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Plan Must Consider All “Independent Grounds” for Claims Coverage

by | Dec 14, 2023 |

The U.S. Court of Appeals for the Tenth Circuit, in Ian C. v. UnitedHealthcare Ins. Co., has ruled that a group health plan violated ERISA’s claims procedures by failing to separately evaluate each “independent ground for coverage.”

Facts. The son of a group health plan participant was admitted to a residential treatment facility for: (1) generalized anxiety disorder; (2) unspecified depressive disorder; (3) cannabis use disorder; (4) parent-child relational problems; and (5) alcohol use disorder. The plan covered such residential treatment if the services were “medically necessary” under the terms of the plan. However, such coverage ceases when “factors which led to admission have been addressed” and “the member can be safely transitioned to a less intensive level of care.”

After a period of time, the plan’s claims administrator determined that residential treatment was no longer necessary because the son “had made progress…was not endangering the welfare of himself or others…was attending and participating in programming…[and] was tapered off his antidepressants as his mood was stable[.]”

The participant sued the plan, claiming, among other things, that because the plan had failed to examine the son’s substance abuse as an independent ground for coverage, it had violated ERISA’s claims procedures.

The district court dismissed the case, ruling that the plan’s decision to deny benefits was not arbitrary and capricious and complied with ERISA. The participant proceeded to appeal the district court’s adverse decision to the Tenth Circuit.

Tenth Circuit. After reviewing the matter, the Tenth Circuit overturned the lower court’s ruling, stating that under ERISA, plan administrators, as fiduciaries, have a “duty to see that those entitled to benefits receive them. This process requires a ‘meaningful dialogue’ between both parties to unearth all the relevant evidence surrounding the participant’s claim and to guarantee that benefits are distributed according to the plan.”

It then noted that the plan denied benefits because the son’s “generalized anxiety disorder no longer required 24-hour nursing care or supervision provided at this level of care” and because he had “made progress.” The claim denial said that the son’s only remaining symptom was “parental-child conflict,” which the plan determined was treatable in a “less restrictive setting.” The court observed that the denial made no substantive mention of the son’s substance abuse.

Based on the foregoing, the court ruled that the plan was not justified in “shutting its eyes” to the possibility that the son was entitled to benefits based on his substance abuse alone. It explained that if an administrator’s claims decision ignores an independent ground for coverage and there is “scant evidence” to refute the claimant’s theory, then the decision fails to comply with ERISA.  A “good faith exchange of information” presumes that the administrator will consider any relevant evidence in the shared record between the parties that supports the claimant’s receiving benefits.

Ultimately, the court concluded that none of the plan’s arguments dissuaded it from concluding that the plan “arbitrarily and capriciously denied [the son’s benefits residential treatment] and deprived [the participant] of a full and fair review of his administrative appeal [under ERISA.]” Therefore, the court remanded the case to the lower court with instructions to consider all independent grounds for coverage, including substance abuse.