F. et al v. Sinclair Services Company et al
Filing
37
MEMORANDUM DECISION AND ORDER;granting in part and denying in part 21 Sinclair's Motion for Summary Judgment ; granting in part and denying in part 22 F. Family's Motion for Summary Judgment. The Clerk of Court is directed to close the case. Signed by Judge Robert J. Shelby on 1/22/2016. (jds)
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
JOSEPH and GAIL F., individually and as
guardians of N.F., a minor,
MEMORANDUM DECISION AND
ORDER
Plaintiffs,
v.
Case No. 2:14-cv-00505-RJS
SINCLAIR SERVICES COMPANY, and
SINCLAIR SERVICES COMPANY POINT
OF SERVICE BASIC (POS BASIC) PLAN,
Judge Robert J. Shelby
Defendants.
This is an ERISA case.1 Plaintiffs Joseph and Gail F. sued Defendants Sinclair Services
Company and Sinclair Services Company Point of Service Basic Plan after Sinclair’s Plan
Administrator denied the F. Family’s claim for benefits relating to long-term residential treatment
services rendered to its minor daughter, N.F., for depression. The F. Family and the Plan
Administrator cross-move for summary judgment on the F. Family’s claim for benefits. For the
reasons stated below, both motions are granted in part and denied in part.2
BACKGROUND
The F. Family lives in Carbon County, Wyoming. Sinclair employs Joseph F. and
provides the F. Family with group health coverage through a self-funded employee benefit plan.
N.F., the F. Family’s minor daughter, was a beneficiary of the Basic Plan during 2012 and the
Plus Plan during 2013. Before addressing the legal issues presented, the court first discusses the
relevant parts of the Basic and Plus Plans, N.F.’s medical treatment, and the procedural history of
1
ERISA stands for the Employee Retirement Income Security Act of 1974.
After examining the briefs and record submitted by the parties, the court concludes that oral argument will
not materially assist the court in resolving this dispute. The court therefore issues this Order without oral argument.
2
1
the case.
I.
The Plan
The Plan terms are summarized in a Summary Plan Description booklet. The Summary
includes “[t]erms that have technical or special meanings [that] are printed in italics and defined
in the Definitions section” of the booklet.3
Health benefits under the Plan “are affected by certain limitations and conditions.”4 For
example, benefits are determined by a beneficiary’s needs and the costs involved. Similarly,
“health benefits are not provided for every kind of medical treatment or service, even if [the
beneficiary’s] health care provider recommends them.”5 Rather, the Plan provides benefits only
for medically necessary treatment.6
Within these limitations, the Plan allows beneficiaries “to choose among health care
providers in a network.”7 An example of a health care provider is a specialized treatment facility.
Residential treatment and skilled nursing facilities are two types of specialized treatment
facilities. A residential treatment facility is a “child-care institution that provides residential care
and treatment for emotionally disturbed children and adolescents.”8 By contrast, a skilled
nursing facility provides “continuous skilled nursing care for persons during the convalescent
stage of their illness or injury.”9 The network is the “group of Health Care Providers with whom
Sinclair has contracted.”10
The Plan provides an Out of Area Program for individuals who live in non-network areas.
3
Pre-Litigation Record (Dkt. 23), at 10. The parties refer to the Pre-Litigation Record as “REC.” The
court adopts the same approach.
4
Id. at 10.
5
Id.
6
Id. at 12.
7
Id. at 10.
8
Id. at 60.
9
Id.
10
Id. at 57.
2
The Program provides coverage “to those who live in an area where one of Sinclair’s networks
does not exist, and to those who receive health care services while traveling (for purposes other
than obtaining health care services) outside of the area where one of Sinclair’s networks is
available.”11 A beneficiary lives in a “non-network area if there are no network health care
providers within a 50 mile radius of [the beneficiary’s] principal residence.”12 A beneficiary
living in a non-network area may select any licensed health care provider.
The Plan also includes a provision styled Use of Network Providers During Travel. The
provision states, “[w]hether or not you live in an area where a network provider is available, if
you travel to an area where a network provider is available, you must utilize the network
(assuming that the treatment is not an emergency).”13
The Plan is administered by a Plan Administrator. The Administrator is the Plan’s “sole
fiduciary” who “exercises all discretionary authority and control over the administration of the
Plan and the management and disposition of Plan benefits.”14 The Administrator has “the sole
discretionary authority to determine eligibility for Plan benefits or to construe the terms of the
Plan.”15
Finally, the Plan excludes certain services and supplies, “even if they are medically
necessary or recommended by a health care provider.”16 For instance, the Plan does not provide
benefits for cosmetic surgery or obesity treatment. And after an amendment took effect on
January 1, 2013, the Plus Plan—of which N.F. was a beneficiary as of January 1, 2013—no
11
Id. at 11.
Id. In the Definitions section, the Plan states that a non-network area is “a location for which the Out of
Area Program is available, defined as an area in which no network health care providers exist within a 50 mile
radius.” Id. at 57.
13
Id. at 11.
14
Id. at 58.
15
Id.
16
Id. at 18.
12
3
longer provided benefits for residential treatment services, even though benefits for residential
treatment services were provided in 2012.17
II. N.F.’s Medical Treatment
N.F. has suffered from serious mental, emotional, and behavioral health conditions. In
early 2012, N.F. spent six weeks at an acute psychiatric hospital in Texas for suicidal ideation.
The Texas facility provides inpatient treatment to adolescents and adults with complex mental
health conditions. Before discharging N.F., staff at the Texas facility recommended that she
receive long-term treatment at an all-girls facility. The staff warned that “placing [N.F.] in an
inappropriate facility for her needs could actually worsen her condition.”18 The staff therefore
recommended “a program similar to Moonridge Academy or New Haven [Residential Treatment
Center].”19 Both programs are non-network facilities in Utah.
Following those recommendations, the F. Family admitted N.F. at Moonridge on May 23,
2012. Moonridge is a licensed residential treatment facility in Cedar City, Utah. N.F. received
treatment at Moonridge until September 7, 2012. After Moonridge discharged N.F., the F.
Family admitted her at New Haven, a licensed residential treatment facility in Utah County,
Utah. The F. Family withdrew N.F. from New Haven on March 1, 2013.
III. Procedural History
While N.F. was receiving treatment at Moonridge and New Haven, the F. Family worked
with the Administrator to determine what coverage was available for N.F.’s treatment. The
Administrator initially told the F. Family that because the F. Family traveled to Utah—a network
area—coverage would be available only for treatment provided at Youthcare, a network facility
in Salt Lake City, Utah. Youthcare provides only coed treatment. The Administrator denied
17
See Dkt. 27, Ex. 1.
REC at 96.
19
Id. at 112.
18
4
coverage for treatment N.F. received at Moonridge and New Haven.
The F. Family appealed the denial of coverage in May 2012. In its appeal, the F. Family
argued that Youthcare was inappropriate for N.F. based on recommendations from the Texas
facility’s staff. The F. Family also noted that Moonridge was willing to consider a single-case
agreement with the Plan.
The Administrator again denied coverage in June 2012. The Administrator maintained
that the Plan did not cover out-of-network care. The Administrator, however, did not address the
F. Family’s argument that Youthcare was not appropriate for N.F. Nor did the Administrator
comment on Moonridge’s willingness to negotiate a rate of reimbursement for N.F.’s treatment.
The F. Family submitted a second appeal letter in December 2012. In it, the F. Family
pointed out that there are no network providers of all-girls residential care within fifty miles of
its home in Wyoming. The F. Family argued that the Plan should therefore cover N.F.’s expenses
because the Out of Area Program provision states that the Plan covers services rendered by nonnetwork providers when there are no network providers within a fifty mile radius of the
beneficiary’s principal residence. The F. Family also contended that the Plus Plan’s post-January
1, 2013, residential treatment exclusion violated the Paul Wellstone and Pete Domenici Mental
Health Parity and Addiction Equity Act of 2008.
