© 2014 by Michael A. McKuin

Attorney at Law

Post Office Box 10577

Palm Desert, CA 92255

(California State Bar No. 103328)

 

The information provided at this website is intended for educational and promotional purposes only. It is strictly general in nature and under no circumstance should it be considered legal advice.  Every case is unique and a competent, qualified lawyer must be consulted for legal advice regarding any specific case. 

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An ERISA lawsuit for health benefits stays in California court despite patient’s domicile.

January 31, 2015

June Bohara vs. Backus Hospital Medical Benefit Plan (Health Net) 390 F. Supp. 2nd 957 (C.D. Cal. 2005)

 

The patient was a resident of Connecticut, who received treatment at a California hospital.   She was insured by Health Net of the Northeast, whose health plan was administered by Value Options, Inc.  Four months before Ms. Bohara’s admission, the hospital called Value Options to verify availability of benefits and was told that benefits were payable under the Plan at 80% of "usual, customary and reasonable" (UCR) charges, subject to a $2,500 patient  "out of pocket maximum".   Three days prior to her admission, the hospital called Value Options a second time to re-verify benefits.  The hospital representative spoke to a different person at Value Options, but received the same information as before.  The hospital was also told that pre-certification was required for inpatient treatment and that such pre- certification should be obtained by calling a different Value Options phone number.

 

The entire course of Ms. Bohara’s treatment was meticulously case-managed and "certified" by Value Options, as was evidenced by seventeen written certification letters from Value Options.  The total charges for her treatment exceeded $50,000.  The hospital submitted a claim, but Value Options paid only $12,024.00 of the total charges. The remainder of the claim was "disallowed" for the stated reason that the "billed amount exceeds fee schedule rate".  No further explanation for the underpayment was given.  No such "fee schedule rate" was ever disclosed to Ms. Bohara or the hospital at any time, during the benefits verification process that took place prior to admission, nor was it disclosed during the lengthy certification process that took place while treatment was in progress.  To the contrary the hospital was specifically told by Value Options, on two separate occasions, that benefits would be paid according to UCR and not according to some undisclosed "fee schedule rate".

 

The hospital administratively appealed the underpayment on Ms. Bohara’s behalf. However, Value Options upheld its previous decision, stating only that "Value Options allows $500 per day as a usual & customary rate for the services billed and correctly processed claims at this level."  Not a single plan provision supporting Value Options' decision was recited it its letter upholding the underpayment, in clear violation of ERISA and the federal regulations.  Furthermore, the mere suggestion that $500 a day was "usual and customary rate" for inpatient hospital treatment in the Southern California geographic area was ludicrous on its face.

 

A further administrative appeal was submitted by the hospital to Health Net.  Health Net upheld the underpayment of the claim.  No reason was explained to the hospital for that decision.  At that point, I became involved in the case.  I sent a letter to Health Net demanding full payment of the claim, as well as a copy of the entire claim file and all plan documents.  Health Net ignored the letter.

 

A lawsuit was filed against the plan. [1]  Health Net’s attorney filed a motion to transfer venue to try to move the action from California to Connecticut, arguing that defense of the lawsuit in California would have been "inconvenient"  for the Plan.  The real reason for the motion was to make it inconvenient for me to prosecute the case.  Defense counsel also seriously advanced the argument in court that the Plan had "virtually no contact with the State of California" and that "the Plan did nothing to avail itself of the privilege of doing business in this jurisdiction".

 

The Court didn’t buy it and the motion was denied.  The Court first observed that Congress intended to give ERISA plaintiffs an expansive range of venue locations.  Varsic v. U.S. District Court, 607 F.2nd 245, 248 (1979). The Court then concluded that Defendant’s actions by first pre-certifying treatment in California, and then failing to fully pay the charges for services performed in California was enough to establish personal jurisdiction over the Defendant plan.  The Court was not persuaded by the "convenience" argument, since the Defendant Plan did not name a single witness, who would be inconvenienced by the action proceeding in California.

 

Shortly after the motion for transfer was denied, the case was resolved satisfactorily.  [Full text of opinion:  https://casetext.com/case/bohara-v-backus-hospital-medical-benefit-plan].

 

 

 

[1]             Even though Health Net was the real party in interest, at the time this claim arose, only the plan could be the named defendant.  This law has now changed.  See Article:  Don’t Sue Me I’m Just the Insurance Company

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