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Stacy S. v. Boeing Company Employee Health Benefit Plan (Plan 626)

United States District Court, D. Utah, Northern Division

September 25, 2018

STACY S., individually and as guardian of M.K., a minor, Plaintiff,
v.
THE BOEING COMPANY EMPLOYEE HEALTH BENEFIT PLAN PLAN 626, and VALUEOPTIONS, Defendants.

          MEMORANDUM DECISION AND ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

          ROBERT J. SHELBY UNITED STATES DISTRICT JUDGE.

         This case involves medical treatment that M.K., a minor, received from March 27 to July 1, 2013. Plaintiff, M.K.'s mother, brought this action for recovery of medical benefits that Defendants Boeing Company Employee Health Benefit Plan and ValueOptions (collectively, ValueOptions) denied. Plaintiff and ValueOptions each filed a Motion for Summary Judgment. For the reasons stated below, Plaintiff's Motion for Summary Judgment is DENIED[1] and ValueOptions' Motion for Summary Judgment is GRANTED.[2]

         BACKGROUND

         M.K. is a beneficiary of the Boeing Company Employee Health Benefit Plan (the Plan). Drawing on the criteria explained in the Plan, ValueOptions denied Plaintiff's request for coverage for M.K.'s stay at Aspen, a residential treatment center (RTC) in Utah.

         The Plan Language

         The Plan provides benefits for Boeing employees, spouses, and dependents. The summary plan description (SPD) states that the Boeing Company Board of Directors designated a committee to serve as Plan Administrator, which has the “absolute discretion” to “[d]elegate its administrative duties and responsibilities to persons or entities of its choice such as the Boeing Service Center, the service representatives, and employees of the Company.”[3] The SPD also states that “[a]ll decisions that the Plan Administrator (or any duly authorized designees) makes with respect to any matter arising under the Plan and any other Plan documents are final and binding.”[4] The SPD defines “service representative” as “an agent that the Company has contracted with to make benefit determinations and administer benefit payments under the plans described in this booklet.”[5] ValueOptions is listed as the service representative for mental health benefits.[6] Under the heading “Who Administers the Benefits, ” the SPD states, “the Company has contracted various service representatives to handle the day-to-day administration of the plan. Service representatives answer benefit questions, make benefit decisions, pay claims, process claim appeals, and account for premiums, service fees and claim costs.”[7]

         The SPD also states a beneficiary may file a civil action in the district court within 180 days after “[d]ecision on appeal of your claim for benefits or eligibility.”[8]

         Denial of Coverage

         This case stems from a denial of coverage for M.K.'s stay at Aspen, an RTC. Prior to her stay at Aspen, M.K. had been hospitalized at Seattle Children's Hospital after Plaintiff discovered M.K. was cutting herself. M.K.'s physician at Seattle Children's Hospital modified M.K.'s medication, and M.K. was discharged on March 9, 2013, with her physician's recommendation that she participate in outpatient therapy.[9] The physician noted that M.K. “reported fewer thoughts to harm herself, and these stopped before discharge.”[10]

         M.K. was admitted to Aspen on March 27, 2013. An Aspen representative contacted ValueOptions to request authorization for M.K.'s inpatient mental health services. ValueOptions' medical director reviewed Aspen's request and concluded M.K. did not meet the criteria for acute in-patient hospitalization because she had shown improvement concerning her psychotic symptoms.[11] Instead, the medical director informed Plaintiff that an appropriate level of care would be partial hospitalization with intensive/structured setting.

         ValueOptions notified Plaintiff of her right to appeal this decision in a letter sent March 29, 2013.[12] The letter stated that the proposed admission “was for evaluation and treatment of behaviors and symptoms of psychosis such as disorganized thoughts, hearing voices, or aggressive behaviors, indicating a risk of harm to self or others.”[13] Based on the information provided as of March 27, 2013, ValueOptions stated its review did not “indicate the presence of behavior or thinking which would meet criteria for Acute Inpatient Hospitalization with 24 hour Medical Supervision.”[14] Rather, ValueOptions stated that “[a]n appropriate level of care to the current needs of the patient is Partial Hospitalization with Intensive/Structured setting.”[15]

         Aspen notified ValueOptions that if M.K. stepped down to a lower level of care such as RTC services, Aspen would contact ValueOptions for precertification.[16] Although Aspen provided M.K. with RTC services, it did not contact ValueOptions for precertification.

