Stephanie C. v. Blue Cross Blue Shield of Mass , 813 F.3d 420 ( 2016 )

United States Court of Appeals
For the First Circuit
No. 15-1531
STEPHANIE C., Individually and as Guardian of M.G.,
Plaintiff, Appellant,
v.
BLUE CROSS BLUE SHIELD OF MASSACHUSETTS HMO BLUE, INC.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Denise J. Casper, U.S. District Judge]
Before
Lynch, Selya and Kayatta,
Circuit Judges.
Brian S. King, with whom Law Firm of Brian S. King and
Jonathan M. Feigenbaum were on brief, for appellant.
Joseph D. Halpern, with whom Law Office of Joseph Halpern and
Donald J. Savery were on brief, for appellee.
February 17, 2016
SELYA, Circuit Judge. In this benefits-denial case,
brought pursuant to the Employee Retirement Income Security Act of
1974 (ERISA), codified in relevant part at 29 U.S.C. §§ 1001-1461,
Stephanie C. (Stephanie), individually and on behalf of her minor
son M.G., challenges a decision of the claims administrator, Blue
Cross Blue Shield of Massachusetts HMO Blue, Inc. (BCBS), partially
denying her claim for benefits. The denial related to some charges
incurred during M.G.'s stay at a residential/educational mental
healthcare facility. The district court upheld the partial denial.
See Stephanie C. v. BCBS, No. 13-13250, 2015 WL 1443012, at *12
(D. Mass. Mar. 29, 2015).
In this venue, Stephanie asserts that the district court
erred in failing to find that BCBS committed procedural violations;
that the court appraised her benefits-denial claim through the
wrong lens; and that the court, in all events, erroneously upheld
the partial denial of benefits. We reject Stephanie's claims that
BCBS committed procedural violations. From that point forward,
however, the case raises important questions concerning what a
plan sponsor or claims administrator must do to reserve discretion
in the handling of benefits claims. Here, the district court did
not hold BCBS to these obligations and, thus, employed the wrong
standard of review when considering the partial denial of benefits.
Accordingly, we vacate the district court's judgment and remand
for further proceedings consistent with this opinion.
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I. BACKGROUND
Stephanie's son, M.G., is a derivative beneficiary of an
ERISA-regulated group health insurance plan (the Plan) furnished
by his father's employer, Harmonix Music Systems, Inc. (Harmonix).
The Plan is denominated as a "Preferred Blue PPO Preferred Provider
Plan," the terms of which are set out in a subscriber certificate
(the Certificate). In pertinent part, the Certificate makes clear
that coverage under the Plan remains subject to a determination of
medical necessity made by BCBS. It specifies that the Plan covers
treatment for psychiatric illnesses, including biologically based
conditions (e.g., autism) and, for children until age nineteen,
for non-biologically based conditions (e.g., behavioral problems).
Such benefits do not accrue for residential, custodial, or
medically unnecessary services, such as those performed in
"educational, vocational, or recreational settings." The
Certificate also stipulates that only the least intensive type of
setting required for treatment of a condition will receive
approval. Any non-emergency inpatient course of treatment needs
approval before the patient is admitted to the facility.
The premium account agreement (the PAA) defines the
relationship between participating employers — such as Harmonix —
and BCBS. It provides that ERISA governs the claims administration
framework. Under it, Harmonix is the plan administrator and BCBS
is the claims administrator. The PAA further states that BCBS "is
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the fiduciary to whom [Harmonix] ha[s] granted full discretionary
authority" and that "[a]ll determinations of [BCBS] . . . will be
conclusive and binding on all persons unless it can be shown that
[a particular] determination was arbitrary and capricious."
M.G. experienced a number of mental health issues
beginning in early childhood. A detailed description of his mental
health history is set forth in the district court's rescript, see
Stephanie C., 2015 WL 1443012, at *1-6, and we assume the reader's
familiarity with that account. For present purposes, a sketch
(concentrating on the pertinent period) suffices.