The Administrator again denied the F. Family’s claim in February 2013. The
Administrator reiterated that the Plan does not cover out-of-network care. It concluded if a “Plan
participant travels to an area to obtain health care services and a network provider is available,
the participant must utilize a network provider” to receive benefits.20 The Administrator cited
page three of the Summary Plan Description as support for its conclusion. Page three includes
20
Id. at 2.
5
the Out of Area Program provision and the Use of Network Providers During Travel provision.
And in response to the F. Family’s Parity Act argument, the Administrator stated that the Plus
Plan no longer provided benefits for residential treatment under an amendment that took effect
on January 1, 2013. The Administrator directed the F. Family to an attachment containing the
notice of the amendment to the Plus Plan. The attachment is not contained in the administrative
record before the court, but the Administrator has submitted it as an exhibit.
The F. Family submitted a third and final appeal in March 2013. In this appeal, the F.
Family appealed the Administrator’s denial of claims for both Moonridge and New Haven. The
F. Family again disputed the Administrator’s interpretation of the Out of Area Program provision.
The F. Family also argued the amended Plus Plan violated the Parity Act by excluding residential
treatment from coverage. According to the F. Family, the Plus Plan imposed an improper
nonquantitative treatment limitation because the Plus Plan covered medical and surgical benefits
analogous to residential treatment but did not provide coverage for similar mental health
benefits.
The Administrator issued its final denial of the F. Family’s claims in May 2013. In
making its denial, the Administrator stated:
[T]he Plan Administrator reviewed the terms of the Plan document, all
information provided by Moonridge Academy and New Haven Residential
Treatment Center concerning the claims and this appeal, the original claims
and other information provided to the Plan when the claims were filed, all
correspondence and other written information received by the Plan from
you and from the providers of the services concerning the original claims,
the original notice of adverse benefit determination dated February 7, 2013
concerning the claims which are the subject of this appeal, and your appeal
letter dated March 28, 2013 and all attachments to the appeal letter. The
Plan Administrator made a full and independent review of the appeal, and
did not afford deference to the initial adverse benefit determinations.21
21
Id. at 114.
6
The Administrator also distinguished between claims incurred before January 1, 2013, and
claims incurred on or after January 1, 2013. The Administrator denied the claims for both
periods, but for different reasons.
The Administrator first denied the claims incurred before January 1, 2013, because the
“Basic Plan does not provide benefits for care or services received from non-network
providers.”22 The Administrator acknowledged that the Plan pays benefits for non-network
providers located within the participant’s non-network area if there are no network providers
within fifty miles of the participant’s residence. The Administrator noted that the purpose of the
Out of Area Program provision “is to provide Plan benefits to participants who do not live close
to a network provider which are comparable to the benefits provided by the Plan to participants
who do live close to a network provider.”23
The Administrator’s denial, however, turned on its interpretation of the Use of Network
Providers During Travel provision. Under that provision, the Plan provides benefits “if a
participant travels to obtain care to an area where a network provider is available . . . [and]
utilizes a network provider . . . . For this purpose, the Plan Administrator interprets area to mean
a state.”24 The Administrator explained that because N.F. traveled to Utah—where there was a
network residential treatment facility—to receive treatment and the F. Family’s claims were for
services provided by non-network providers, the Plan provides no benefits.
Second, the Administrator denied the claims incurred on or after January 1, 2013, because
the “Plus Plan does not provide benefits for care or services received at residential treatment
centers,” whether in or out of network.25 The Administrator refuted the F. Family’s argument
22
Id.
Id. at 116.
24
Id.
25
Id. at 114.
23
7
that the exclusion of residential treatment violates the Parity Act. The Administrator concluded
that the Plus Plan “does not make impermissible distinctions between its payment of claims for
Medical/Surgical benefits and Mental Health/Substance Abuse (MH/SUD) benefits.”26 The
Administrator stated:
The Plan does not provide any benefits for services at residential treatment
centers, regardless of whether the services are for Medical/Surgical
treatment or for Mental Health/Substance Abuse treatment. The Plan
provides benefits for skilled nursing services both for Medical/Surgical
treatment and Mental Health/Substance Abuse Disorder treatment, if the
other requirements of the Plan, such as medical necessity, are met. The Plan
is not required under [the Parity Act] to provide benefits for services at
residential treatment centers, and it is not required by that law to provide
these benefits because it provides benefits for services at skilled nursing
facilities.
The F. Family then brought this ERISA suit in July 2014 to recover benefits pursuant to
29 U.S.C. § 1132(a)(1)(B). Both the F. Family and the Administrator now move for summary
judgment on the F. Family’s claim.
LEGAL STANDARD
In general, summary judgment is appropriate “if the movant shows that there is no
genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of
law.”27 A material fact is one that “might affect the outcome of the dispute under the applicable
law,”28 and a party must show more than “some metaphysical doubt as to the material facts” to
establish a genuine dispute.29
But in an ERISA case where both parties have moved for summary judgment, “summary
judgment is merely a vehicle for deciding the case; the factual determination of eligibility for
benefits is decided solely on the administrative record, and the non-moving party is not entitled
26
Id. at 116.
Fed. R. Civ. P. 56(a).
28
Ulissey v. Shvartsman, 61 F.3d 805, 808 (10th Cir. 1995).
29
Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
27
8
to the usual inferences in its favor.”30
DISCUSSION
ERISA allows individuals denied benefits under an employee benefit plan to sue in
federal court to recover benefits due under the terms of the plan.31 The F. Family argues it is due
benefits under the Plan for two reasons. First, the F. Family argues the Administrator abused its
discretion when it denied the F. Family’s claim for benefits incurred before January 1, 2013,
based on an unreasonable interpretation of the Plan’s terms. Second, the F. Family argues it is
entitled to benefits incurred on or after January 1, 2013, because the 2013 amendment to the Plus
Plan excluding coverage for residential treatment services violates the Paul Wellstone and Pete
Domenici Mental Health Parity and Addiction Equity Act of 2008.
The Administrator, however, argues that it did not abuse its discretion when it denied the
F. Family’s claim for benefits incurred before January 1, 2013, because its denial was based on a
reasonable interpretation of the Plan’s terms. The Administrator also argues that the F. Family is
not entitled to benefits incurred on or after January 1, 2013, because the Plus Plan’s residential
treatment exclusion does not violate the Parity Act.
The court addresses the competing arguments in turn.
I.
Benefits Incurred Before January 1, 2013
The F. Family urges the court to reverse the Administrator’s denial of pre-January 1,
2013, benefits because the Administrator based its denial on an unreasonable interpretation of the
Plan’s terms. Before discussing the F. Family’s argument, the court addresses the applicable
30
LaAsmar v. Phelps Dodge Corp. Life, Accidental Death & Dismemberment & Dependent Life Ins. Plan,
605 F.3d 789, 796 (10th Cir. 2010) (citation omitted) (internal quotation marks omitted).
31
29 U.S.C. § 1132(a)(1)(B). Section 1132(a)(1)(B) provides that a plan participant or beneficiary may
bring a civil action “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms
of the plan, or to clarify his rights to future benefits under the terms of the plan.” Id.