         On May 13, ValueOptions received a claim from Aspen for RTC services provided from March 27 to April 30, 2013. ValueOptions denied the claim on the basis that the services had not been authorized.[17] After receiving more information from Plaintiff, ValueOptions' medical director reviewed the claim again in October 2013 and determined the services could not be certified because the criteria for RTC services had not been met.[18] The medical director noted that many of the symptoms reported occurred before M.K.'s hospitalization and that M.K.'s outpatient therapist had expressed a concern that Plaintiff was seeking long-term placement for M.K. because she did not want her to return home.

         ValueOptions' letter to Plaintiff notifying her of this decision recited the same clinical rationale as the March 27 letter, except it replaced “Acute Inpatient Hospitalization with 24 hour Medical Supervision” with “Residential Treatment Setting.”[19]

         Plaintiff requested an appeal of the denial in April 2014. Plaintiff included a letter from M.K.'s outpatient therapist, who stated that long-term residential treatment “seems to be consistent with [his] impressions gathered over time, of [M.K.]'s growing needs.”[20] A psychiatrist who was not involved in prior decisions reviewed M.K.'s records and advised that RTC services should not be certified because M.K. did not exhibit any behavior or thinking that would warrant RTC services and that she could have been treated safely in a home setting through adolescent partial hospitalization or intensive outpatient treatment.[21]

         ValueOptions notified Plaintiff of this decision on May 1, 2014.[22] The denial stated that ValueOptions' review “included any additional information received in support of your appeal.” The denial was based on the psychiatrist's determination that M.K. “could have safely been treated in Adolescent Partial Hospitalization or Intensive Outpatient Treatment and remained in the home setting” and that she did not “show any behavior or thinking which would need the requested level of [residential treatment] care.” The denial notified Plaintiff that the review was “the final level of appeal available to you through ValueOptions and your plan, ” but it did not notify Plaintiff of her 180-day time limit to file an action with the district court.

         Plaintiff requested an external appeal, which Allmed was randomly selected to conduct. Allmed reviewed Plaintiff's appeal letters, M.K.'s medical records from Aspen, ValueOptions' denial letter, the Plan language, and ValueOptions' clinical criteria for child/adolescent RTC services. Allmed notified Plaintiff on October 16, 2014 that the RTC services were “not clinically appropriate, known to be effective for or consistent with the patient's condition, or in accordance with the generally accepted standards for residential care based on current literature.”[23] Allmed stated M.K. “was not actively suicidal during her stay at [Aspen]” and that the self-injurious behavior she did exhibit “was superficial at best and did not require 24-hour intense supervision to control.”[24] The letter also stated M.K. “did not manifest overt repetitive outbursts of aggression that required containment in a facility, ” and that her treatment “could have taken place safely and effectively at a lower level of care.” The letter addressed M.K.'s weight as a health concern, but noted she did not have repetitive hospitalizations, did not fail at attempts at lower levels of care, and “did not demonstrate a home or community environment that would be considered not conducive to conducting treatment.”

         Following the denials, Plaintiff filed her Complaint on June 5, 2015, seeking $79, 350 for denied medical benefits.[25]

         LEGAL STANDARD

         Where, as here, the parties in an ERISA case both move for summary judgment, “the factual determination of eligibility for benefits is decided solely on the administrative record, and the non-moving party is not entitled to the usual inferences in its favor.”[26] Additionally, the court considers “only the arguments and evidence before the administrator at the time it made [the] decision.”[27]

         ANALYSIS

         ValueOptions argues Plaintiff's civil action was untimely filed and should be dismissed. In the alternative, ValueOptions contends its decision to deny M.K. benefits was reasonable. Plaintiff argues the untimeliness of her action should be excused. She maintains the court should review the denial of benefits de novo, and hold that ValueOptions should have covered the RTC services.

