Ninth Circuit Emphasizes Need for an Insurer to Have a Meaningful Dialogue With the Claimant When Denying Benefits

A recent Ninth Circuit Court of Appeals decision reaffirmed the need for plan administrators to state the reasoning behind their denial of coverage.  In Lukas v. United Behavioral Health,  __ F.3d __, 2013 U.S. App. LEXIS 1230 (9th Cir. Jan. 17, 2013) the Ninth Circuit was faced with evaluating whether the district court properly weighed the factors necessary to determine if there was an abuse of discretion by the plan administrator in denying the benefits to the claimant.  On de novo review, the Ninth Circuit found that the lower court failed to properly weigh these factors and reversed the decision, remanding the case back to the district court for a benefit award and further necessary proceedings related to that award.

The claim at issue in Lukas was based upon Lukas’ stay at a residential treatment facility for an eating disorder and co-morbid conditions.  United Behavioral Health denied Lukas’ claim for benefits because it did not think the treatment at the facility was a medical necessity.  Furthermore, United Behavioral Health stated that Lukas had not provided adequate documentation to prove a medical need for the treatment.  However, Lukas had provided United Behavioral Health with a letter from the medical treatment facility expressing why the treatment was necessary.  At no time during the initial denial or the appeals process, did United Behavioral Health explain why the letter from the medical treatment facility was insufficient in proving a medical necessity, nor did they request any further information.  The Ninth Circuit specifically found that the lower court had not properly weighed the factors pertaining to the existence of a conflict of interest and the procedural requirements for review of the claim.  The Court made it clear that the weight given to the conflict interest factor depends on the facts of each case, and the Administrative Record revealed that United Behavioral Health committed numerous procedural errors that caused the conflict of interest to weigh more heavily in the analysis.

The Ninth Circuit found that United Behavioral Health committed three clear ERISA statutory violations during the review process, including a failure to provide a meaningful explanation in the initial determination of denial of benefits, a failure to provide a complete case file on request and a failure to reveal the name of the reviewing doctor upon the second appeal.  Additionally, the Court stated that United Behavioral Health inadequately investigated the claim by not clearly defining their decision and requesting more information.  This was particularly troublesome because of the conflict presented by United Behavioral Health acting as both a payor and evaluator of claims.

The Court stated that United Behavioral Health’s:

Reliance upon a lack of documentation was unreasonable because it was not supported by the record and because [United Behavioral Health’s] numerous procedural violations deprived [Lukas] of the opportunity to provide additional relevant records.

The Ninth Circuit’s decision suggests that a single statement denying coverage does not meet the standard necessary to constitute meaningful dialogue, and without a further explanation by the plan administrator or a request for further information from the claimant, a plan administrator likely exposes itself to the risk of liability under ERISA.

There are several procedural protections ERISA affords claimants in ensuring that their claims are properly investigated and reviewed.  This opinion is one of many recent Ninth Circuit opinions explaining how a claims administrator’s violation of these procedural protections will positively impact the outcome of a court’s review of a insured’s/participant’s claim.


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