The U.S. Court of Appeals for the Ninth Circuit, in Solis v. T. Mobile US, Inc., has reversed a group health plan’s denial of benefits because the plan failed to follow ERISA’s claims procedure.
Law. ERISA’s claims procedure regulations require employee benefit plans to provide adequate written notice to any participant whose claim for benefits has been denied. This notice must: (i) be composed in a manner calculated to be understood by the participant; (ii) set forth the specific reasons for the denial; and (iii) afford a reasonable opportunity to the participant for a full and fair review of the decision denying the claim.
Facts. A participant in his employer’s group health plan submitted a claim for hernial surgery. When the claim was denied, he sued in federal district court, claiming he had received an inadequate explanation of why the claim had been denied. The district court agreed with the participant, and the plan appealed to the Ninth Circuit.
Appeals Court. The Ninth Circuit agreed with the district court that the plan’s denial was insufficient to meet the regulatory standards of the Department of Labor, observing that the plan had failed to identify a particular plan provision upon which the denial was based. The court refused to let the plan provide additional information as to the basis for its denial during the appeal, noting a prior case in which it stated that, “[A] court will not allow an ERISA plan administrator to assert a reason for denial of benefits that it had not given during the [participant’s claims] administrative process.”
The Ninth Circuit also found that the plan’s “denials were conclusory, twice using non-committal phrases such as ‘may be’ without any further explanation. [The plan’s] explanatory deficiencies during the administrative process failed to provide meaningful engagement and denied [the participant] the opportunity to address the specific bases for [the plan’s] denials.” Accordingly, the court ruled that this violated ERISA’s requirements, stating that, “This explanatory deficiency, the district court correctly concluded, amounted to a procedural irregularity…[and] underscores the district court’s conclusion that [the plan’s] claims denial was insufficient under ERISA.”
The Ninth Circuit determined that a review of the full record of the plan’s denial may produce sufficient evidence to permit the participant to respond to the claim denial and, therefore, further fact-finding is necessary before the case can be decided. Consequently, the Ninth Circuit remanded the case to the district court to either retry the matter or instruct the plan to reevaluate the merits of the claim after proper augmentation of the administrative record.