         I. Timeliness

         ValueOptions first argues Plaintiff's claim must be dismissed as untimely because she did not file suit within 180 days of ValueOptions' final denial, as required by the Plan.

         ERISA does not contain a limitations provision for district court actions, but parties may contractually agree on a time limit.[28] The Plan in this case requires filing a civil action within 180 days after notification of a final denial of benefits. Plaintiff does not dispute that she missed the 180-day deadline, but she argues the time limit is unenforceable because ValueOptions' failure to include the time limit in adverse benefit determination letters violated ERISA's claims procedure regulations.[29] The parties disagree about whether such a notification was required.

         A. ERISA's requirements

         Two sections of ERISA address the information a plan administrator is required to include in its adverse benefit determinations. The court includes below the entirety of both, observing that the first includes in Subsection (iv) reference to “the time limits applicable” to review procedures. This provision is noticeably absent in Subsection 4 of the second applicable ERISA section. The first relevant section, 29 C.F.R. § 2560.503-1(g), is titled “Manner and content of notification of benefit determination.” This section mandates that “any adverse benefit determination” include:

(i) The specific reason or reasons for the adverse determination;
(ii) Reference to the specific plan provisions on which the determination is based;
(iii) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary;
(iv) A description of the plan's review procedures and the time limits applicable to such procedures, including a statement of the claimant's right to bring a civil action under section 502(a) of the Act following an adverse benefit determination on review.

         The second relevant portion of ERISA, Section 2560.503-1(j), addresses “Manner and content of notification of benefit determination on review.” This section requires an adverse benefit determination on review to include:

1) The specific reason or reasons for the adverse determination;
2) Reference to the specific plan provisions on which the benefit determination is based;
3) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant's claim for benefits. . . .
4) A statement describing any voluntary appeal procedures offered by the plan and the claimant's right to obtain the information about such procedures . . . and a statement of the claimant's right to bring an action under section 502(a) of the Act.

         The court must take into account both sections when determining whether an adverse benefit determination on review must include the applicable time limits for the claimant's right to bring an action under Section 502(a), which is the claimant's avenue to file a civil action in district court.

         B. Split in authority

         The majority of courts that have interpreted Section (g)(1)(iv) conclude it requires a plan administrator to include, in adverse benefit determinations, the time limits for a civil action.[30]These courts find the plain language of Section (g)(1)(iv) compels that result because the position of the word “including” means the claimant's right to bring a civil action is part of the plan's review procedures. A contrary interpretation, in which notification of time limits for “review procedures” and notification of the right to bring a civil action are two distinct requirements, would read out the word “including” and replace it with “and.”[31] The First, Third, and Sixth Circuits have held that such an interpretation does violence to plain text.[32] Thus, these courts conclude adverse benefit determinations must disclose the time limit for a claimant to file a civil action. However, none of these courts addressed how Section (g) interacts with Section (j)(4), which deals directly with adverse benefit determinations on review but omits Section (g)(1)(iv)'s language concerning time limits.[33]

         The Tenth Circuit has not directly addressed this question. The Court addressed a related issue in Hancock v. Metropolitan Life Insurance, in which a claimant argued the plan administrator violated Sections (g)(1)(ii) and (g)(1)(iii) by providing her with a denial of an appeal that did not cite the provision upon which the denial was based and did not explain how she could perfect her claim.[34] The Tenth Circuit rejected that argument, stating that Section (g) “applies only to denials of benefits, not denials of appeals.”[35] Although the Court referred to Section (g) as a whole, it applied only Section (g)(1)(ii) and (g)(1)(iii). In other words, the Court did not address Section (g)(1)(iv), and its holding does not contradict the conclusion in other Circuits that Section (g)(1)(iv)'s time limits notice requirement applies to final denials.

