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Michael D. v. Anthem Health Plans of Kentucky, Inc.

United States District Court, D. Utah

February 13, 2019




         This ERISA case is before the court on the parties' cross-motions for summary judgment. Defendant Anthem Health Plans of Kentucky, Inc. (“Anthem”) moved for summary judgment on June 5, 2018 (ECF No. 38). On June 9, 2018, plaintiffs Michael D. (“Mike”) and Madeline D. (“Maddie”) (collectively “Plaintiffs”) moved for summary judgment as well (ECF No. 40).

         I. BACKGROUND

         This dispute involves the denial of benefits allegedly due under a group health benefit plan provided by U.S. WorldMeds, LLC to its employees (“the Plan”). The Plan is fully insured by Anthem and governed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. section 1001, et. seq. (“ERISA”). Anthem is also the administrator of the Plan and has reserved discretionary authority to make decisions regarding coverage. Mike, as an employee of U.S. WorldMeds, LLC, is a participant in the Plan and his daughter Maddie is a beneficiary of the Plan.

         A. Maddie's History

         Maddie, a very bright girl, has struggled with a variety of mental health conditions over the years, including attention deficit/hyperactivity disorder (“ADHD”), Persistent Depressive Disorder, Borderline and Narcissistic Personality Features, anxiety, suicidal thoughts, and self-harm behavior (“cutting”). On August 30, 2014, Maddie was admitted at Aspiro Wilderness Adventure Therapy (“Aspiro”) for stabilization and assessment. She resided there and received “wilderness therapy”[1] until she was discharged on November 11, 2014. Maddie was then admitted to Uinta Academy (“Uinta”) on November 11, 2014, where she received “residential treatment” for over a year until her discharge on December 17, 2015. Plaintiffs first submitted claims for coverage of the Aspiro medical expenses on April 29, 2015 and for the Uinta expenses on October 26, 2015. Anthem denied both claims.

         B. Aspiro Treatment

         Upon receipt of Plaintiffs' claims for coverage of treatment at Aspiro, Anthem conducted a retrospective review and denied coverage. The “Explanation of Payment” section of the Explanation of Benefits (“EOBs”) sent to Mike from Anthem explains that Anthem reduced payment for the “benefits for this service [at Aspiro] because you were not precertified” and “[p]re-certification is needed for certain services under the Health Care Management guidelines.” Then, in a letter dated May 4, 2015, Anthem notified Plaintiffs that Maddie's claim for benefits at Aspiro was denied because there are no benefits in the Plan for a “Wilderness Camp Program.” Anthem's letter did not address the precertification issue, nor did it refer Mike to any specific section in his benefit plan.

         Mike appealed the denial of the Aspiro claims on October 1, 2015. Anthem received the appeal on October 5, 2015. Mike alleges that he did not receive a response to his appeal for coverage of the Aspiro treatment during the time prescribed by the Plan or by ERISA. Accordingly, on June 24, 2016, Mike wrote a letter to the Kentucky Department of Insurance (“KDOI”) asking the Consumer Protection Division to investigate. KDOI contacted Anthem and asked for further information regarding the claims. KDOI and Anthem exchanged various communications. In one response, Anthem provided a copy of the letter it allegedly sent to Mike on November 4, 2015, denying his appeal for coverage of the “Wilderness Camp Program at Aspiro” because wilderness camps are not a covered benefit. The letter directed Mike to a specific section of his Plan benefits booklet and the EOBs, and informed Mike that he had exhausted his appeal rights with Anthem. On November 16, 2016, KDOI informed Mike that it was upholding Anthem's denial of benefits because Aspiro was a wilderness camp and therefore clearly excluded under the Plan.

         C. Uinta Treatment

         Anthem also denied coverage of treatment at Uinta. EOBs issued to Mike from April 27, 2015 through May 20, 2016 explain payments were not made to cover the services at Uinta because the services were not “pre-certified.” Then, in a letter dated November 10, 2015, Anthem informed Mike that, after a retrospective review, Anthem denied coverage for the Uinta expenses because Maddie's treatment at Uinta, a “Residential Treatment Center, ” was not medically necessary. Mike appealed the denial of the Uinta treatment on May 5, 2016. Anthem notified Mike through letter on June 1, 2016 that it was upholding its decision and that he had exhausted his appeal rights. Mike then requested external review of this decision by an independent review organization on September 26, 2016. The external reviewer upheld Anthem's denial.