9
standard of review.32
A. Standard of Review
The court reviews de novo a denial of benefits claimed under an ERISA plan “unless the
benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility
for benefits or to construe the terms of the plan.”33 If the plan gives the administrator or
fiduciary discretionary authority, the court “employ[s] a deferential standard of review, asking
only whether the denial of benefits was arbitrary and capricious.”34 “Under this arbitrary-andcapricious standard, [the court’s] review is limited to determining whether the interpretation of
the plan was reasonable and made in good faith.”35 The Administrator bears the burden to show
the arbitrary and capricious standard of review applies to its benefits decisions under the Plan.36
Here, the Plan grants the Administrator discretionary authority to determine eligibility for
Plan benefits and to construe the terms of the Plan. A deferential arbitrary and capricious
standard therefore applies. The F. Family, however, argues that the court should nevertheless
review the denial under a less deferential standard because of an alleged conflict of interest,
procedural irregularity, and breach of fiduciary duty.37 The court takes each argument in turn.
1. Conflict of Interest
The F. Family contends that the court should temper the deference it affords the
Administrator’s denial because the Administrator operates under a conflict of interest.
32
See LaAsmar, 605 F.3d at 796 (“Like the district court, we must first determine the appropriate standard
to be applied to [the Plan’s] decision to deny benefits.” (citation omitted) (internal quotation marks omitted)).
33
Id. (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)).
34
Id. The Tenth Circuit uses the terms “arbitrary and capricious” and “abuse of discretion” interchangeably
in the ERISA context. Weber v. GE Grp. Life Assurance Co., 541 F.3d 1002, 1010 n.10 (10th Cir. 2008) (citation
omitted).
35
LaAsmar, 605 F.3d at 796 (citation omitted) (internal quotation marks omitted).
36
Id.
37
See Flinders v. Workforce Stabilization Plan of Phillips Petroleum Co., 491 F.3d 1180, 1189–90 (10th
Cir. 2007) (stating that if a plan administrator operates under a “conflict of interest or there is a serious procedural
irregularity in the administrative process, it is necessary to adjust the standard of review”).
10
A conflict of interest exists when an employer “both funds the plan and evaluates the
claims.”38 “[I]f a benefit plan gives discretion to an administrator or fiduciary who is operating
under a conflict of interest, that conflict must be weighed as a factor in determining whether
there is an abuse of discretion.”39 The Tenth Circuit has incorporated this factor by “craft[ing] a
sliding scale approach where the reviewing court will always apply an arbitrary and capricious
standard, but will decrease the level of deference given in proportion to the seriousness of the
conflict.”40 The conflict “should prove more important (perhaps of great importance) where
circumstances suggest a higher likelihood that it affected the benefits decision.”41 But it “should
prove less important (perhaps to the vanishing point) where the administrator has taken active
steps to reduce potential bias and to promote accuracy.”42
For example, a conflict should play a larger role in the analysis when an “administrator
has a history of biased claims administration.”43 A conflict should play a less important role,
however, when the administrator has “wall[ed] off claims administrators from those interested in
firm finances” or has “impos[ed] management checks that penalize inaccurate decisionmaking
irrespective of whom the inaccuracy benefits.”44
Here, Sinclair, the Administrator, both funds the plan and evaluates the claims. This dual
role suggests that the Administrator operates under a conflict of interest.45 But “[t]he fact that
[Sinclair] administered and insured the . . . plan does not on its own warrant a further reduction
38
Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 112 (2008).
Firestone, 489 U.S. at 115; see also Glenn, 554 U.S. at 117 (explaining “that when judges review the
lawfulness of benefit denials, they will often take account of several different considerations of which a conflict of
interest is one”).
40
Weber, 541 F.3d at 1010 (citation omitted) (internal quotation marks omitted).
41
Glenn, 554 U.S. at 117.
42
Id.
43
Id.
44
Id.
45
See Hancock v. Metro. Life Ins. Co., 590 F.3d 1141, 1155 (10th Cir. 2009) (noting that in light of Glenn,
the Tenth Circuit “now weigh[s] all conflicts of interests—be they standard or inherent—as a factor in [its] review”).
39
11
in deference.”46 The F. Family must instead offer some proof that a conflict “could [have]
plausibly jeopardize[d] the plan administrator’s impartiality.”47 It has failed to do so.
The F. Family contends the conflict impacted the Administrator’s decision to deny the F.
Family’s claim because the denial resulted in a financial benefit to Sinclair. This concern,
however, is mitigated by the fact that an insurer who doubles as the administrator also “has an
incentive to pay claims and to get it right so as to avoid dissatisfaction . . . and lawsuits.”48
Pointing to its May 2012 appeal letter, the F. Family also argues the conflict influenced
the Administrator’s decision to initially—and incorrectly—tell the F. Family that no residential
treatment was covered under the Plan at all.49 But the same letter also states that “[a]ccording to
Andrea, of Sinclair Health Services, the only adolescent Residential Treatment Center covered
by Sinclair Health is Youth Care in Draper, Utah.”50 This suggests the Administrator notified the
F. Family during initial discussions that residential treatment was available for adolescents like
N.F.51 The F. Family has failed to meet its burden to put forth evidence that the Administrator’s
conflict of interest “could [have] plausibly jeopardize[d] the plan administrator’s impartiality.”52
The court will afford the conflict of interest little weight in determining if the Administrator’s
46
Adamson v. Unum Life Ins. Co. of Am., 455 F.3d 1209, 1213 (10th Cir. 2006); see also id. (“Whatever the
merits concerning the potential motivation of an insurer doubling as a plan administrator, such observations were
never meant to be an ipso facto conclusive presumption to be applied without regard to the facts of the case . . . .”).
47
Id.
48
Id.
49
See REC at 95.
50
Id.
51
Sinclair filed with its motion for summary judgment a declaration by Andrea Carey, the Director of
Medical Plan for Sinclair. (Dkt. 27.) In the declaration, Ms. Carey declares that during initial conversations with
the F. Family, “Sinclair understood that [the F. Family was] seeking residential treatment for an adult.” (Id.) Such
treatment is not covered by the Plan. (Id.) But “as soon as Sinclair determined that the coverage being discussed
was for a minor, it informed [the F. Family] that coverage would be available under the Basic Plan prior to 2013
from a network provider given that [the F. Family] had traveled to a network area.” (Id.). Although the declaration
sheds light on the F. Family’s argument, the court declines to consider Ms. Carey’s declaration for this purpose
because it was not included in the administrative record. See Holcomb v. Unum Life Ins. Co. of Am., 578 F.3d 1187,
1192 (10th Cir. 2009) (“Our review is limited to the administrative record—the materials compiled by the
administrator in the course of making his decision.” (citation omitted) (internal quotation marks omitted)).
52
Adamson, 455 F.3d at 1213.
12
denial was arbitrary and capricious.
2. Procedural Irregularities
The F. Family next urges the court to apply a de novo standard of review, arguing the
Administrator violated ERISA’s claims procedure regulations.
“[S]erious procedural irregularities” can require the court to apply a de novo standard of
review where deferential review would otherwise be required.53 That said, there is not a serious
procedural irregularity requiring de novo review every time “the plan administrator’s conclusion
is contrary to the result desired by the claimant.”54 Instead, “de novo review may be appropriate
if the benefit-determination process did not substantially comply with ERISA regulations.”55 For
instance, the Tenth Circuit has held that de novo review is appropriate where the administrative
appeal was “‘deemed denied’ because the administrator made no decision to which a court may
defer.”56 The Tenth Circuit has also applied de novo review where the plan administrator failed
53
Martinez v. Plumbers & Pipefitters Nat’l Pension Plan, 795 F.3d 1211, 1215 (10th Cir. 2015); see also
Johnson v. United of Omaha Life Ins. Co., 775 F.3d 983, 988 (8th Cir. 2014) (holding that a procedural irregularity
sufficient to trigger de novo review “must leave the court with serious doubts as to whether the result reached was
the product of an arbitrary decision or the plan administrator’s whim” (citation omitted) (internal quotation marks
omitted)).
