What? You want to know the rules ahead of the game?

Kelly B. (Blue Cross Blue Shield of Michigan (BCBSM))

Kelly B. was admitted to a treatment facility, diagnosed as suffering major depression and as having a compulsive personality. She also suffered other medical problems, including malnutrition. According to the treating psychotherapist, her symptoms were getting worse and she had been unable to make the necessary gains in therapy. Her depression was considered incapacitating and she had engaged in self-destructive behavior, all of which stemmed from the fact that she had had been raped as a young teenager. She had tried outpatient therapy but without success.

Prior to her admission, the treatment facility contacted BCBSM and verified that inpatient benefits were payable at 100% “usual, reasonable and customary” charges, subject to a calendar year maximum of 45 days. But when the facility submitted a claim for benefits, it was denied for lack of "medical necessity", because the insurer said that there was a “lack of inpatient criteria” to justify the inpatient admission and that Kelly should have been treated on an outpatient basis.

It would be later be determined that the claim denial was based on a review by the BCBSM’s “go to” “Medical Director” for such reviews. The claim denial letter stated: “Based upon that review, BCBSM has denied the entire admission because: The patient was not imminently suicidal. The patient was not homicidal. The patient was not psychotic.” “For all of these reasons, BCBSM has denied the entire admission on the basis of lack of acuity and severity of illness and no documented intensity of service so as to require inpatient treatment.”

OK, so what? The patient is not a bird, a fish or perhaps a Democrat either. How would any of those things relate to any stated plan criteria or to any other objective criteria for determining medical necessity? They wouldn’t. In fact, they related to nothing. They were nothing more than BCBSM’s unpublished internal non-plan criteria, which are irrelevant under ERISA. These words were remarkably familiar to me at the time as I had previously represented the same treatment facility against BCBSM and that claim had been denied for the exact same stated reason. So it was nothing more than mindless boilerplate. But ERISA requires that there be a “full and fair review” given each claim for benefits. That certainly was not the case. No serious consideration was given to Kelly’s claim.

ERISA also requires 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. The notice must also make specific reference to the pertinent plan provisions on which the denial is based.

In my appeal letter, I stated: “In the absence of any such plan provisions, I would very much like to see any literature, or other generally accepted medical authority, which equates ‘medical necessity’ with these standards; or which holds that ‘medical necessity’ may be determined by reference to such standards.” It appeared to me that BCBSM’s reviewing doctor had retroactively promulgated his own set of requirements and prerequisites for impatient care, none of which appeared in any plan document and none of which were disclosed, in advance, to either the patient or the facility until a year and a half after the fact. Under this scheme, no insured could ever know ahead of time, that she is required to first exhaust some other unspecified level of treatment for some unspecified period of time, before her claim is payable by the plan.

ERISA imposes fiduciary duties on any person who exercises any discretionary authority or discretionary control respecting management or disposition of plan assets or has any discretionary authority or discretionary responsibility in the administration of the plan. A fiduciary is under a duty of loyalty and care to the beneficiaries of the plan. The fiduciary responsibilities, as well as the reporting and disclosure requirements of ERISA are the most fundamental safeguards, provided by ERISA, for the protection of the plan participants. It was clear that those duties had been breached in this case.

Result: The case was resolved satisfactorily without litigation.

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