David A. (Self-funded plan self-administered by Blue Cross Blue Shield of Mississippi.)
David A. was admitted to a residential treatment facility, with a primary diagnosis of Alcohol Dependence. At the time of his admission, he was a 39 year-old single truck driver, with a 20 year history of drinking. He reported that his alcohol use had increased over the past 8 to 10 years and that he consumed 1 to 1 1/2 pints of whiskey per day. He also reported experiencing occasional blackouts. He stated that in the two-weeks prior to admission, he had started drinking in the morning. He also stated that he had recently been arrested for driving under the influence, which had resulted in a suspension of his license.
After admission, David A. continued with group and individual therapy, as part of the inpatient rehabilitation program. He made good progress through treatment.
Prior to admission, the treatment facility contacted a presumed plan representative at Blue Cross Blue Shield of Mississippi (BCBSM), who provided “verification” that inpatient benefits for chemical dependency treatment were payable under David A. 's plan at 60% “Usual, Reasonable and Customary” (URC) charges, subject to a $15,000 lifetime maximum. The facility was instructed to submit a claim for benefits to the local Blue Shield of California.
Charges for 30 days inpatient treatment totaled almost $22,000.00. A claim was then properly submitted to Blue Shield of California. Thereafter, the treatment facility received two "Provider Voucher" forms from the local Blue Shield. The first one referenced certain charges for a part of the treatment in the amount of $9,150. It stated, "Amount allowed: $9,150"; "Subscriber liability $9,150"; "Approved to pay: $0.0"; and "Amount paid: $0.0". Thus, that portion of the clam was denied in its entirety. The stated reason for denial was: "This service is not a benefit of the subscriber's Health Plan." The second form basically referenced remaining charges of approximately $12,000, which were denied for the same reason as stated on the first form. However, an additional reason was stated on that form for part of the charges: "Coverage was terminated prior to the date this service was provided."
The facility called the “home plan”, BCBSM and was told by one representative that David A.’s coverage terminated on a date well after commencement but shortly prior to completion of treatment. The facility called BCBSM again and spoke to a different representative, who advised that David A.’s coverage terminated just three days prior to commencement of treatment.
At that point the case was referred to me. I immediately pointed out to BCBSM that, curiously, there were quite a few things that I did not know about the claim, but which I certainly intended to find out. In addition to questions relating to the status of the claim and the precise reason(s) for denial, there were several unanswered questions, concerning the actual coverage provided by the plan, as well as David A.’s individual eligibility for that coverage. I noted that I had reviewed the employer’s Annual Report, which could be accessed via the internet and I found nothing in it evidencing any termination of the medical plan. So, I was not certain if there was some alleged termination of coverage arising from a plan termination, or from an amendment to the plan, or from a termination of David A.’s employment. I also noted that if David A. was in fact covered at the time treatment was rendered, I did not know if such coverage was provided pursuant to the initial plan coverage extended by virtue of his status as an employee or pursuant to continued coverage provided by virtue of COBRA.
I pointed out that BCBSM had certain fiduciary duties imposed by ERISA and that by law, (1) A fiduciary must discharge his or her duties solely in the interest of plan participants and beneficiaries and for the exclusive purpose of providing plan benefits to them; (2) A fiduciary must act with care, skill prudence and diligence; and (3) a fiduciary may not act in any capacity involving the plan, on behalf of a party whose interests are adverse to the interests of the plan, its participants, or its beneficiaries. I pointed out that the two "Provider Voucher" forms did not comply with ERISA in that they did not set forth the specific reasons for such denial, written in a manner calculated to be understood by the participant, a required by ERISA.
Finally, I pointed out that even if David A. was not in fact covered by the plan, during the period of time treatment was rendered, then the Plan's conduct, in verifying his eligibility status as well as verifying benefits available under the plan for chemical dependency treatment, amounted to a negligent misrepresentation of benefits. See: The Meadows v. Employers Health Ins 826 F. Supp. 1225; 1993 U.S. Dist. LEXIS 9608 (Dist Ct - Arizona); upheld by Ninth Circuit Court of Appeals in The Meadows v. Employers Health Ins. 47 F.3d 1006 (9th Cir., 1995) and Regents of the University of California v. First Pyramid Life Insurance Co. of America 1994 U.S. Dist. LEXIS 12288 (So. Dist Cal) . Those cases hold that where a plan representative makes misrepresentations to a third-party health care provider, that provider may proceed on state law theories of “negligent misrepresentation”, “estoppel” and/or “breach of contract”. Such claims are not pre-empted by ERISA. In such a case, the third party provider may pursue the plan, independently, and not just derivatively as an assignee of benefits. Therefore, even assuming that there were no plan benefits available under David A.’s plan, the facts were that BCBSM verified benefits and responsible plan representatives were fully aware of the fact that David A. was receiving inpatient rehabilitative treatment. Only after his treatment was over did BCBSM communicate a claim denial based upon some previously undisclosed and mysterious unavailability of benefits.
I submitted an administrative appeal to BCBSM covering these and other ERISA-related issues.
Result: The claim denial was administratively reversed and the claim paid in full.