54
Adamson, 455 F.3d at 1214 n.2; see also Grosvenor v. Qwest Commc’ns Int’l, 191 F. App’x 658, 662
(10th Cir. 2006) (unpublished) (“A serious procedural irregularity is not present every time a plan administrator
comes to a decision adverse to the claimant on conflicting evidence.”).
55
Hancock, 590 F.3d at 1152. In Kellogg v. Metropolitan Life Insurance Co., 549 F.3d 818, 827–28 (10th
Cir. 2008), the Tenth Circuit left open the question of whether the substantial compliance rule still applies under the
revised 2002 ERISA regulations. The Tenth Circuit has since declined to resolve the issue on several other
occasions. See, e.g., LaAsmar, 605 F.3d at 800 (“We need not decide whether [the] ‘substantial compliance’
doctrine still applies to the revised regulation at issue here, 29 C.F.R. § 2560.503-1 . . . .”); Hancock, 590 F.3d at
1152 n.3 (“Because Ms. Hancock has failed to show any noncompliance, we need not consider whether substantial
compliance is sufficient under the January 2002 revisions of ERISA.”); Rasenack ex rel. Tribolet v. AIG Life Ins.
Co., 585 F.3d 1311, 1316 (10th Cir. 2009) (“Because AIG has failed [the] substantial compliance test, . . . we need
not decide whether a minor violation of the deadlines or other procedural irregularities would entitle the claimant to
de novo review under the 2002 amendments.”).
56
Finley v. Hewlett-Packard Co. Emp. Benefits Org. Income Prot. Plan, 379 F.3d 1168, 1173 (10th Cir.
2004); see also Kellogg, 549 F.3d at 826–28 (applying de novo review, even though the plan granted the plan
administrator discretion to determine benefits eligibility, because the plan administrator never issued any decision on
the claimant’s administrative appeal).
13
to timely respond to a beneficiary’s appeal.57
The F. Family argues the Administrator’s determination was so procedurally defective as
to deny the F. Family a full and fair review of its appeal in accordance with ERISA claims
procedures. ERISA requires that, “[i]n accordance with regulations of the Secretary [of Labor],
every employee benefit plan shall . . . 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.”58 The Secretary’s regulations implementing this language
require, among other things, every benefit plan to provide claimants “a reasonable opportunity to
appeal . . . under which there will be a full and fair review of the claim and the adverse benefit
determination.”59 A full and fair review “takes into account all comments, documents, records,
and other information submitted by the claimant relating to the claim, without regard to whether
such information was submitted or considered in the initial benefit determination.”60 This
requirement seeks to “enable claimants to submit informed responses to the adverse decision and
to engage in meaningful dialogue with the plan administrator.”61
The F. Family contends the Administrator violated ERISA’s claims procedure regulations
when it failed to meaningfully respond to the points the F. Family raised in its appeals. The
Administrator never addressed the F. Family’s argument that Youthcare was not medically
appropriate for N.F. Nor did the Administrator retain anyone with medical qualifications to
review the F. Family’s claims. And the Administrator likewise did not address N.F.’s medical
condition, diagnosis, or treatment in making its determination.
57
See, e.g., LaAsmar, 605 F.3d at 796–99 (applying de novo review where the plan administrator resolved
the administrative appeal 170 days after receiving the appeal instead of within 60 days as required by ERISA
regulations).
58
29 U.S.C. § 1133(2).
59
29 C.F.R. § 2560.503-1(h)(1).
60
Id. § 2560.503-1(h)(2)(iv).
61
Metzger v. UNUM Life Ins. Co. of Am., 476 F.3d 1161, 1168 n.4 (10th Cir. 2007).
14
The F. Family overstates the Administrator’s obligations. The Administrator based its
denial on its interpretation of the Use of Network Providers During Travel provision—not on an
evaluation of Youthcare’s medical appropriateness or N.F.’s medical condition. The
Administrator therefore had no reason to discuss the appropriateness of Youthcare or N.F.’s
medical condition, diagnosis, or treatment. Similarly, the Administrator was not required to
retain a medically qualified professional to review the claims. An administrator must “consult
with a health care professional who has appropriate training and experience in the field of
medicine involved in the medical judgment” only when the administrator’s “adverse benefit
determination . . . is based in whole or in part on a medical judgment, including determinations
with regard to whether a particular treatment . . . is . . . not medically necessary or appropriate.”62
Here, the Administrator’s adverse benefit determination was not based on a medical judgment or
a determination that Youthcare was medically appropriate for N.F. The Administrator’s denial
was instead based on its interpretation of the Use of Network Providers During Travel provision.
In short, both N.F.’s medical condition and the appropriateness of Youthcare were irrelevant to
the Administrator’s decision and interpretation of the Plan.63
In addition, the F. Family was not prejudiced by the Administrator’s decision not to
address the F. Family’s arguments at issue. While the F. Family clearly disagrees with the
Administrator’s decisions, the F. Family cannot plausibly maintain that they were not fully aware
of the rationale underlying the Administrator’s decisions.64 In each of the Administrator’s
denials, the Administrator stated that the Plan does not cover treatment rendered by out-of-
62
29 C.F.R. § 2560.503-1(h)(3)(iii).
See Johnson, 775 F.3d at 988 (declining to apply de novo review where the “alleged procedural
irregularities would not have changed the outcome”).
64
See Lunt v. Metro. Life Ins. Co., No. 2:05-cv-784 TC, 2007 WL 1964514, at *8 (D. Utah July 2, 2007)
(concluding that the claimant suffered no prejudice under ERISA’s full and fair review requirement, because the
claimant was fully aware of the insurer’s decision and rationale).
63
15
network providers when a beneficiary travels to an area to receive treatment. The Administrator
also directed the F. Family in its February 2013 denial to page three of the Summary Plan
Description, which contains the Use of Network Providers During Travel provision. And the
Administrator’s May 2013 letter explicitly states that the Administrator’s denial was based on its
interpretation of the Use of Network Providers During Travel provision. The F. Family was on
notice of the Administrator’s underlying rationale. That the F. Family never addressed the Use of
Network Providers During Travel provision in its appeal letters—and instead relied on its own
competing interpretation of the Out of Area Program provision—does not mean the
Administrator denied the F. Family a full and fair review. At bottom, the court cannot conclude
the Administrator committed a serious procedural irregularity justifying de novo review.
3. Breach of Fiduciary Duty
Finally, the F. Family argues that a less deferential standard of review is warranted
because the Administrator breached its fiduciary duty to administer the Plan in the best interest
of N.F., a beneficiary under the Plan.
ERISA imposes “higher-than-marketplace quality standards”65 on plan administrators and
requires them to “discharge [their] duties . . . solely in the interests of the participants and
beneficiaries” of the plan.66 And “[w]hile a fiduciary has a duty to protect the plan’s assets
against spurious claims, it also has a duty to see that those entitled to benefits receive them. It
must consider the interests of deserving beneficiaries as it would its own.”67 Moreover, the
claims process through which a plan administrator determines a beneficiary’s eligibility for
benefits is not designed to be adversarial.68 “Indeed, one purpose of ERISA was to provide a
65
Glenn, 554 U.S. at 115.
29 U.S.C. § 1104(a)(1).
67
Gaither v. Aetna Life Ins. Co., 394 F.3d 792, 807–08 (10th Cir. 2004).
68
Rasenack, 585 F.3d at 1325.