M.G.'s condition intensified in severity in the summer
of 2010 (the summer between his freshman and sophomore years in
high school). At that time, he became physically aggressive toward
his parents and attended weekly mental health therapy sessions.
Although enrolled in an intensive outpatient educational facility,
he continued to exhibit aggressive behavior that led to multiple
arrests. His problems escalated because he steadfastly refused to
take medications despite a court order requiring him to do so.
Concerned about the apparent inadequacy of his care,
Stephanie enrolled M.G. (at her own expense and without prior
approval) in Vantage Point by Aspiro (Aspiro), a wilderness therapy
program based in Utah, which specializes in neurodevelopmental
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disorders.1 M.G. remained at Aspiro from October of 2010 to January
of 2011. His psychological evaluators there diagnosed him as
having Asperger's Syndrome, anxiety disorder, and attention
deficit and hyperactivity disorder. Noticing some improvement,
they recommended that he continue therapy in a longer-term setting.
On the advice of a consultant and without prior approval,
Stephanie proceeded to enroll M.G. in Gateway Academy (Gateway),
a private school treatment center in Utah that BCBS insists is
"out of network" (that is, not in a contractual relationship with
BCBS). While at Gateway, M.G.'s aggressive and emotionally erratic
behavior continued; among other things, he engaged in
inappropriate sexual contact and committed a variety of petty
criminal offenses.
In April of 2011, Harmonix submitted claims to BCBS for
three sets of psychiatric evaluations and consultation services
(performed during the period from January 27, 2011 to February 23,
2011) in connection with M.G.'s admission to Gateway. In late
June, BCBS informed Harmonix that Gateway was a non-covered
provider but that it would cover the three sets of evaluations "as
a one-time exception." Gateway itself submitted claims in
September of 2011 and March of 2012 seeking reimbursement for
1The Aspiro charges are not at issue in this appeal. The
partial denial of benefits challenged by Stephanie relates only to
M.G.'s subsequent enrollment at Gateway Academy (discussed infra).
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principally residential services rendered to M.G. dating back to
January of 2011.
In an informal process, BCBS denied these room and board
claims because the services were not medically necessary and the
submitted documentation did not support the need for an inpatient
admission. In an explanatory letter dated May 25, 2012, BCBS
advised M.G.'s father that its denial of benefits was based largely
upon an evaluation conducted by Dr. Elyce Kearns, a psychiatrist-
reviewer, who relied upon "InterQual," a nationally recognized set
of criteria used to assess the level of care for mental health
patients. Given Dr. Kearns' evaluation, BCBS concluded that M.G.'s
"clinical condition does not meet the medical necessity criteria
required for an acute residential psychiatric stay."
About a year later, Stephanie requested and received a
sheaf of pertinent records from BCBS. She then contested the
denial of coverage through BCBS's internal review process. In
support of her appeal, Stephanie furnished documentation from
M.G.'s psychotherapists, evaluators, and educators in addition to
police reports and juvenile court records. Collectively, these
materials described M.G.'s difficulties involving physical and
verbal aggression, emotional volatility, lack of impulse control,
and thinking errors. This pattern of conduct, Stephanie
maintained, posed a danger to M.G. and to others.
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A second psychiatrist-reviewer, Dr. Kerim Munir,
scrutinized the administrative record and recommended that BCBS
uphold the denial of benefits. He cited the absence of any medical
necessity for the placement and reiterated the conclusions of the
first psychiatrist-reviewer. On June 19, 2013, BCBS denied the
internal appeal in a letter to Stephanie.
Stephanie repaired to the federal district court, suing
to recover the denied benefits. See 29 U.S.C. § 1132(a)(1)(B).
In due course, the parties cross-moved for summary judgment.2 The
district court granted BCBS's motion and denied Stephanie's cross-
motion. See Stephanie C., 2015 WL 1443012, at *12. This timely
appeal followed.
II. ANALYSIS
We subdivide our analysis into two segments, first
addressing Stephanie's claimed procedural irregularities and then
addressing the benefits-denial claim itself.
