Benjamin Z. (Plan insured and administered by Prudential Insurance Company)
Benjamin Z. was first admitted to an acute care hospital for treatment of alcoholism and chemical dependency. Prudential apparently wanted to get Benjamin out of the more expensive acute-care facility and into a less expensive non-acute residential treatment facility. So Prudential took it upon itself to contact Oasis Treatment Center and to refer Benjamin to Oasis.
In order to accommodate Prudential, Oasis not only agreed to accept Benjamin as a patient, but also to reduce its inpatient charge to a mere one-third of its customary charge. When this agreement was made, at no time was there any written or any verbal notice given to Oasis that Benjamin’s inpatient coverage would be limited to a calendar year maximum of 20 days. And in fact, after the first 20 days of treatment, Prudential specifically approved an additional 20 days.
Benjamin remained at Oasis for a total of 60 days. After his discharge, Oasis submitted a timely claim to Prudential. Prudential paid about one third of the amount due and then spent the next two and a half years trying to avoid payment, based on one excuse after another. Prudential sent Oasis five “Explanation of Benefits” (forms), each stating various reasons for non-payment, none of which made sense.
There appeared to be some confusion, on Prudential’s part as to whether Benjamin’s coverage had terminated prior to his admission. Prudential took the position that his coverage had terminated and therefore the charges were not eligible for payment. Then it said that there was “no evidence of pre-authorization” for the treatment rendered. Ultimately, it said that there was a 20-day limit on inpatient coverage for chemical dependency treatment.
In light of the fact that Prudential was the entity responsible for referring Benjamin to Oasis, and in light of the fact that Benjamin’s inpatient stay at Oasis was case managed by Prudential, Prudential certainly knew or should have known about any benefit limitations that might adversely affect Oasis’ ability to get paid for the treatment that it rendered to Benjamin, at Prudential’s request. Furthermore, if there was any such benefit limitation applicable to his coverage, Prudential had an affirmative duty to disclose that fact to Oasis. Not only did Prudential fail to disclose any such 20 day benefit limit, but it did not even raise the issue until some two and a half years later, after making numerous attempts to deny the claim on other unrelated grounds.
At that point, I became involved in the dispute. I sent an administrative appeal to Prudential, which pointed out several things. First, it emphasized to Prudential that it was a fiduciary, under ERISA; and that ERISA required that each plan establish internal procedures for a "full and fair review" of claims disputes. I also pointed out that ERISA required that every employee benefit plan must provide notice to every participant and beneficiary, whose claim for benefits under a plan has been denied; this notice must set forth the specific reasons for the denial, written in a manner calculated to be understood by the participant.
I also pointed out that a review of the correspondence from Prudential, relating to the claim, particularly the five EOB forms clearly disclosed a failure by Prudential to set forth any specific reasons for the denial that could be understood by the participant or by Oasis, as well as a failure to make any specific reference to pertinent plan provisions upon which the denial is based. I also pointed out that the ground which was ultimately relied upon by Prudential for denial of the claim (i.e. the 20-day calendar year maximum) was one that was not raised by Prudential until some two and a half years after the fact. Accordingly, I pointed out that the denial of the claim was untimely under the federal regulations; the provision of misinformation about plan benefits constituted a breach of Prudential’s fiduciary duty as well as a negligent misrepresentation of plan benefits.
Result: The claim denial was administratively reversed and the claim paid in full.