66
16
nonadversarial method of claims settlement.”69
The F. Family argues that the Administrator breached its fiduciary duty to N.F. because
the Administrator’s “justification for its denials . . . indicate an adversary bent on denial of the [F.
Family’s] claims.”70 The F. Family presents no facts to support this argument. The court cannot
conclude that a plan administrator breaches its fiduciary duty to a plan beneficiary simply by
interpreting a plan provision in a manner that results in a denial of the beneficiary’s claims.
In sum, the court will apply an arbitrary and capricious standard of review, but will weigh
the Administrator’s conflict of interest as one factor in determining the lawfulness of its decision
to deny the F. Family’ claim for benefits.
B. The Administrator’s Interpretation of the Plan and Rationale for Denying the
Claim
Having determined the applicable standard of review, the court now examines whether
the Administrator’s decision to deny the F. Family’s claim for benefits incurred before January 1,
2013—based on the Administrator’s interpretation of the Plan—was arbitrary and capricious.
The court applies the arbitrary and capricious standard of review “to the extent the administrator
actually exercised a discretionary power vested in it by the terms of the Plan.”71 To receive this
deferential review, “the administrator’s decision in a given case must be the valid exercise of that
discretion.”72
Under this deferential standard of review, the court considers “only the rationale asserted
by the plan administrator in the administrative record”73 and asks “whether the interpretation of
69
Gaither, 394 F.3d at 807.
Dkt. 22.
71
Spradley v. Owens-Ill. Hourly Emps. Welfare Benefit Plan, 686 F.3d 1135, 1140 (10th Cir. 2012).
72
Gilbertson v. Allied Signal, Inc., 328 F.3d 625, 631 (10th Cir. 2003).
73
Spradley, 686 F.3d at 1140 (quoting Flinders v. Workforce Stabilization Plan of Phillips Petroleum Co.
491 F.3d 1180, 1190 (10th Cir. 2007), abrogated on other grounds by Metro. Life Ins. Co. v. Glenn, 554 U.S. 105
(2008)).
70
17
the plan was reasonable and made in good faith.”74 The interpretation need not be the only
logical one or even the best one.75 Instead, the court will uphold an administrator’s decision
unless the decision “is not grounded on any reasonable basis.”76 The court likewise will not
substitute its judgment for that of an administrator so long as the administrator’s decision falls
“somewhere on the continuum of reasonableness—even if on the low end.”77 As the claimant,
the F. Family bears the burden to prove the occurrence of a covered loss.78
Here, the Administrator denied the F. Family’s claim for benefits incurred before January
1, 2013, because the Plan does not provide benefits for treatment rendered by non-network
providers when a beneficiary travels to another state to receive the treatment. The Administrator
rested its decision on its interpretations of the Out of Area Program and the Use of Network
Providers During Travel provisions. The Administrator stated in its final denial that, under the
Out of Area Program provision, the Plan “pays benefits for non-network providers located within
the participant’s non-network area” when the participant lives in a non-network area.79 But
under the Use of Network Providers During Travel provision, “if a participant travels to obtain
care to an area where a network provider is available,” then benefits are available only “if the
participant utilizes a network provider . . . . For this purpose, the Plan Administrator interprets
area to mean a state.”80 The Administrator then explained that because the F. Family traveled to
Utah—a state in which there was a network residential treatment facility—so N.F. could receive
medical treatment and the F. Family’s claims are for services rendered by non-network providers,
74
Weber, 541 F.3d at 1010 (citation omitted) (internal quotation marks omitted).
Hancock, 590 F.3d at 1155 (citation omitted).
76
Id. (citation omitted) (internal quotation marks omitted).
77
Kimber v. Thiokol Corp., 196 F.3d 1092, 1098 (10th Cir. 1999) (citation omitted) (internal quotation
marks omitted).
78
See Hancock, 590 F.3d at 1155 (“As the claimant, Ms. Hancock bore the burden of proving the
occurrence of a covered loss.”).
79
REC at 115.
80
Id. at 116.
75
18
the Plan provides no benefits.
The heart of the dispute is whether the Administrator acted arbitrarily and capriciously
when it interpreted “area” as used in the Use of Network Providers During Travel provision to
mean a state. “A decision denying benefits based on an interpretation of an ERISA provision
survives arbitrary and capricious review so long as the interpretation is reasonable.”81 The court
must conduct this inquiry by examining the Plan language as a whole.82 If the Plan term at issue
“is unambiguous, and the plan administrator’s interpretation differs from the unambiguous
meaning, then the plan administrator’s interpretation is unreasonable, and the decision to deny
benefits on that interpretation is arbitrary and capricious.”83 But if the term is ambiguous—
meaning it is susceptible to two or more reasonable interpretations—and “the plan administrator
adopts one of [those] two or more reasonable interpretations, then the plan administrator’s
decision to deny benefits based on that interpretation survives arbitrary and capricious review.”84
Applying these authorities, the court must first determine whether the term “area” as used
in the Use of Network Providers During Travel provision is ambiguous.85 To determine whether
“area” is ambiguous, the court gives the term “its common and ordinary meaning as a reasonable
person in the position of the plan participant would have understood the word[] to mean.”86
The F. Family argues that the term “area” is unambiguous because the Plan’s only
reference to “area” is in the separate Out of Area Program provision. Under that provision, the
Plan provides coverage to those who live in a non-network area. A claimant lives in a non-
81
Flinders, 491 F.3d at 1193.
Weber, 541 F.3d at 1011.
83
Flinders, 491 F.3d at 1193; see also id. at 1193–94 (stating that if the court determines “the plan
provision is unambiguous, then we must construe it as a matter of law”).
84
Id. at 1193.
85
See id. (“Thus, the starting point in this and similar cases is to determine whether the relevant plan
provision is ambiguous.”).
86
Id. (citation omitted) (internal quotation marks omitted).
82
19
network area if there are no network health care providers within a fifty mile radius of the
claimant’s primary residence. A claimant who lives in such an area may use any licensed health
care provider. Based on this provision and its use of the term “area,” the F. Family argues that
“area” is unambiguous and that the Plan “provides coverage for treatment obtained from any
licensed health care provider if there are no network providers located within 50 miles of the
primary residence of the claimant.”87 The F. Family’s argument is unpersuasive.
First, that the Out of Area Program provision uses the phrase “non-network area” to refer
to a fifty mile radius from the claimant’s primary residence does not make the more general term
“area” unambiguous. It is only when the Plan uses the term “area” together with the modifiers
“non-network” that the term has a specific definition. But that definition says little about what
“area” means when used on its own, especially when used in different Plan provisions.
Second, the definition of “non-network area” as used in the Out of Area Program
provision is not applicable to situations covered by the Use of Network Providers During Travel
provision. The Out of Area Program provision includes the limiting phrase “for purposes other
than obtaining health care services,”88 which indicates that the definition of “non-network area”
does not apply to situations in which a beneficiary travels for the purpose of obtaining medical
treatment. That is the situation here.
Finally, contrary to the F. Family’s assertion, the term “area” is used elsewhere in the
Plan. Importantly, the term is employed in the Use of Network Providers During Travel
provision to describe an undefined geographic location away from the claimant’s primary
residence to which the claimant has traveled. The Plan also refers to an undefined “geographic
87
88
Dkt. 22.
REC at 11.