A. Alleged Procedural Violations.
At the outset, Stephanie argues that BCBS committed
serious procedural violations in failing to engage in dialogue
2 As we have explained before, motions for summary judgment
in this context are nothing more than vehicles for teeing up ERISA
cases for decision on the administrative record. See Scibelli v.
Prudential Ins. Co., 666 F.3d 32, 40 (1st Cir. 2012). The burdens
and presumptions normally attendant to summary judgment practice
do not apply. See id.- 7 -
with her, to answer her questions, and to take into account the
materials that she submitted in the course of the internal review.
Affording de novo review to these claims of error, see Wenner v.
Sun Life Assur. Co., 482 F.3d 878, 881 (6th Cir. 2007), we reject
them.
ERISA requires that every benefit plan
(1) provide adequate notice in writing to any
participant or beneficiary whose claim for benefits
under the plan has been denied, setting forth the
specific reasons for such denial, written in a manner
calculated to be understood by the participant, and (2)
afford a reasonable opportunity to any participant whose
claim for benefits has been denied for a full and fair
review by the appropriate named fiduciary of the
decision denying the claim.
29 U.S.C. § 1133. The Secretary of Labor has promulgated
interpretive regulations, which mandate that the denial of
benefits spell out the specific reasons for an adverse
determination, delineate the particular plan provisions on which
the determination rests, furnish a description of any additional
material necessary to perfect the claim, and provide a description
of the plan's review procedures and applicable time limits. See
29 C.F.R. § 2560.503-1(g)(1). These requirements serve the
salutary purpose of ensuring that a claimant is told the reasons
for a denial of her benefits claim and how to take an internal
appeal if such a denial should occur. See Niebauer v. Crane &
Co., Inc., 783 F.3d 914, 926-27 (1st Cir. 2015); DiGregorio v.
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Hartford Comprehensive Emp. Benefit Serv. Co., 423 F.3d 6, 14 (1st
Cir. 2005).
The "full and fair review" contemplated by section 1133
entails a process that permits a claimant to supply supplementary
"written comments, documents, records, and other [related]
information" to the claims administrator. See 29 C.F.R.
§ 2560.503-1(h)(2). In turn, the claims administrator must furnish
the claimant, upon request and free of charge, all records and
documents relevant to the claim. See id. The claims administrator
also has a duty to consider the materials submitted by the
claimant. See id. Last but not least, even if the claimant shows
that procedural irregularities have occurred in the course of a
review, we typically require her to show prejudice as well. See
Bard v. Bos. Shipping Ass'n, 471 F.3d 229, 240-41 (1st Cir. 2006);
Recupero v. New Eng. Tel. & Tel. Co., 118 F.3d 820, 840 (1st Cir.
1997).
In the case at hand, BCBS's May 25 letter apprised
Stephanie, clearly and concisely, of the reason why BCBS was
denying payment for some of Gateway's services: "your child's
clinical condition does not meet the medical necessity criteria
required for an acute residential psychiatric stay in the area of
symptoms/behaviors." Even in the absence of a discussion directly
engaging with the Plan's medical necessity criteria, Stephanie
received a sufficiently definite explanation of the reason for the
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denial. See, e.g., Cooper v. Hewlett-Packard Co., 592 F.3d 645,
652-54 (5th Cir. 2009); Orndorf v. Paul Revere Life Ins. Co., 404
F.3d 510, 526 (1st Cir. 2005); see also Juliano v. Health Maint.
Org. of N.J., Inc., 221 F.3d 279, 287 (2d Cir. 2000) ("The purpose
of [the 'full and fair review'] requirement is to provide claimants
with enough information to prepare adequately for further
administrative review or an appeal to the federal courts."
(alteration in original) (quoting DuMond v. Centex Corp., 172 F.3d
618, 622 (8th Cir. 1999))). Though the claims administrator must
give particular reasons for the denial of benefits, see 29 U.S.C.
