Insurance company logic: If there’s no legitimate reason to deny a claim, just make one up.

Christina R. (Plan administered and insured by Blue Cross Blue Shield of Michigan.)

Christina R. was 21 years old when she was admitted to a treatment facility upon referral from a hospital following 28 days of inpatient hospitalization for major depression and chemical dependency. She had been using both alcohol and marijuana for 9 years before her admission. She also had a history of cocaine use. She had undergone treatment four years earlier, where she spent 36 days as an inpatient and 6 months as an outpatient, but only remained sober for nine months before she elapsed. She had intentionally overdosed four times. She reported that the consequences of her alcohol/drug use were isolation, low self-esteem, tardiness at work, financial difficulties, and promiscuity. She had attempted suicide, on one occasion.

Prior to admission, the Executive Director of the treatment facility contacted Blue Cross Blue Shield of Michigan. (BCBSM) and verified that inpatient benefits would be payable under Christina’s health plan at 50%, of “usual, reasonable and customary” (URC) charges, subject to a $100.00 deductible, a calendar year maximum of $15,000 and a lifetime maximum of $30,000. The Executive Director was also told that no pre-certification would be needed for out of state treatment.

When the claim for Christina’s treatment was submitted for payment, BCBSM denied it on grounds of “medical necessity”, applying criteria that appeared out of nowhere. These included such things as: “no documented evidence of recent bona fide outpatient treatment”; “patient was not imminently suicidal”; and “patient was not psychotic.”

When the case was referred to me, it seemed immediately apparent based on my review of the file that there had been a complete lack of meaningful communication between BCBSM and the treatment facility. It appeared that medical information had been requested by BCBSM and provided to it, but never acknowledged. Instead, the same information was simply requested again as if the right hand of BCBSM did not know what its left hand is doing. I found no written correspondence in the file, evidencing any actual denial of the claim. Assuming that it had been denied, I could not determine the precise grounds for the denial. Nor could I determine if the internal appeals procedures were exhausted, or if they were still in progress, or for that matter if they had even begun. Instead, there were notations of several phone contacts indicating that a BCBSM representative advised that the claim had been denied as “not medically necessary"; that the initial denial had been appealed and the denial upheld. There was a further notation that to obtain further consideration of the claim, the facility would need to "appeal again".

Obviously, a lawyer’s first step in such a case is to simply pick up the phone and speak to a live person in charge. So I called a BCBSM claims representative, who told me that BCBSM had requested several categories of documents from the facility but had received no response and for that reason the claim was denied. It appeared to me that the documents had already been submitted, but rather than argue the point, I submitted them again.

An entire month passed and I heard nothing further from BCBSM, so I called and spoke to a claims supervisor, who told me that the information I provided had been sent to a "reviewing nurse", who found that "clinical criteria for inpatient treatment was not present". The supervisor explained that the matter would next be sent to an appeals committee, and if the denial was upheld, then upon request the claim could be sent to an outside facility for final review.

After several more weeks, I received a letter from BCBSM’s “Medical Director” once again stating that the entire claim was denied because: “There is no documented evidence of recent bona fide outpatient treatment. The patient was not imminently suicidal. The patient was not psychotic.” Accordingly, the claim was denied because of a “lack of acuity and severity of illness and no documented intensity of service so as to require inpatient treatment.” A second letter announced that the records had been “reviewed by the First Level Appeals Committee” and that “The non-approved determination for inpatient setting was upheld. That letter invited the facility to “to submit additional medical documentation for a reconsideration review. . .”

ERISA requires that every employee benefit plan must provide notice to every participant or beneficiary, whose claim for benefits 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. The notice must also make specific reference to the pertinent plan provisions on which the denial is based. Unless there was a specific plan provision, which stated that the criteria stated were to be relied upon by the plan in making benefit determinations; or alternatively, unless there was some recognized medical authority, which held such criteria were to be applied in determining the “medical necessity” for inpatient treatment of chemical dependency, the denial was indefensible.

As far as I could tell, the standards set forth in the letter from the Medical Director seemed to have been pulled out of thin air. No plan provision existed, which referenced any of those standards as being the criteria for covering inpatient treatment for chemical dependency. Nor was there any literature or other generally accepted medical authority, equating “medical necessity” with those standards; or which held that “medical necessity” could be determined by reference to such standards. Since neither letter from BCBSM set forth any specific reasons for the denial which could be understood by anybody, nor did either letter make any reference to any plan provision,the review standards of ERISA had clearly been breached. Therefore, I submitted an administrative appeal on behalf of the treatment facility.

The appeal explained out that according to the then current edition of the Diagnostic Statistical Manual of Mental Disorders (DSM), the diagnostic criteria for psychoactive substance dependence, were that a person must meet at least three of the following criteria (thus establishing the need for treatment): (1) Substance often taken in larger amounts or over a longer period than the person intended; (2) Persistent desire or one or more unsuccessful efforts to cut down or control substance use; (3) A great deal of time spent in activities necessary to get the substance, taking the substance, or recovering from its effects; (4) Frequent intoxication or withdrawal symptoms when expected to fulfill major role obligations at work, school or home or when substance use is physically hazardous: or (5) Continued substance use despite knowledge of having a persistent or recurrent social, psychological, or physical problem that is caused or exacerbated by the use of the substance.

Based upon the very clear medical records, it was clear that Christina met all five of the DSM criteria. Given the diagnosis of alcohol and drug dependency; and the course of treatment, which was carried out at the direction and under the supervision of a licensed medical doctor, I felt confident that any uncertainty about the necessity or reasonableness of her treatment would be resolved by a Court in favor of coverage.

I also pointed out that ERISA requires that the notice of a decision to deny a claim (in whole or in part) must be furnished to the claimant within a reasonable period of time. It took BCBSM more than two and a half years to formally and finally deny liability for the claim.

Result: The claim denial was administratively reversed and the claim paid in full.

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