20
area” from which the usual and reasonable charges for services are established,89 an undefined
geographic area where health care providers must practice for a birthing center to qualify for
coverage,90 and a “specialized area of nursing” that is necessary for a registered nurse to qualify
as a clinical nurse specialist.91
In the end, the court concludes that the general term “area” is undefined, ambiguous, and
susceptible to two or more reasonable interpretations as used in the Plan. Indeed, Garner’s
Modern American Usage defines “area” as “an abstract word, [which] is sometimes used almost
as a space-filler.”92 The American Heritage Dictionary of the English Language also provides
seven definitions for the term that vary depending on the term’s usage. One of the definitions is
“[a] division of experience, activity or knowledge; a field.”93 And another is “[a] roughly
bounded part of the space on a surface; a region: a farming area; the New York area.”94
Like the latter definition, a reasonable person in the F. Family’s position would have
understood that “area,” as used in the Use of Network Providers During Travel provision, refers
to a smaller part of a larger whole in a geographic sense. For example, “area” may refer to a city
within a state; a state within the country; or a grouping of states within the country, such as the
Pacific Northwest. The Administrator’s interpretation of “area” to mean a state is consistent with
a reasonable person’s understanding of the term. Even though the Administrator operates under
a conflict of interest, the court concludes the Administrator’s denial of the F. Family’s claim for
benefits incurred before January 1, 2013, based on that interpretation was not arbitrary and
capricious.
89
Id. at 12.
See id. at 50.
91
See id. at 51.
92
Garner’s Modern American Usage 62 (3d ed. 2009).
93
The American Heritage Dictionary of the English Language 97 (3d ed. 1992).
94
Id.
90
21
II. Benefits Incurred On or After January 1, 2013
The F. Family next argues that it is entitled to benefits incurred on or after January 1,
2013, because the 2013 amendment to the Plus Plan excluding benefits for residential treatment
violates the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of
2008.
As an initial matter, the Administrator contends that the F. Family’s claim for benefits
incurred on or after January 1, 2013, is not properly before the court. The Administrator points
out that the F. Family stated in its Complaint that it is seeking only benefits incurred through
January 1, 2013.95 The Administrator also notes the F. Family failed to separately name the Plus
Plan as a defendant in addition to the Basic Plan. Accordingly, the Administrator urges the court
to decline to hear the F. Family’s claim that the Plus Plan’s residential treatment exclusion
violates the Parity Act.
In response, the F. Family argues that the claim is properly before the court because “the
context of the Complaint and pre-litigation appeal process makes clear that the F. Family’s
claims in this case go for the entire treatment periods at Moonridge and New Haven for which
Sinclair did not make payment.”96 Indeed, “[t]he F. [F]amily’s pre-litigation appeal based on the
Plan violating the [Parity Act] would have made no sense for claims other than for those arising”
on or after January 1, 2013.97 And even though the F. Family did not separately name the Plus
Plan as a defendant, the Basic Plan and the Plus Plan are not two separate plans: there is just one
plan with varying levels of coverage.
The court generally agrees with the F. Family. Federal Rule of Civil Procedure 8(a)
requires a pleading to contain “a short and plain statement of the claim showing that the pleader
95
Dkt. 2.
Dkt. 34.
97
Id.
96
22
is entitled to relief” and “a demand for the relief sought.”98 Rule 8 is designed to “give the
defendant fair notice of what the plaintiff’s claim is and the grounds upon which it rests.”99
While “summary judgment is not a procedural second chance to flesh out inadequate
pleadings,”100 the court must construe pleadings liberally “to do justice”101 and “prevent errors in
draftsmanship from barring justice to litigants.”102
Here, although the F. Family made a drafting error in stating it is seeking benefits through
January 1, 2013, instead of through March 1, 2013, the Administrator had ample notice that the
F. Family would argue the Plus Plan violates the Parity Act and seek benefits through March 1,
2013. First, the parties addressed the alleged Parity Act violation and the F. Family’s claim for
benefits through March 1, 2013, in the pre-litigation appeals process.103 Second, the F. Family’s
Complaint contains several references to the Parity Act and the Administrator’s denial of claims
incurred through March 1, 2013. The F. Family notes in its Complaint that “[t]he Plan argued [in
its final denial] that the Act did not require coverage for residential treatment and the Plan had
not violated the requirements of the Act in any way.”104 Then in the “Cause of Action” section,
the F. Family claims that “the failure of the Plan to provide coverage for N.F.’s treatment violates
the requirements of the [Parity] Act.”105 The F. Family further alleges in that section that “[t]he
Plan is responsible to pay for N.F.’s medical treatment at Moon Ridge and New Haven under the
98
99
Fed. R. Civ. P. 8(a)(2)–(3).
Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512–13 (2002) (citation omitted) (internal quotation marks
omitted).
100
Wasco Prods., Inc. v. Southwall Techs., Inc., 435 F.3d 989, 992 (9th Cir. 2006) (citation omitted)
(internal quotation marks omitted).
101
Fed. R. Civ. P. 8(e).
102
Carter v. Ford Motor Co., 561 F.3d 562, 566 (6th Cir. 2009) (citation omitted) (internal quotation marks
omitted).
103
See REC at 116.
104
Dkt. 2, ¶ 45.
105
Id. ¶ 5.
23
terms of the Plan as required under ERISA and the Act.”106 Third, although the F. Family did not
name the Plus Plan as a defendant, the Administrator has failed to show that the Plus Plan is a
separate legal entity that must also be named as a defendant in this lawsuit. The Summary Plan
Description’s cover states that the Summary applies to the Basic Plan and the Plus Plan. 107 And
the first line of the Summary’s Introduction section clarifies that Sinclair is the Plan sponsor of
both the Basic Plan and the Plus Plan. 108 Even if the Plus Plan is separate from the Basic Plan,
the Administrator has offered no explanation for why it has waited until this late stage to raise
what is otherwise a technical issue. In short, the court agrees with the F. Family that the Basic
Plan and the Plus Plan should not here be viewed or treated as two entirely separate plans. The
F. Family’s claim for benefits incurred on or after January 1, 2013, is properly before the court.
The court now turns to the merits of the F. Family’s argument that the Plus Plan violates
the Parity Act. The court’s analysis proceeds in three parts. First, the court provides the standard
of review. Second, the court discusses the Parity Act generally. And third, the court examines
whether the Plus Plan’s residential treatment exclusion violates the Parity Act.
A. Standard of Review
Although the court reviews the Plan Administrator’s decision to deny benefits based on
its interpretation of Plan terms under an arbitrary and capricious standard, the court affords the
Administrator’s interpretation of the Parity Act no deference because the interpretation of a
statute is a legal question.109
When interpreting a federal statute, the court’s goal is to effectuate Congress’s intent.110
106
Id. ¶ 7.
See REC at 8.
108
See id. at 10.
109
See Foster v. PPG Indus. Inc., 693 F.3d 1226, 1233 (10th Cir. 2012).
110
United States v. Am. Trucking Ass’ns, 310 U.S. 534, 542 (1940).
107
24
To that end, the court must begin by examining “the language employed by Congress.”111 If the
statutory language is plain and unambiguous, then the court enforces it according to its terms.112
But if the statutory language is ambiguous, then the court “must turn to other sources to find its
meaning.”113 Statutory language is ambiguous if it is reasonably “susceptible to more than one
interpretation.”114 In determining whether language is plain or ambiguous, the court looks not
only to the statutory language itself, but also to “the specific context in which that language is
used, and the broader context of the statute as a whole.”115 To resolve any ambiguity, the court
may look to the statute’s “broader context” and “primary purpose.”116
B. The Parity Act
Congress enacted the Mental Health Parity Act in 1996, requiring group health plans to
impose the same “aggregate lifetime and annual dollar limits for mental health benefits and
medical and surgical benefits.”117 Congress amended the MHPA when it passed the Paul
Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008.118
111
Wright v. Fed. Bureau of Prisons, 451 F.3d 1231, 1234 (10th Cir. 2006); see also Park ‘N Fly, Inc. v.
