On Tuesday, in the District of Minnesota, District Judge Paul A. Magnuson ruled that the Employment Retirement Income Security Act (ERISA), not state laws, dictated the standard of review for denial of benefits for self-funded plans offered by the Affordable Care Act.
The underlying litigation, as explained in the opinion, involved the mother of a child with depression and anxiety, seeking judicial review of insurer United Healthcare’s decision to deny her son coverage in a wilderness therapy program in Hawaii. As a result of the denial of coverage, the mother received a bill for $49,000.
The mother then sued the insurance company for benefit review and payout, alleging the denial of benefits violated ERISA. The plaintiff averred that the correct standard of review by the court was de novo, pointing to a Minnesota law that states “no health plan…may specify a standard of review upon which a court may review denial of a claim or any other decision made by a health plan company.” The court disagreed, writing that not only does the state law merely say that a health plan cannot specify a standard of review for the court — without actually specifying a court must use a de novo standard of review for denied benefits — but that even if the state law did specify a standard, ERISA supersedes any state law in this area.
Judge Magnuson then turned to the appropriate standard of review under ERISA. ERISA has two standards of review for denial of benefits by self-funded insurance plans covered by the federal law. The first is de novo, which is used when the plan does not have an administrator with the “discretionary authority to determine eligibility for benefits or to construe the terms of the plan.” “Abuse of discretion” review is used when an administrator possesses such discretionary authority, as the plaintiff’s plan allowed.
The court continued its analysis by explaining that the abuse of discretion standard upholds a decision by an insurance company to deny benefits if said denial is reasonable. The opinion noted that the plaintiff correctly proffered that a denial of benefits is unreasonable if it is contrary to the plan’s language. The mother averred that her son was denied coverage for a residential program solely due to a lack of suicidal ideation, which she claims the defendant required prior to entry in that type of mental health program. The court disagreed, pointing to evidence showing that the plan terms failed to mandate suicidal tendencies for entry in a residential treatment program, but did require some indicators of “acute impairment of behavior or cognition…to the extent that the welfare of the individual or others is endangered….”
The district judge explained that the evidence presented indicated that the plaintiff’s son lacked possession of such “acute impairment,” as even the son’s neuropsychologist agreed that a residential treatment program was not necessary. As such, the court granted the defendant a motion for summary judgment, upholding the denial of benefits, writing that “given the deferential standard of review for plan decisions under ERISA, the court cannot say that United abused its discretion in denying benefits here.”