It should not surprise anyone that health insurance companies are motivated and incentivized to deny coverage of costly surgical procedures.  Most insurers deny health insurance claims by claiming that a recommended surgery is “not medically necessary” or that the claimant “did not try conservative treatment” prior to undergoing surgery.  Does a health insurer abuse its discretion by denying a claim without providing a reviewing doctor with important records that would assist in proving medical necessity? The Fourth Circuit Court of Appeals recently answered this question in the affirmative, ruling that insurers who do not provide important records to their medical reviewers abuse their discretion by denying claims on the grounds that medical procedures are not medically necessary.  In Garner v. Central States, __ F.4th __, 2022 WL 1160386 (4th Cir. 2022), the claimant, Dorothy Garner, suffered from back and neck pain that continued to increase despite her taking medication and treating with postural exercise like yoga.  Her doctor recommended surgery, based on the results of an MRI.  To cover the cost of the surgery, Ms. Garner submitted a claim with Central States as a beneficiary of her husband’s ERISA employee health benefit plan sponsored by United Parcel Service, Inc.

Central States denied Ms. Garner’s claim on the grounds that her $90,000 surgery was not “medically necessary” under the plan provisions.  This decision was based on an independent medical review (“IMR”) of Ms. Garner’s claim, conducted by Dr. Francesco Serafini, a physician who is Board-certified in general surgery.  But the records that Central States provided to Dr. Serafini for his IMR did not contain either the MRI report that had led her doctor to recommend surgery or his office notes that explained this recommendation.  Without access to these missing documents, Dr. Serafini concluded that there was no basis in the provided records to justify Ms. Garner’s surgery, and this conclusion formed the basis for Central States’ denial letter.

Ms. Garner submitted another appeal after having a physician review her file, and Central States conducted another IMR of Garner’s claim, this time by Dr. Brad Ward, a physician who is Board-certified in neurological surgery.  Unlike Dr. Serafini, Dr. Ward had full access to Ms. Garner’s medical records, including the MRI report and the office notes.  But Dr. Ward also concluded that the surgery was not medically necessary, relying in part on the fact that Ms. Garner had not taken “any conservative measures other than medication.”  Central States thus upheld its denial decision.

Ms. Garner filed an ERISA lawsuit against Central States, seeking coverage under the plan for her surgery.  The district court, ruling on the parties’ summary judgment motions, found for Ms. Garner because Central States “had not engaged in a ‘reasoned and principled’ decision-making process.”  The court’s ruling was based on three points: (1) Central States had not provided Dr. Serafini with the “critically important” MRI records and office visit records, (2) “nothing in the plan required covered individuals to exhaust conservative treatment options before undergoing surgery” and (3) it was undisputed that Garner had unsuccessfully tried postural exercises to relieve her pain.

On Central States’ appeal of the district court’s finding, the Fourth Circuit reviewed Central States’ claim denial to determine whether it had abused its discretion under the plan by denying Ms. Garner’s claim.  Even under this abuse-of-discretion standard, which affords deference to Central States in its claims decisions, the Court affirmed that the district court’s decision to deny her claim was an abuse of discretion.  The Court provided various substantive items that supported its finding.

First, the court noted that Central States “utterly failed to disclose” Ms. Garner’s pertinent medical records to Dr. Serafini, including her MRI results and her doctor’s notes explaining his surgery recommendation.  The court found that these documents “were critical” — the MRI report because it established the underlying medical basis for her surgery, and the office visit notes because they explained why her doctor recommended the surgery.  Notably, the reviewing physician had complained of a lack of information during the initial review, and after he completed his report, Central States did not follow up with him or provide him with the MRI or doctor’s notes.

While the Court stopped short of concluding that Central States “acted in bad faith or deliberately withheld documentation,” it emphasized that under ERISA, Central States owed Ms. Garner a “deliberate, principled reasoning process,” but that it had failed to provide such a review. Central States argued that it cured the flaws in its initial review by providing all of Ms. Garner’s relevant records, including the MRI report and the doctor’s notes, to Dr. Ward.  However, the Court did not accept this reasoning because Central States had repeatedly indicated that it relied on both doctors’ reports in upholding its decision.  Central States’ denial was not “a reasoned determination” because it relied on Dr. Serafini’s report that did not consider the MRI report or the doctor’s notes.

Second, the Court focused on Central States’ basing its denial on Ms. Garner’s not trying conservative treatment before having surgery.  The record indicated that Ms. Garner “had tried postural exercises such as yoga without relief.”  Also, the reason why she had the MRI done was that her pain had continued “despite her efforts at conservative treatment over the past several months,” including medication.  Central States could not require Ms. Garner to receive conservative treatment “as an absolute condition” to finding that her surgery was medically necessary.  By not allowing Central States to “add a new term to the plan, a term for which Garner did not bargain, and about which she lacked any notice,” the Court precluded it from using subjective terminology to “move the goal posts” by requiring ever more “conservative” treatment in order to find her surgery to be medically necessary.

Third, the court observed Central States’ persistence in attempting to justify its improper denial of Ms. Garner’s claim through vague terms.  The court noted that Central States “repeatedly failed to handle Garner’s claim in a sensitive and fair-minded manner.”  After “no fewer than three opportunities to give [Ms.] Garner’s claim the reasoned consideration that it deserved…[i]t would neither encourage the careful and efficient resolution of benefits claims, nor would it be fair to [Ms.] Garner, to permit Central States a fourth opportunity. Three strikes are enough.”

While the court’s reasoning hints that insurers have significant leeway in their claims review processes under the abuse-of-discretion standard of review, insurers must use a fair and reasoned claim review process in deciding claims.  When they do not do so, the courts will not condone this conduct.

The claims review process can be daunting for claimants who are simply trying to obtain much-needed care or treatment, and even more so when insurance companies use unfair means to justify denying legitimate health insurance claims.  McKennon Law Group PC is highly experienced in handling denied ERISA health insurance claims, especially those based on an alleged lack of medical necessity.