Dollar Park & Fly, Inc., 469 U.S. 189, 194 (1985) (“Statutory construction must begin with the language employed
by Congress and the assumption that the ordinary meaning of that language accurately expresses the legislative
purpose.”).
112
King v. Burwell, 135 S. Ct. 2480, 2489 (2015); see also Robinson v. Shell Oil Co., 519 U.S. 337, 340
(1997) (“Our first step in interpreting a statute is to determine whether the language at issue has a plain and
unambiguous meaning with regard to the particular dispute in the case.”).
113
S. Utah Wilderness Alliance v. Office of Surface Mining Reclamation & Enforcement, 620 F.3d 1227,
1237–38 (10th Cir. 2010).
114
Wright, 451 F.3d at 1235; see also S. Utah Wilderness Alliance, 620 F.3d at 1238 (“The language used in
a statute . . . is ambiguous if it is ‘capable of being understood in two or more possible senses or ways.’” (quoting
Chickasaw Nation v. United States, 534 U.S. 84, 90 (2001))).
115
Robinson, 519 U.S. at 341; see also Burwell, 135 S. Ct. at 2489 (“[W]hen deciding whether the language
is plain, we must read the words in their context and with a view to their place in the overall statutory scheme.”
(citation omitted) (internal quotation marks omitted)).
116
Robinson, 519 U.S. at 345–46.
117
IFRs Under the Parity Act, 75 Fed. Reg. 5410-01, 5411 (Feb. 2, 2010).
118
Id.; see also 29 U.S.C. § 1185a. Congress enacted the Parity Act as an amendment to ERISA, making it
enforceable through a cause of action under 29 U.S.C. § 1132(a)(3) as a violation of a “provision of this subchapter.”
A.F. ex rel. Legaard v. Providence Health Plan, 35 F. Supp. 3d 1298, 1304 (D. Or. 2014); see also 29 U.S.C.
§ 1132(a)(3)(A)–(B) (“A civil action may be brought by a participant, beneficiary, or fiduciary (A) to enjoin any act
or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate
equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the
25
The Parity Act was “designed to end discrimination in the provision of coverage for
mental health and substance use disorders as compared to medical and surgical conditions in
employer-sponsored group health plans and health insurance coverage offered in connection with
group health plans.”119 The Parity Act is self-implementing and became effective for most plan
years beginning after October 3, 2009.120 As relevant here, it states:
In the case of a group health plan (or health insurance coverage offered in
connection with such a plan) that provides both medical and surgical
benefits and mental health or substance use disorder benefits, such plan or
coverage shall ensure that—
...
(ii) the treatment limitations applicable to such mental health or substance
use disorder benefits are no more restrictive than the predominant treatment
limitations applied to substantially all medical and surgical benefits covered
by the plan (or coverage) and there are no separate treatment limitations that
are applicable only with respect to mental health or substance use disorder
benefits.121
Stated otherwise, if a group health plan provides both medical and surgical benefits as
well as mental health or substance use disorder benefits, then it may not apply any “treatment
limitation to mental health or substance use disorder benefits in any classification that is more
restrictive than the predominant . . . treatment limitation of that type applied to substantially all
medical/surgical benefits in the same classification.”122 And if a plan “provides mental health or
substance use disorder benefits in any classification of benefits . . . , mental health or substance
use disorder benefits must be provided in every classification in which medical/surgical benefits
are provided.”123
plan.”). The F. Family brought its single cause of action under 29 U.S.C. § 1132(a)(1)(B). Because the Plan makes
nothing of the F. Family’s failure to bring its claim under § 1132(a)(3), neither will the court.
119
Am. Psychiatric Ass’n v. Anthem Health Plans, 50 F. Supp. 3d 157, 160 (D. Conn. 2014) (quoting Coal.
for Parity, Inc. v. Sebelius, 709 F. Supp. 2d 10, 13 (D.D.C. 2010)).
120
IFRs Under the Parity Act, 75 Fed. Reg. at 5419.
121
29 U.S.C. § 1185a(a)(3)(A)(ii).
122
29 C.F.R. § 2590.712(c)(2)(i) (amended Jan. 13, 2014); see also IFRs Under the Parity Act, 75 Fed. Reg.
at 5413.
123
29 C.F.R. § 2590.712(c)(2)(ii).
26
The rules interpreting the Parity Act define “type” as referring to treatment limitations of
the same nature.124 Further, a treatment limitation must be compared only to a treatment
limitation of the same type within a particular classification.125 There are six classifications:
(1) inpatient, in-network; (2) inpatient, out-of-network; (3) outpatient, in-network; (4) outpatient,
out-of-network; (5) emergency care; and (6) prescription drugs.126
The rules also clarify that the term “treatment limitations” includes both “quantitative
treatment limitations, which are expressed numerically (such as 50 outpatient visits per year),
and nonquantitative treatment limitations, which otherwise limit the scope or duration of benefits
for treatment under a plan.”127 The parity requirement governing nonquantitative treatment
limitations provides:
A group health plan (or health insurance coverage) may not impose a
nonquantitative treatment limitation with respect to mental health or
substance use disorder benefits in any classification unless, under the terms
of the plan (or health insurance coverage) as written and in operation, any
processes, strategies, evidentiary standards, or other factors used in
applying the nonquantitative treatment limitation to mental health or
substance use disorder benefits in the classification are comparable to, and
are applied no more stringently than, the processes, strategies, evidentiary
124
See id. § 2590.712(c)(1)(ii). The Parity Act charges three federal agencies with administering the
statute: the Department of Labor, the Department of Health and Human Services, and the Department of the
Treasury. See 29 U.S.C. § 1185a(g). In April 2009, the Departments solicited comments on the Act’s application.
Request for Information Regarding the Parity Act, 74 Fed. Reg. 19155 (Apr. 28, 2009). The Departments then
issued interim final rules in February 2010, instead of soliciting comments on a proposed rule, after concluding it
was necessary to provide prompt guidance for members of the regulated community. IFRs Under the Parity Act, 75
Fed. Reg. at 5419. The interim final rules became effective for most plan years beginning on or after July 1, 2010.
29 C.F.R. § 2590.712(i)(1). After soliciting further comment, the Departments issued final rules in November 2013.
Final Rules Under the Parity Act, 78 Fed. Reg. 68240-01, 68240 (Nov. 13, 2013). The final rules apply to plan years
beginning on or after July 1, 2014. Id. Because the F. Family seeks benefits through only March 1, 2013, the court
looks only to the interim final rules—not the final rules—in determining whether the Plus Plan’s residential
treatment exclusion violates the Parity Act.
125
See 29 C.F.R. § 2590.712(c)(1)–(2); see also IFRs Under the Parity Act, 75 Fed. Reg. at 5413 (stating
that the parity requirements under the Parity Act for treatment limitations are applied on a classification-byclassification basis).
126
29 C.F.R. § 2590.712(c)(2)(ii).
127
Id. § 2590.712(a); see also 29 U.S.C. § 1185a(a)(3)(B)(iii) (“The term ‘treatment limitation’ includes
limits on the frequency of treatment, number of visits, days of coverage, or other similar limits on the scope or
duration of treatment.”); IFRs Under the Parity Act, 75 Fed. Reg. at 5412 (“A nonquantitative treatment limitation is
a limitation that is not expressed numerically, but otherwise limits the scope or duration of benefits for treatment.”).