         Given the nature of a final denial, there was no reason for the Tenth Circuit to apply either Section (g)(1)(ii) or Section (g)(1)(iii) in the context of denial of an appeal. To begin with, Section (g)(1)(ii)'s requirement of a “[r]eference to the specific plan provisions on which the determination is based” is repeated nearly verbatim in Section (j)(2), making application of Section (g)(1)(ii) unnecessary for final denials. Additionally, Section (g)(1)(iii)'s requirement of a “description of any additional material or information necessary for the claimant to perfect the claim” is nonsensical in the context of a final benefit determination, because the claimant has already exhausted her opportunities to provide such additional information. Thus, Hancock's determination that Sections (g)(1)(ii) and (g)(1)(iii) do not apply to final benefit determinations has no bearing on Section (g)(1)(iv)'s potential relevance.

         The Tenth Circuit also addressed a similar issue in an unpublished decision, Young v. United Parcel Services.[36] In that case, the Court interpreted language in an SPD stating an adverse benefit determination would contain “a description of the Plan's appeal procedures and the time limits applicable to such procedures, including a statement of your right to bring a civil action following a denial of your appeal.”[37] The claimant argued that language required the plan administrator to notify her of the time limit for filing a civil action. The Court rejected that argument, stating that the “internal appeals process” was separate from “the filing of a legal action after that process has been fully exhausted, ” and that the SPD required time limits only for the former.[38]

         Like Hancock, Young did not address the application of Section (g)(1)(iv). Additionally, two decisions in District of Utah cases have recently noted that Section (g)'s language is broader than the SPD in Young.[39] Both decisions observe that Section (g) requires notification of time limits for “the plan's review procedures, ” which includes both internal appeals and judicial review.[40] Thus, Young's holding is unhelpful for answering the question before the court today.

         Because neither Hancock nor Young addressed Section (g)(1)(iv), district courts in the Tenth Circuit have been left with little guidance, giving rise to a split within this district.

         The first District of Utah case to address this question was Michael C.D. v. United Healthcare.[41] The court in Michael C.D. stated that Young's holding concerning SPD language was persuasive for interpreting Section (g)(1)(iv).[42] Applying Young, the court concluded Section (g) applies only to initial benefit determinations, and that Section (j) addresses final benefit determinations. Because the time to file a civil action is not triggered until the final benefit determination, the court stated it would be “counterintuitive” to require plan administrators to give claimants notice of that timeline in an initial determination but not a final determination.[43] Thus, the court concluded Section (g)(1)(iv) “only requires initial denial letters to include time limits applicable to a plan administrator's internal review procedures, ” and Section (j) “does not require the plan administrator to include any time limits for review procedures in the final denial letters.”[44]

         The same issue was presented a year later in John H. v. United Healthcare.[45] The court there stated “[t]he word ‘including' necessarily modifies its previous clause, ‘a description of the plan's review procedures, '” leading to the conclusion that a civil action is one of the “review procedures” for which a plan administrator must disclose the time limit.[46] The court explained this interpretation “aligns with ERISA's remedial nature” because “[c]laimants are more likely to read a relatively short denial letter, as opposed to long, complex plan documents.”[47] In light of the text and policy considerations, the court found Young unpersuasive.[48] Section (j)(4)'s lack of an explicit requirement for notification of time limits did not alter the court's conclusion. Rather, the court noted that Section (g) applies to “any adverse benefit determination, ” which means “final denial letters must meet the requirements of both Subsection (g)(1)(iv) and the requirements of Subsection (j)(4).”[49]

         This question arose again in William G. v. United Healthcare.[50] In that case, the court concluded that the only proper reading of Section (g)(1)(iv)'s use of the word “including” is that the section requires notification of time limits for civil actions in all denial letters.[51] The court pointed to the differences between Section (g) and Section (j), noting that Section (g) refers to “review procedures” as opposed to Section (j)'s “appeal procedures.”[52] This, the court stated, was further evidence that the two sections do not conflict: “If the Department of Labor intended that Subsection (g)(1)(iv) require denial letters to disclose only time limits related to internal appeal procedures, it would have used the more narrow phase -‘appeal procedures'-found in Subsection (j)(4)(i) rather than the broader phrase-‘review procedures'-when drafting Subsection (g)(1)(iv).”[53] And the court rejected the reasoning of Michael C.D., stating that such a reading would render the word “any” in Subsection (g) superfluous.[54] The court concluded final benefit determinations must satisfy both Subsection (g) and Subsection (j)'s requirements.

