Metropolitan Life Case Brings A New Standard to Decisions
From The Bench – The Self-Insurer Volume 26* August 2009
By John H. Eggertsen, Esq. and Michael Friedman, Esq.
II. Fifth Circuit Rejects Benefit Decision For Procedural Defects; Can’t Even Assess If Determination was Arbitrary And Capricious
In Lafleur v. Louisiana Health Service Indemnity Company, d/b/a Blue Cross Blue Shield of La., 563 F.3d 148 (5th Cir. 2009), the Fifth Circuit found that Blue Cross Blue Shield of Louisiana (“BCBSL”) was so deficient in its substantive compliance with ERISA’s procedural regulations that it could not even express an opinion as to whether the determination was arbitrary and capricious.
Lafleur underwent a cardiovascular bypass operation. During surgery he suffered an anoxic event and never regained consciousness. He was sent to Eunice Manor Nursing Hime, and BCBSL agreed to pay for the cost of his care there under the Plan’s Alternate Benefit provision. This allowed payment not otherwise covered to be paid through case management, at BCBSL’s discretion. The issue on appeal was whether the nursing home care is Skilled Nursing Care (which is covered), or Custodial Care, which is not.
After paying for Lafleur’s treatment for some time, two BCBSL doctors determined that the nursing home services were Custodial Care, and BCBSL should no longer continue paying for them. This decision was reached without consultation with either of Lafleur’s treating physicians. In preparation for his appeal, Lafleur requested a copy of the complete administrative record and the names of all persons consulted, whether that person’s opinion had been relied on or not.
Lefleur’s claim went through both levels of BCBSL doctors who had made the initial decision to re-classify Lafleur’s claim, conducted the Level I Appeal, and an appeals committee conducted the Level II appeal. Dr. Brower testified at his deposition that he did not consult with any other health care professional in conducting the Level I Appeal.
At the Level II Appeal, Lafleur submitted letters from his treating physicians testifying as to his fragile condition such that “his long term survival is dependent on good skilled nursing rather than custodial care.” The Level II Appeals committee only consulted with Dr. Brower before making its determination, and Dr. Brower did not produce any written report in response to the concerns raised by Lafleur’s treating physicians.
The Fifth Circuit found this entire process failed to substantially comply with the procedural requirements of ERISA because (1) it raised new grounds for denial in the courts that had not been raised at the administrative level, (2) it did not identify a board certified urologist, despite Lafleur’s request for this information, (3) it relied on the same urologist’s opinion in the initial denial and on appeal, (4) to the extent it did not rely on the urologist’s opinion on appeal, it relied on Dr. Brower’s opinion even though he did not posses appropriate training and experience in the field of urology, and (5) it effectively gave deference to the initial claim denial, when ERISA regulations expressly forbid this.
Despite these egregious failures, the Fifth Circuit determined that BCBSL’s procedural errors were not so severe as to warrant a finding that there was an abuse of discretion as a mater of law. Rather than awarding Lafleur the benefits due, it remanded the case to the administrator so that the claim can be reviewed in compliance with ERISA procedures. Nor did the Fifth Circuit find BCBSL’s failures flagrant enough to warrant de novo review and have the court make the benefit determination in place of the plan administrator. Finally, the Court found that a retroactive reinstatement of benefits would not be appropriate because Lafleur was not in continuing need of these benefits because he had died in the interim, but “[o]n remand, the plan administrator can determine whether Lafleur is entitled to a lump sum payment for wrongfully denied benefits between May 2003 and November 2005.”
The Fifth circuit was clearly offended by BCBSL’s lackadaisical adjudication process, and its cavalier flouting of ERISA’s claims procedure requirements. This was clearly an abuse, if not of discretion, then of the statue itself. The Fifth Circuit was perhaps being a bit disingenuous in remanding the case back to BCBSL for a “full and fair review,” while at the same time practically directing it as to the benefit determination it should make. After all, the patient had died (a fact that one does not learn until the very end of the case), and other than the remedy proposed by the Court, the only alternative would be to have BCBSL uphold its original determination. Given BCBSL’s track record in this matter, that would be unconscionable.
Despite the Fifth Circuit’s convoluted conclusion, its careful review of the steps BCBSL took in making this determination is clear indication that even under a deferential standard of review, the courts seem to be examining with some care and in careful detail the steps taken by plan administrators in reaching their conclusions, and are not simply sitting back and accepting the “reasonableness” of those results as a given. In many instances, the court may well agree with the administrative decision, but it should no be glibly assumed by any litigant that simply because the court is adopting a deferential standard of review that it will uphold the decision. Administrators must be careful when reviewing the record and convincing when marshaling the evidence in it to support their conclusions. It should go without saying that ERISA’s claim procedure requirements should always be followed (though this case provides some indication that this may need to be repeated). If these are not followed, the result cannot be a full and fair review to which any court needs to defer.
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