27
standards, or other factors used in applying the limitation with respect to
medical surgical/benefits in the classification, except to the extent that
recognized clinically appropriate standards of care may permit a
difference.128
Notwithstanding the parity requirement, “[n]othing in [the Parity Act] shall be construed
as requiring a group health plan (or health insurance coverage offered in connection with such a
plan) to provide any mental health or substance use disorder benefits.”129
C. The Plus Plan’s Residential Treatment Exclusion
The court now turns to whether the Plus Plan’s residential treatment exclusion violates
the Parity Act. The Plus Plan, of which N.F. became a beneficiary beginning on January 1, 2013,
provides no benefits for services received at a residential treatment facility.130
The Administrator argues that the Plus Plan’s residential treatment exclusion does not
violate the Parity Act, because the Plus Plan denies benefits for residential treatment services
across the board, regardless of whether the services are for medical and surgical conditions or
mental health and substance abuse disorder conditions. The Administrator attempts to bolster
this argument by noting that it provides skilled nursing services for both types of conditions.
128
29 C.F.R. § 2590.712(c)(4)(i).
29 U.S.C. § 1185a(b)(1).
130
The F. Family argues that the court may not consider the terms of the Plus Plan, because it is not part of
the administrative record compiled by the Plan Administrator. See Spradley, 686 F.3d at 1140 (holding that a court
must “consider only the rationale asserted by the plan administrator in the administrative record and determine
whether the decision, based on the asserted rationale, was arbitrary and capricious”); see also LaAsmar, 605 F.3d at
801 (holding that the court is limited to considering only the rationale given by the plan administrator for denying
benefits). In contrast, the Administrator argues that the court may consider the Plus Plan’s terms because the court
may supplement the record when circumstances indicate that additional evidence is necessary to conduct an
adequate review. See Hall v. UNUM Life Ins. Co. of Am., 300 F.3d 1197, 1202 (10th Cir. 2002) (holding that a
district court may supplement the record in an ERISA case “when circumstances clearly establish that additional
evidence is necessary to conduct an adequate de novo review of the benefit decision” (citation omitted) (internal
quotation marks omitted)). While both parties correctly articulate Tenth Circuit law, those rules apply when the
court is reviewing a plan administrator’s decision to deny benefits based on the terms of the plan. Neither party,
however, articulates how those rules apply when the court is reviewing a plan’s compliance with a federal statute,
such as the Parity Act. Nevertheless, even though the Plus Plan is not part of the pre-litigation record submitted by
the parties, the Administrator has submitted the relevant parts of the Plus Plan as an exhibit. In addition, the
Administrator’s denial letters show that the Administrator considered the Plus Plan in arriving at its decision. The
court concludes that it may properly consider the terms of the Plus Plan.
129
28
The F. Family argues that, under the Parity Act, the Plus Plan may permissibly exclude
coverage for sub-acute inpatient treatment for mental health disorders, such as services received
at a residential treatment facility, only if the Plus Plan also excludes coverage for sub-acute
inpatient treatment for physical conditions, such as services received at a skilled nursing facility.
But here, the F. Family contends the residential treatment exclusion violates the Parity Act
because the Plus Plan does not cover services received at residential treatment facilities—which
treat only mental health and substance use disorders—yet does cover services received at skilled
nursing facilities—which do not treat mental health or substance use disorders. In other words,
the F. Family argues that residential treatment facilities and skilled nursing facilities are
analogous but, contrary to the Administrator’s belief, not identical. So, if the Plus Plan is going
to cover treatment received at a skilled nursing facility, which provides only medical and surgical
treatment, then the Act requires that it also cover treatment received at a residential treatment
facility, which provides only mental health and substance use disorder treatment.
Based on the foregoing arguments, the parties seemingly agree that the residential
treatment exclusion is a nonquantitative treatment limitation. The crux of the dispute is whether
the limitation is a permissible one.
As stated above, the Parity Act first states that treatment limitations applicable to mental
health benefits must be “no more restrictive than the predominant treatment limitations applied
to substantially all medical and surgical benefits.”131 The Act further states that a plan must
ensure “there are no separate treatment limitations that are applicable only with respect to mental
health . . . benefits.”132 Here, by its terms, the Plus Plan’s residential treatment exclusion runs
afoul of the clear and unambiguous language of the Parity Act’s second requirement.
131
132
29 U.S.C. § 1185a(a)(3)(A)(ii).
Id.
29
Like the Basic Plan, the Plus Plan defines a residential treatment facility as “[a] childcare institution that provides residential care and treatment for emotionally disturbed children
and adolescents.”133 This definition shows that, before the Plus Plan’s amendments went into
effect on January 1, 2013, residential treatment benefits were available only for mental health
conditions. When the Plus Plan eliminated coverage for residential treatment services, it
necessarily imposed a treatment limitation that applies only with respect to mental health
conditions. This violates the plain language of the Parity Act.134
To be sure, the Parity Act does not require plans to provide mental health or substance
use disorder benefits at all.135 But once a plan does provide such benefits, the plan must do so on
a level that is on par with the benefits it provides for medical and surgical benefits. And once
provided, the Parity Act prohibits imposing treatment limitations applicable only to mental health
benefits.
Further, although the Administrator argues that the exclusion applies across the board,
there is no evidence to suggest that coverage for residential treatment would have been available
for medical or surgical conditions but for the exclusion. Without evidence to that effect, the
Administrator’s argument that it would have also denied residential treatment benefits for
medical or surgical conditions under the exclusion is illusory.
The court concludes that the Plus Plan’s residential treatment exclusion violates the Parity
Act because the exclusion is a “separate treatment limitation[] that [is] applicable only with
133
Dkt. 27, Ex. 1, at 11.
See, e.g., Craft v. Health Care Serv. Corp., 84 F. Supp. 3d 748, 754 (N.D. Ill. 2015) (denying the
insurer’s motion to dismiss where the plan excluded all residential treatment care, except for inpatient substance
abuse rehabilitation treatment, in part because the exclusion prevented beneficiaries “from receiving 24-hour
supervision and care in a non-hospital setting” and “[t]here is no corresponding limitation on the treatment of
medical conditions”); A.F. ex rel. Legaard v. Providence Health Plan, 35 F. Supp. 3d 1298, 1315 (D. Or. 2014)
(holding that the plan’s exclusion of services “related to developmental disabilities, developmental delays or
learning disabilities” violated the Parity Act because the “exclusion is overtly applicable only to mental health
conditions—specifically developmental disabilities—and does not apply to medical or surgical conditions”).
135
29 U.S.C. § 1185a(b)(1).
134
30
respect to mental health . . . benefits.”136 In arriving at this conclusion, the court expresses no
judgment about the wisdom of the Parity Act itself.
As for the appropriate remedy, the F. Family urges the court to award it the benefits it
incurred on or after January 1, 2013, because the Plus Plan’s residential treatment exclusion—the
basis on which the Administrator denied the F. Family’s claim—violates the Parity Act. The
court, however, finds that remanding the matter to the Administrator is more appropriate.137 On
remand, the Administrator will have an opportunity to evaluate in the first instance whether it
owes the F. Family benefits incurred on or after January 1, 2013, based on the Administrator’s
interpretation of the Plus Plan’s terms.
CONCLUSION
For the reasons stated above, the court GRANTS the F. Family’s motion for summary
judgment (Dkt. 22) in part and DENIES it in part. The court also GRANTS Sinclair’s motion for
summary judgment (Dkt. 21) in part and DENIES it in part. The Clerk of Court is directed to
close the case.
SO ORDERED this 22nd day of January, 2016.
BY THE COURT:
___________________________
ROBERT J. SHELBY
United States District Judge
136
Id. § 1185a(a)(3)(A)(ii).
See Scruggs v. ExxonMobil Pension Plan, 585 F.3d 1356, 1360 (10th Cir. 2009) (“The district court is
vested with discretion to remand a case to the plan administrator for a renewed evaluation of the claimant’s case.”).
137
31
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