         This court is now presented with the same issue. For largely the same reasons articulated in the decision, the court agrees with the holdings in John H. and William G., and concludes final benefit determinations must notify the claimant of the time limit to file an action in district court. This is explained more fully in the next Section.

         C. Application of canons of statutory construction

         When analyzing a regulation, the court applies ordinary principles of statutory construction.[55] “Statutory construction must begin with the language employed by Congress and the assumption that the ordinary meaning of that language accurately expresses the legislative purpose.”[56] Courts also must interpret statutes so that “if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant.”[57] Another canon of statutory construction provides that “a negative inference may be drawn from the exclusion of language from one statutory provision that is included in other provisions of the same statute.”[58]

         The court recognizes that no reconciliation of Sections (g) and (j) would perfectly effect all the above-mentioned canons of statutory construction. Applying the plain language of Section (g) leads to the conclusion that “any adverse benefit determination” includes final determinations. But that reading renders several portions superfluous. If Sections (g)(1)(i) and (ii) already require a final determination to contain “[t]he specific reason or reasons for the adverse determination” and a “[r]eference to the specific plan provisions on which the determination is based, ” then there would be no need for Section (j) to repeat those requirements. Additionally, Section (g)(1)(iv)'s requirement that the plan administrator notify a claimant of the right to bring a civil action is repeated in Section (j)(iv) but without Section (g)'s language about time limits, which seems to implicate the negative-inference canon. Thus, no reading of the statute perfectly harmonizes the two sections.

         Given this tension, the best solution is to rely on the plain language and conclude that any superfluousness that occurs is the result of Congress' intent to craft a statute that leaves no doubt as to the importance of explaining adverse benefit determinations to claimants.

         Under this reading, Section (g)'s language concerning “any adverse benefit determination” includes final denials. The court finds no support in the plain language for the conclusion that Section (g) applies only to initial benefit determinations. Rather, the word “any” encompasses “final.”

         Additionally, the court agrees with the conclusion in William G. that giving meaning to the word “including” in Section (g)(1)(iv) must mean that a civil action is one of the “review procedures” for which a time limit must be provided. “[T]he word ‘including' cannot be easily removed or changed since it modifies the word ‘description,' which is followed by a prepositional phrase explaining what must be described-the plan's review procedures and applicable time limits for those procedures.”[59] The resulting conclusion is that any benefit determination requires notification of a time limit for filing a civil action.

         This interpretation admittedly results in some duplication of requirements between Sections (g) and (j), namely the reasons for the adverse determination, the reference to the provision on which the determination is based, and the notification of the right to file a civil action. But this duplication reflects ERISA's policy considerations. ERISA “is remedial legislation that should be construed liberally in favor of those persons it was meant to benefit, namely participants . . . and beneficiaries.”[60] Congress' stated intent in enacting ERISA was

to protect interstate commerce and the interests of participants in employee benefit plans and their beneficiaries, by requiring the disclosure and reporting to participants and beneficiaries of financial and other information with respect thereto, by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts.[61]

         The duplication of Section (g)'s provisions serves to highlight several of those stated purposes, including the importance of disclosure of information to participants and ready access to federal courts.

         Additionally, as the First Circuit Court of Appeals noted, “[c]laimants are obviously more likely to read information stated in the final denial letter, as opposed to included (or possibly buried) somewhere in the plan documents, particularly since, as was the case here, plan documents could have been given to a claimant years before his claim for benefits is denied.”[62]Reading Sections (g) and (j) to require notification of the time limit for a district court action in final benefit determinations supports Congress' intent to facilitate claimant's easy access to important information, and it avoids the “counterintuitive” approach ...


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