Sara N. (Self-funded plan administered by Aetna)
At the time of her hospital admission, Sara N. was a 23-year-old single white female suffering severe symptoms of depression and bulimia. She reported worsening irritability and dysphoria, along with significant anhedonia and poor concentration to the point that she had to resign from work. Shortly before admission she experienced significant suicidal ideation with a plan to overdose on drugs. She had been slowly increasing the amounts of Valium that she was taking for anxiety. She reported a sense of hopelessness.
The hospital discharge summary indicated that her condition on discharge had greatly improved. She was then transitioned to a “partial hospitalization” level of care. Her prognosis was considered good.
Sara N. was hospitalized for a period of 26 days. Charges were approximately $30,000 for her treatment. Her health benefits were provided by a self-funded ERISA plan. Upon admission, she had executed a standard Assignment of Benefits form, by which she expressly assigned all of her Plan benefits to the hospital. Therefore, under the law, the hospital had standing to assert whatever rights Sara N.. possessed, relating to the Plan, including the right to pursue administrative remedies, the right to request plan documents and other information, as well as the right to pursue legal action against the Plan to recover benefits, if necessary.
Approximately two months before her admission, the hospital verified her health benefits by contacting the plan. The hospital verified benefits a second time on the day of admission. The hospital was told by plan representatives on both occasions that inpatient benefits for psychiatric treatment were payable at 70% of “usual, reasonable and customary” (URC) charges, subject to a $300 deductible and a $1,800 out of pocket maximum, then payable at 100% URC thereafter up to a 60 day annual limit.
A claim for benefits was submitted to the plan. The hospital received two Explanation of Benefits (EOB) forms from Aetna. The first referenced charges of approximately $22,000 and indicated that additional information was requested to process that portion of the claim. The second referenced the remaining $8,000 in charges and indicated that they were denied outright. No reason was stated for this denial.
There were phone conversations between the hospital and Aetna, during which the hospital was told that Aetna was awaiting receive of some kind of a “questionnaire” from Sara N. However, Sara N. had no knowledge of any such questionnaire. Then it appeared that Aetna has simply “closed” the claim and took no further action on it. Repeated phone calls and letters from the hospital proved futile. The hospital then offered to transmit the all-important questionnaire to Sara N. and then transmit it back to Aetna, but Aetna refused the offer.
At that point the case was referred to me. I immediately noticed that there was nothing in the file, in writing, evidencing the processing of the claim or any decision on the claim by Aetna, except for the two EOB forms. And those forms utterly failed to comply with even the most rudimentary mandates of ERISA and the federal regulations.
Under the federal regulations, if a claim is denied in whole or in part, the Plan must notify the claimant within 90 days after receipt of the claim or notify the claimant that an extension for “special circumstances” is required, in which case it may take up to an additional 90 days (i.e. total 180 days) to decide the claim. If an extension of time is required, the extension notice must state what the “special circumstances” are which require an extension, as well as the date by which the Plan expects to render the benefit determination. See: 29 CFR 2560.503-1(f).
29 USC § 1133(1) requires adequate notice in writing of claim denial, setting forth the specific reasons for denial and written in a manner calculated to be understood by the participant. 29 CFR 2560.503-1(g)(1) provides that (among other things) a notification of benefit determination “shall set forth, in a manner calculated to be understood by the claimant -- (i) The specific reason or reasons for the adverse determination; (ii) Reference to the specific plan provisions on which the determination is based . . . .”
“In simple English, what this regulation calls for is a meaningful dialogue between ERISA plan administrators and their beneficiaries. If benefits are denied in whole or in part, the reason for the denial must be stated in reasonably clear language, with specific reference to the plan provisions that form the basis for the denial . . .” Booton v. Lockheed Medical Benefit Plan 110 F.3d 1461, 1465 (9th Cir., 1997).
These requirements of ERISA were politely pointed out in a letter and follow-up correspondence that was sent not only to Aetna, but also to Sara N.’s employer, who was the named plan administrator of the self-funded plan. It was also pointed out that Aetna was a deemed “fiduciary” of the Plan, under ERISA, pursuant to 29 U.S.C. 1002(21)(A) and had a duty to act like it. Instead, its handling of Sara N.’s claim fell far short of that standard. My letter stated, “In fact, based on the foregoing, it appears to me that Aetna has engaged in a pattern of sheer gamesmanship, regarding the claim.”
So that I could prepare the necessary ERISA-mandated administrative appeal, I requested copies of the entire claim file and all plan documents. What I encountered was even more stonewalling and gamesmanship. Aetna and the employer simply ignored my requests. I made four separate follow-up requests. I eventually received a few pages of documents, which consisted of nothing more than copies of my own correspondence.
At that point, I pointed out several things to both the plan administrator and to Aetna. First I explained that ERISA litigation is considerably different from other forms of general civil litigation, where such documents are customarily obtained via discovery. Since judicial review is generally limited to the administrative record, ERISA provides a procedure for requesting these documents in writing, which I had done. ERISA further authorizes a civil enforcement action by participants or beneficiaries to obtain relief with regard to notices and information which administrators are required to provide to participants and beneficiaries. (See: 29 U.S.C. §§ 1132(a)(1)(A) and (c). If information is not furnished by the administrator within 30 days of a written request, the Court is authorized in its discretion to award a monetary penalty of up to $110.00 per day against the administrator. I explained that since the “administrator” is the plan administrator, the employer would be responsible for paying any such penalty.
I further explained that if I did not receive the requested documents within 30 days, it was my intent to proceed to file an action against the Plan in U.S. District Court, for not only the plan benefits due, but for the statutory penalty and an award of attorney fees, pursuant to 29 U.S.C. Section 1132(g).
Result: The employer instructed Aetna to issue full payment to the hospital for the covered charges incurred by
Sara N. The matter was resolved without litigation.