§ 1133(1); 29 C.F.R. § 2560.503-1(g)(1)(i), it need not spell out
"the interpretive process that generated the reason for the
denial," Gallo v. Amoco Corp., 102 F.3d 918, 922 (7th Cir. 1996).
BCBS's letter ended with an outline of the relevant
internal appeal procedures and, thus, substantially complied with
that aspect of the ERISA notice requirements. See Niebauer, 783
F.3d at 927; Terry v. Bayer Corp., 145 F.3d 28, 39 (1st Cir. 1998).
The record makes manifest that Stephanie developed an effective
claim and was able to navigate BCBS's internal review process.
Stephanie's next procedural claim is likewise
unavailing. When Stephanie pursued her internal appeal, she
requested that BCBS furnish her with M.G.'s claim-related medical
records. BCBS complied in a timely manner. Stephanie had an ample
opportunity, after receiving those records, to supply comments and
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supporting materials in conjunction with her internal appeal. She
perfected that appeal by means of a grievance letter attaching
well over 465 pages of supporting documents.
By letter dated June 19, 2013, BCBS reiterated its
partial denial of benefits. Although Stephanie contends that
BCBS's denial failed to take into account the supporting materials
that she had submitted (particularly those that came from M.G.'s
psychotherapists), that is sheer speculation. The mere act of
upholding a denial of benefits cannot mechanically be equated with
overlooking medical evidence that tends to support a different
outcome. See Terry, 145 F.3d at 39. Nor was BCBS obliged to
accept unquestioningly the pronouncements of M.G.'s
psychotherapists: "[n]othing in [ERISA] suggests that plan
administrators must accord special deference to the opinions of
treating physicians." Black & Decker Disab. Plan v. Nord, 538
U.S. 822, 831 (2003).
Relatedly, Stephanie complains that BCBS did not
directly answer all of her questions. But even though a plan
participant is entitled to have the claims administrator engage in
a meaningful dialogue and clearly communicate the reasons for its
actions, ERISA creates no obligation for claims administrators to
respond exhaustively to each and every list of questions a
participant propounds.
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In sum, Stephanie received the full and fair internal
review that 29 U.S.C. § 1133 prescribes. Throughout, BCBS engaged
in a sufficiently meaningful dialogue with Stephanie about her
claim. It assessed her original claim with the help of an
independent psychiatrist-reviewer and engaged a second independent
psychiatrist-reviewer to ensure adequate consideration of the
additional materials that Stephanie submitted on appeal.
If more were needed — and we do not think that it is —
Stephanie has failed to show prejudice attributable to any
purported procedural irregularity. This failure, in and of itself,
is fatal to her procedural claims. See Niebauer, 783 F.3d at 927.
That ends this aspect of the matter. For the reasons
elucidated above, we hold that Stephanie's procedural violation
claims lack force.
B. The Merits.
This brings us to the merits: Stephanie's claim that the
district court erred in upholding BCBS's partial denial of
benefits. Stephanie's initial gambit is that the district court
employed the wrong standard of review. We begin — and end — there.
We must assay the Plan "in order to determine the
standard of judicial review applicable to a claims administrator's
denial of benefits." McDonough v. Aetna Life Ins. Co., 783 F.3d
374, 379 (1st Cir. 2015). The default rule favors de novo review:
a challenge to a denial of benefits is to be reviewed de novo
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"unless the benefit plan gives the administrator or fiduciary
discretionary authority to determine eligibility for benefits or
to construe the terms of the plan." Firestone Tire & Rubber Co.
v. Bruch, 489 U.S. 101, 115 (1989). Moreover, such authority must
be expressly provided for, see Rodriguez-Abreu v. Chase Manhattan
Bank, N.A., 986 F.2d 580, 584 (1st Cir. 1993), and notice of that
reservation must appropriately be given to Plan participants, see
Gross v. Sun Life Assur. Co., 734 F.3d 1, 14 (1st Cir. 2013)
("[T]he critical question is whether the plan gives the employee
adequate notice that the plan administrator is to make a judgment
within the confines of pre-set standards, or if it has the latitude
to shape the application, interpretation, and content of the rules
in each case." (quoting Diaz v. Prudential Ins. Co., 424 F.3d 635,
639-40 (7th Cir. 2005))). Where the delegation of discretionary
authority is sufficiently clear and notice of it has been
appropriately provided, the claims administrator's decision will
be upheld unless it is arbitrary, capricious, or an abuse of
discretion. See Colby v. Union Sec. Ins. Co. & Mgmt. Co. for
Merrimack Anesth. Assocs. LTD Plan, 705 F.3d 58, 61 (1st Cir.