         Mike and Maddie filed their single-count Complaint on June 23, 2017 seeking recovery of benefits under 29 U.S.C § 1132(a)(1)(B). Under Count One, Plaintiffs also allege that Anthem breached its fiduciary duties under 29 U.S.C. § 1104 and § 1133 by failing to act solely in the interest of the Plan participants and beneficiaries when it denied Maddie's benefits and by failing to provide a full and fair review as required under the Plan and by ERISA. Plaintiffs seek judgment in the amount of $200, 000.00, plus prejudgment interest pursuant to Utah Code Ann. § 15-1-1, and attorney fees and costs incurred under 29 U.S.C. § 1132(g). The court held oral argument on these motions on January 24, 2019. On the basis of that hearing, the parties' briefs, and a review of the relevant law, the court grants in part and denies in part Anthem's Motion for Summary Judgment and grants in part and denies in part Plaintiffs' Motion for Summary Judgment.


         A. Summary Judgment Standard

         Under Federal Rule of Civil Procedure 56(a), “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” When both parties move for summary judgment in an ERISA case, thereby stipulating that a trial is unnecessary, “summary judgment is merely a vehicle for deciding the case; the factual determination of eligibility of benefits is decided solely on the administrative record, and the non-moving party is not entitled to the usual inferences in its favor.” LaAsmar v. Phelps Dodge Corp. Life, Accidental Death & Dismemberment & Dependent Life Ins. Plan, 605 F.3d 789, 796 (10th Cir. 2010) (quoting Bard v. Boston Shipping Ass'n, 471 F.3d 229, 235 (1st Cir. 2006)).

         B. Standard of Review for Denial of Benefits

         “[A] denial of benefits challenged under § 1132(a)(1)(B) 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 explicitly vests such discretion with the administrator, a reviewing court will apply “a deferential standard of review, asking only whether the denial of benefits was arbitrary and capricious.” Weber v. GE Grp. Life Assurance Co., 541 F.3d 1002, 1010 (10th Cir. 2008) (internal citation and quotation marks omitted). The court “consider[s] only the rationale asserted by the plan administrator in the administrative record and determine[s] whether the decision, based on the asserted rationale, was arbitrary and capricious.” Spradley v. Owens-Illinois Hourly Employees Welfare Ben. Plan, 686 F.3d 1135, 1140-41 (10th Cir. 2012) (citation omitted).

         Review under an arbitrary and capricious standard “is limited to determining whether [the plan administrator's] interpretation was reasonable and made in good faith.” Fought v. UNUM Life Ins. Co. Of Am., 379 F.3d 997, 1003 (10th Cir. 2004) (alteration in original) (quoting Hickman v. GEM Ins. Co., 299 F.3d 1208, 1213 (10th Cir. 2002)). The court should consider “whether: (1) the decision was the result of a ‘reasoned and principled process,' (2) is ‘consistent with any prior interpretations by the plan administrator,' (3) is ‘reasonable in light of any external standards,' and (4) is ‘consistent with the purposes of the plan.'” Flinders v. Workforce Stabilization Plan of Phillips Petroleum Co., 491 F.3d 1180, 1193 (10th Cir. 2007), abrogated on other grounds by Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (2008) (quoting Fought, 379 F.3d at 1003). The court “need not determine that the Plan's interpretation was the only logical one, nor even the best one. Instead, the decision will be upheld ‘unless it is not grounded an any reasonable basis.'” Id. (quoting Finley v. Hewlett-Packard Co. Employee Benefits Org. Income Protection Plan, 379 F.3d 1168, 1176 (10th Cir. 2004)).

         However, if there were “procedural irregularities” the court may apply a less deferential standard. See Kellogg v. Metro. Life Ins. Co., 549 F.3d 818, 825-27 (10th Cir. 2008) (citing Fought, 379 F.3d at 1003). The Tenth Circuit has also enunciated a framework for “dial[ing] back” the level of deference accorded to an administrator's decision when the administrator is operating under a conflict of interest as both fiduciary and insurer. See Weber, 541 F.3d at 1010 (citing Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 128 (2008)). Even though the Plan at issue contains discretionary language, Plaintiffs argue that Anthem's failure to comply with the Plan procedures and its breach of fiduciary duty entitles them to a de novo standard of review.

         1. Reservation of Discretionary Authority

         The Plan at issue in this case has vested discretion in the administrator as set forth in the “Reservation of Discretionary Authority” section:

The Plan, or anyone acting on Our behalf, shall determine the administration of benefits and eligibility for participation in such a manner that has a rational relationship to the terms set forth herein. However, We, or anyone acting on Our behalf, have, to the fullest extent permitted under application law, discretion to determine administration of your benefits. Our determination shall be binding, subject to any rights of complaint and/or appeal provided under the Certificate or under applicable law. This may include, without limitation, determinations of whether the services, care, treatment, or supplies are Medically Necessary, Experimental/Investigational, whether surgery is cosmetic, and whether charges are consistent with Our Maximum Allowed Amount . . . .

