor Care Inc., 373 F.3d 822, 832 (7th Cir. 2004) (“It would be a terribly unfair and inefficient use of judicial resources to continue remanding a case to the Committee to dig up new evidence until it found just the right support for its decision to deny an employee her benefits.”)