2013).
The court below concluded that the Plan contained an
adequate grant of discretionary decisionmaking authority and,
therefore, its review of the claims administrator's decision to
deny benefits should be for abuse of discretion. The court offered
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twin rationales in support of its conclusion. First, it held that
the Certificate alone contained a sufficiently clear grant of
discretionary authority to BCBS. See Stephanie C., 2015 WL
1443012, at *7 (quoting the Certificate). Second, the court
posited that the Certificate could be read in combination with the
PAA, which admittedly provides an unambiguous grant of
discretionary authority to the claims administrator. See id.(quoting the PAA).
Stephanie disputes both branches of this reasoning. She
argues that the language of the Certificate is insufficiently
distinct to comprise a clear grant of discretionary authority.
She further argues that the PAA was never disclosed when coverage
attached and that, therefore, it cannot be used to clarify the
less-than-pellucid grant of authority contained in the
Certificate.
The district court's determination of the applicable
standard of review is a matter of law and, thus, engenders de novo
review. See United States v. Howard (In re Extrad. of Howard),
996 F.2d 1320, 1327 (1st Cir. 1993). The key question is whether
the Plan "reflect[s] a clear grant of discretionary authority to
determine eligibility for benefits." Leahy v. Raytheon Co., 315
F.3d 11, 15 (1st Cir. 2002). In answering that question, "we
review the language of the Plan de novo, just as we would review
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the language of any contract." Ramsey v. Hercules Inc., 77 F.3d
199, 205 (7th Cir. 1996).
The principal language to which both BCBS and the
district court advert in support of their shared conclusion that
the Plan confers a clear grant of discretionary decisionmaking
authority is contained in the Certificate. In this respect, the
Certificate states that BCBS "decides which health care services
and supplies that you receive (or you are planning to receive) are
medically necessary and appropriate for coverage." The power to
decide, they say, necessarily implies the existence of discretion.
In our view, the quoted language simply cannot carry the
weight that BCBS and the district court load upon it. That
language merely restates the obvious: that no benefits will be
paid if BCBS determines they are not due. See Diaz, 424 F.3d at
637-38 (noting that "[a]ll plans require an administrator first to
determine whether a participant is entitled to benefits before
paying them").
Clarity of language is crucial to accomplishing a grant
of discretionary authority under an ERISA plan, and the Certificate
lacks that degree of clarity. Under our case law, the "BCBS
decides" language falls well short of what is needed for a clear
grant of discretionary authority. See Gross, 734 F.3d at 15-16;
see also Herzberger v. Standard Ins. Co., 205 F.3d 327, 331 (7th
Cir. 2000). Put bluntly, the quoted language is not sufficiently
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clear to give notice to either a plan participant or covered
beneficiary that the claims administrator enjoys discretion in
interpreting and applying plan provisions.
To be sure, "no precise words [in the Plan] are required"
to grant discretionary decisionmaking authority. Gross, 734 F.3d
at 15-16. But in this regard, the Plan "must offer more than
subtle inferences." Id. at 16. Here, the inference of discretion
is subtle at best: it is merely one of two equally plausible
inferences that a reader might draw from the "BCBS decides"
language.