         It is uncontested that the language of the Reservation of Discretionary Authority section sufficiently vests discretionary authority in the administrator to entitle Anthem to an arbitrary and capricious standard for its decisions, absent the alleged breach of fiduciary duty and failure to comply with the Plan procedures.

         2. Anthem did not Fail to Comply with the Plan's Procedures

         The Plan administrator's denial of benefits is only entitled to a “deferential standard of review to the extent the administrator actually exercised a discretionary power vested in it by the terms of the Plan.” Spradley v. Owens-Illinois Hourly Employees Welfare Ben. Plan, 686 F.3d 1135, 1140 (10th Cir. 2012). “Serious procedural irregularities” can require the court to apply “de novo review where deferential review would otherwise be required.” Martinez v. Plumbers & Pipefitters Nat'l Pension Plan, 795 F.3d 1211, 1215 (10th Cir. 2015). Plaintiffs allege that Anthem failed to respond in a timely manner to Mike's appeal of the denial of Aspiro benefits and that Anthem failed to provide a meaningful dialogue with Mike regarding the claim for treatment at Uinta. Plaintiffs allege that Anthem breached its fiduciary duties when it failed to comply with its obligations under 29 U.S.C. § 1004 and § 1133, when it failed to act solely in the interest of the Plan participants and beneficiaries, and when it failed to discharge its duties in accordance with the documents governing the Plan. For these reasons, Plaintiffs allege that the court should apply a de novo standard.

         a. Aspiro Claim

         Mike appealed the denial of the Aspiro benefits on October 1, 2015. Anthem received the appeal on October 5, 2015. The Plan document requires Anthem to respond within thirty days of receipt of a written request for appeal. Mike alleges he did not receive a copy of the response to the Aspiro appeal until it was provided by KDOI in response to Mike's complaint. But Anthem alleges that it sent the response letter on November 4, 2015. In support, Anthem has provided a copy of the letter. Whether or not Mike received the letter, it is apparent from the record that Anthem did send the letter as required by the Plan. Anthem then fully participated in the investigation conducted by the KDOI, engaging in meaningful dialogue regarding its denial. The court finds that Anthem complied with the Plan's appeals process and is entitled to the deferential arbitrary and capricious standard on review of the Aspiro denial.[2]

         b. Uinta Claim

         Plaintiffs allege that Anthem failed to provide a meaningful dialogue in handling the claims for Maddie's Treatment at Uinta because the communications regarding its denial of benefits failed to rise to the level of specificity required by ERISA. Although the EOBs sent to Mike regarding the Uinta treatment only specify that the treatment was not pre-certified, Anthem's letter of November 10, 2015 specifies that Anthem considered the Uinta services not medically necessary and therefore not covered under the Plan. The letter then includes the full conclusion of the “physician consultant.” The consultant concluded that Maddie was not “at risk for serious harm” and that “24 hour structured care” was not needed. The letter directed Plaintiffs to the “clinical guideline” used by the physician to determine whether treatment was medically necessary. The guideline, “Psychiatric Disorder Treatment - Residential Treatment Center CG-BEH-03” was not provided to Mike, but he was able to access it and read over the criteria used to deny coverage in writing his appeal. In response to Mike's appeal, Anthem sent another letter on June 1, 2016, upholding the denial of coverage. The letter specified which doctors reviewed the information provided and which guidelines Anthem used to make its decision. Finally, when Mike requested an external review of the decision, Anthem provided one.

         Although Mike alleges that these responses legally do not constitute meaningful dialogue, the court disagrees. Anthem explained what documents it reviewed, identified the doctors who reviewed the documents, and referenced the specific provisions that Anthem used to decide the claim. Anthem responded to Plaintiffs in a timely fashion and gave the specific reasoning for the denial of benefits. As the court in Joseph F. v. Sinclair Servs. Co., 158 F.Supp.3d 1239 (D. Utah 2016) noted, just because the Administrator failed to address all of the Plaintiffs' arguments does not mean that the Plaintiffs were prejudiced. Id. at 1252. (“[Plaintiffs] cannot plausibly maintain that they were not fully aware of the rationale underlying the Administrator's decisions.”). Anthem continued to engage in the dialogue and provided Mike with the necessary information. Thus, the court concludes that Anthem is entitled to an arbitrary and capricious standard of review on both the Uinta and the Aspiro claims.

         3. Anthem is Inherently Conflicted

         In their motion for summary judgment, Plaintiffs also allege that Anthem had a conflict of interest. In Pitman v. Blue Cross & Blue Shield of Oklahoma, 217 F.3d 1291, 1296 n.4 (10th Cir. 2000), the Tenth Circuit held that a company that is both the insurer and the administrator is inherently conflicted because “as both insurer and administrator of the plan, there is an inherent conflict of interest between its discretion in paying claims and its need to stay ...

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