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Michael P. v. Aetna Life Insurance Co.

United States District Court, D. Utah, Central Division

September 11, 2017

MICHAEL P. et al., Plaintiffs,
v.
AETNA LIFE INSURANCE COMPANY, and BECTON, DICKINSON AND COMPANY GROUP LIFE AND HEALTH PLAN, Defendants.

          MEMORANDUM DECISION AND ORDER

          DAVID SAM SENIOR JUDGE UNITED STATES DISTRICT COURT

         I. INTRODUCTION

         Plaintiffs are parents Michael and Karilyn P. and their daughter Kirstyn, who seek to recover benefits for Kirstyn's residential treatment under 29 U.S.C. § 1132(a)(1)(B). Through his employment and during the relevant time period, Michael P. was a participant in the Becton, Dickinson and Company Group Life and Health Plan (the “Plan”)[1] and Karilyn and Kirstyn were beneficiaries of the Plan. The Plan was administered by Aetna Life Insurance Company (“Aetna”). The Plan is a self-funded employer sponsored welfare benefit plan that is governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq.

         Kirstyn, who has a history of mental, behavioral and emotional disorders, was treated at New Haven Residential Treatment Center (“New Haven”). Aetna by letter dated July 13, 2015, denied Plaintiffs' claim for services because New Haven did not meet the Plan's definition of a residential treatment facility and, therefore, it was not a covered service. (AETPER00130-134).

         Plaintiffs filed two appeals with Aetna.

         By letter dated September 19, 2015, Plaintiffs filed a level one appeal asserting that because New Haven is duly licensed in Utah it should be covered as a residential treatment center, and that Aetna's denial of benefits was a violation of the Mental Health Parity and Addictions Equity Act of 2008 (the “Parity Act”). (AETPER00123-128).

         Aetna failed to issue its level one appeal decision within 60 days as required. (AETPER00484; 29 C.F.R. § 2560.503-1(i)(1)(i)). On January 1, 2016, Plaintiffs called to request a decision on the appeal. Aetna acknowledges the delay in notifying Plaintiffs of its decision, but asserts that a decision on the appeal was made on October 24, 2015. (AETPER0046-048 & 00260). Aetna finally issued its denial of Plaintiffs' claims by letter dated December 31, 2015, stating that Plaintiffs failed to comply with precertification procedures as required, and repeating that New Haven did not qualify as a residential treatment facility under the Plan. (AETNAPER00154-156).

         Plaintiffs filed a level two appeal on February 8, 2016, arguing among other things, that-- precertification cannot be a basis for denial because the Plan states that failure to precertify would only result in a reduction of benefits; they were not given a fair level one appeal because Aetna's response contained no explanation as to how the reviewer arrived at its conclusion; residential treatment was a covered benefit; and, Aetna's failure to pay for treatment at New Haven violated the Parity Act. (AETNAPER00159-165).

         Aetna reported its final appeal decision to Plaintiffs in a letter dated February 24, 2016, upholding its denial because Plaintiffs failed to comply with required precertification procedures set forth in the Plan. (AETPER00219-221).

         This litigation followed. The parties have filed cross-motions for summary judgement.

         II. Standard of Review [2]

         “[A] denial of benefits challenged under [ERISA] is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.” Firestone Tire & Rubber Co. V. Bruch, 489 U.S. 101, 115 (1989). If the plan gives the administrator discretionary authority, courts “employ a deferential standard of review, asking only whether the denial of benefits was arbitrary and capricious.” Weber v. GE Group Life Assur. Co., 541 F.3d 1002, 1010 (10th Cir. 2008) (internal quotation marks and citation omitted).[3] Aetna contends that an arbitrary and capricious standard of review applies, while Plaintiffs urge that de novo review is applicable.[4]

         It is undisputed that Plan language properly delegates discretionary authority to Aetna which ordinarily suggests deferential review. However, Plaintiffs assert that de novo review applies because Aetna failed to strictly comply with Plan requirements for review of their September 19, 2015 appeal. The Court agrees.[5]

         Procedural irregularities, such as the plan administrator's failure to comply with ERISA or Plan mandated time limits in deciding an administrative appeal, “require” application of de novo review. LaAsmar v. Phelps Dodge Corp. Life, Accidental Death & Dismemberment & Dependent Life Ins. Plan, 605 F.3d 789, 796 (10th Cir. 2010) (emphasis added) (applying de novo review where the plan administrator resolved the administrative appeal 170 days after receiving the appeal instead of within 60 days as required by ERISA regulations and plan provisions). See also Rasenack ex rel. Tribolet v. AIG Life Ins. Co., 585 F.3d 1311, 1315-1318 (10th Cir. 2009) (de novo review applied where plan administrator unduly delayed both in initially deciding the claim and in resolving the subsequent appeal); Hancock v. Metro Life Ins. Co., 590 F.3d 1141, 1152 (10th Cir. 2009) (“de novo review may be appropriate if the benefit-determination process did not substantially comply with ERISA regulations”). It is uncontroverted that Aetna failed to notify Plaintiffs of its initial decision within the time-frame required.

         In opposing de novo review, Aetna, in essence, argues that it has substantially complied with the relevant time requirements. See Def.[‘] Mem. Opp'n at 17 (“Here, Plaintiffs have failed to show anything more than a de minimis departure from the procedural terms of the Plan with respect to timeframe for mailing members notice of an appeals decision, and have not shown any substantive harm.”).

         This Court, like other courts, need not decide the “continuing validity of the substantial compliance test we have used to avoid creating a rule that would automatically permit de novo review for every violation of the deadlines.” Rasenack, 585 F.3d at 1316.As explained in LaAsmar:

We need not decide whether that “substantial compliance” doctrine still applies to the revised regulation at issue here, 29 C.F.R. § 2560.503-1, because even assuming it does apply, MetLife did not substantially comply here with ERISA's requirement of a timely resolution of an administrative appeal. In our cases addressing the prior regulation, we stated that an administrator substantially complied if the procedural irregularity was ” (1) ‘inconsequential'; and (2) in the context of an on-going, good-faith exchange of information between the administrator and the claimant.” Finley, 379 F.3d at 1174 (quoting Gilbertson, 328 F.3d 635); see also Rasenack, 585 F.3d at 1317. Assuming, without deciding, that test would apply under the revised regulation, MetLife has failed to meet it because the 170-day delay in this case did not occur within “the context of an on-going, good-faith exchange of information between the administrator and the claimant.” Finley, 379 F.3d at 1174 (quoting Gilbertson, 328 F.3d at 635).

LaAsmar, 605 F.3d at 800. The same holds true for this case. Aetna points to no evidence of record that there was any such ongoing good faith exchange of information between it and Plaintiffs. Therefore, even assuming that the substantial compliance doctrine is still valid, Aetna has failed to meet that test. The Court, therefore, will apply a de novo standard of review.

         III. DISCUSSION

         A. Denial of Coverage

         For the reasons that follow, the Court agrees with Aetna that because New Haven does not meet the Plan's definition of a Residential Treatment Facility, and because Plaintiffs failed to obtain precertification as required, Plaintiffs' claim for coverage at New Haven was properly denied.

         1. Residential Treatment Facility

         Aetna initially denied Plaintiffs' claim because New Haven did not meet the Plan's definition of a residential treatment facility. The Plan defines Residential Treatment Facility as an institution that meets a list of requirements, including the following: “Services are managed by a licensed Behavioral Health Provider who, while not needing to be individually contracted, needs to (1) meet the Aetna credentialing criteria as an individual practitioner, and ...


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