The short of it is that a grant of discretionary
decisionmaking authority in an ERISA plan must be couched in terms
that unambiguously indicate that the claims administrator has
discretion to construe the terms of the plan and determine whether
benefits are due in particular instances. See id. at 15-16;
Feibusch v. Integrated Device Tech., Inc. Emp. Benefit Plan, 463
F.3d 880, 884 (9th Cir. 2006); Kinstler v. First Reliance Standard
Life Ins. Co., 181 F.3d 243, 252 (2d Cir. 1999). The phraseology
that BCBS chose to use in the Certificate to describe its
decisionmaking authority is capable of supporting reasonable
differences of opinion as to the nature and extent of the authority
reserved to BCBS. A fortiori, that phraseology is insufficiently
distinct to constitute a clear grant of discretionary
decisionmaking authority. See Gross, 734 F.3d at 13-15 (holding
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formulation "[p]roof [of claim] must be satisfactory to [claims
administrator]" insufficient to confer discretionary authority);
Heasley v. Belden & Blake Corp., 2 F.3d 1249, 1254-56 (3d Cir.
1993) (holding formulation that claims administrator "will
evaluate the proposed admission for certification of medical
necessity" similarly insufficient).
Contrary to BCBS's importunings, the PAA is not
available to cure the ambiguity contained in the Certificate.
There is simply no evidence that the PAA was ever disclosed either
to Stephanie or to M.G.'s father when coverage attached.3 Any
terms that concern the relationship between the claims
administrator and the beneficiaries cannot be held against the
beneficiaries where, as here, the terms appear in a financing
arrangement between the employer and the claims administrator that
was never seasonably disseminated to the beneficiaries against
whom enforcement is sought. See Fritcher v. Health Care Serv.
Corp., 301 F.3d 811, 817 (7th Cir. 2002). Consequently, the PAA
3
In its brief, BCBS suggests that Stephanie should have been
on notice of the PAA because of references to the PAA contained in
the Certificate. But that suggestion is a non-sequitur: Stephanie
had no obligation to go in search of undelivered documents in order
to ascertain whether BCBS had reserved for itself discretionary
decisionmaking authority. See Helwig v. Kelsey-Hayes Co., 93 F.3d
243, 249 (6th Cir. 1996) (explaining that the critical
consideration "is the language actually given to the employees and
upon which they could reasonably have relied").
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cannot be used against Stephanie to bring clarity to an ambiguously
worded grant of decisionmaking authority.4 See Alday v. Container
Corp. of Am., 906 F.2d 660, 665-66 (11th Cir. 1990).
That ends this aspect of the matter. We hold that the
Certificate is ambiguous as to whether or not the Plan confers
discretionary decisionmaking authority upon BCBS. We further hold
that, in the circumstances of this case, the undelivered PAA cannot
be employed to resolve this ambiguity. Thus, the default rule
applies. See Firestone, 489 U.S. at 115. Under that rule, the
claims administrator's decision should have engendered de novo
review. See id. Because the district court looked at BCBS's
partial denial of benefits through the wrong standard-of-review
lens, we must vacate that portion of its judgment and remand for
reconsideration.
4 With narrow exceptions not relevant here, see, e.g., Senior
Exec. Benefit Plan Participants v. New Valley Corp. (In re New
Valley Corp.), 89 F.3d 143, 149-50 (3d Cir. 1996) (allowing use of
bargaining history and conduct of parties to shed light on meaning
of plan terms), the practice is to look within plan documents to
clarify infirmities in plan language. See Bland v. Fiatallis N.
Am., Inc., 401 F.3d 779, 784-86 (7th Cir. 2005); Gridley v.
Cleveland Pneumatic Co., 924 F.2d 1310, 1312-14, 1316-17 (3d Cir.
1991); Alday v. Container Corp. of Am., 906 F.2d 660, 665-66 (11th
Cir. 1990). This appeal, however, does not require us to decide
whether the PAA is a plan document. Nor does it require us to
decide whether due notice of a reservation of discretionary
decisionmaking authority can be effected only through the Plan
itself.
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III. CONCLUSION
We need go no further. For the reasons elucidated above,
we affirm the judgment of the district court in part, vacate that
judgment in part, and remand for further proceedings consistent
with this opinion. No costs.
So Ordered.
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