De Novo Standard Does Not Save Participant's Claim

Although the Fifth Circuit Court of Appeals, in Ariana v. Humana Health Plan of Texas, held that the "de novo" standard of review applies to a denial of benefits, this was not sufficient to save a group health plan participant's claim for denial of benefits.

The participant's daughter was partially hospitalized to treat an eating disorder. The plan approved benefits for 49 days of partial hospitalization, but denied benefits for additional days after concluding that continued hospitalization was not "medically necessary." Despite the plan's decision, the daughter remained partially hospitalized for another 106 days.

The participant then challenged the plan's decision to discontinue coverage by bringing suit in federal district court. After reviewing the claim using the "arbitrary and capricious" standard, the district court ruled in favor of the plan. In turn, the participant appealed the decision to the Fifth Circuit.

Note: Generally, the default standard of review for benefit denials in an ERISA-covered plan is the de novo standard of review, which means that a court will independently review a claim and not defer to the plan administrator's, or insurer's, decision. However, if the plan document (or insurance contract) grants discretionary authority to determine benefit entitlement, the court applies a less demanding arbitrary and capricious standard of review, under which the plan's or insurer's decision will be upheld unless it is determined to be "without reason, unsupported by substantial evidence or erroneous as a matter of law."

In its first ruling the Fifth Circuit held that, in the absence of specific plan provisions, the more rigorous de novo standard of review applied to both factual and legal interpretations by the plan.

The case was then returned to the lower court to make a determination based on the de novo standard and that court ruled in favor of the plan based on the fact that two board-certified psychiatrists reviewed the daughter's case and found several required criteria absent during the claimed treatment period.

On a second appeal, the Fifth Circuit held that, even under the de novo standard, the plan did not err in finding that the final 106 days hospitalization were medically unnecessary, and that the district court had correctly entered judgment for the plan.