Sharon Mondry worked for American Family and sought payment for speech therapy for her son from her self-funded health plan sponsored by American Family and administrated by the CIGNA the TPA. CIGNA denied payment fro Zev Mondry’s speech therapy on the basis that it was educational training and not restorative pursuant to the terms of the Plan Document. After months of trying, Mondry finally obtained all the relevant Plan documents and eventually got CIGNA to reverse its denial and pay the claims. Mondry filed suit alleging that American Family and CIGNA had violated a statutory obligation to produce plan documents and breached their fiduciary duties by misrepresenting the terms of the Plan.

The Seventh Circuit’s assessment in Mondry v. American Family Mutual Insurance Company, et al., 2009 WL 539861 (7th Cir. March 5, 2009) contains lessons for both plan sponsors and TPAs. The court noted that the phrase “not restorative” is nowhere to be found in the SPD, and the terms “educational” and “training” are not used in the portion of the SPD dealing with speech therapy.

The SPD says that speech therapy will be covered if it is performed by a licensed or certified therapist and is referred by a doctor, subject to 35 visits per injury or illness, unless more are deemed necessary by a physician.

The Benefit Interpretation Resource Tool for Speech Therapy (the “BIRT”) referenced in CIGNA’s denial letter is not part of the SPD and was not posted on the American Family’s internal website as a Plan document. When Mondry appealed this initial rejection and asked for copies of the BIRT, her letter was treated simply as a request for a first level appeal, and no further documents were provided.

Mondry’s first level appeal was rejected got the same reasons, though this time a different CIGNA document was referenced – the CIGNA Clinical Resource Tool for Speech Therapy (the “CRT”). At this point, Mondry sent both CIGNA and American Family a request for “the total and complete copy of my Plan documents.” American Family responded by saying that the SPD is the Plan document.

Even though CIGNA’s denial had referenced two of CIGNA’a speech therapy guidelines – the BIRT and the CRT – neither American Family nor CIGNA provided these guidelines. Indeed, in communications with her attorneys, CIGNA claimed that these guidelines were confidential and only available to CIGNA personnel.

CIGNA eventually did provide her a copy of both the CRT and the BIRT. The CRT contained non of the language that CIGNA had cited in denying Mondry’s claims. At her second level appeal, Mondry claimed that CIGNA had denied her claim based on the wrong criteria. CIGNA agreed, reversing itself and finding that her son’s speech therapy expenses were covered under the Plan. Ten months after this decision, Mondry was reimbursed for all medical expenses.

As to Mondry’s claims against both American Family and CIGNA for failure to produce Plan documents, the Court held that ERISA imposes the obligation to provide plan documents on the “Plan Administrator,” which in this case was American Family, not CIGNA.

As for the CRT and BIRT, the Court held that these were subject to disclosure under ERISA ~ 104(b)4)’s catch-all reference to “other instruments under which the plan is established or operated.” “In short, CIGNA had been relying on the BIRT and the CRT as the equivalent of plan language, treating the former documents as if they were dispositive and citing them to Mondry as such.

The holding was a narrow one. When a claims administrator expressly cites an internal document and treats that document as the equivalent of plan language in ruling on a participant’s entitlement to benefits, the administrator renders that document one that in effect governs the operation of the plan for purposes of section 1024(b)(4), and production of that document is required.

The BIRT and CRT were subject to disclosure, and it was American Family that was obligated to disclosure them, even though thee were CIGNA documents that American Family did not have in its possession. The Seventh Circuit did not see this as a problem, and imposed on American Family the duty to secure these documents. The Seventh Circuit remanded the case to the District Court for a determination of the amount of the penalty to be imposed on American Family for not producing the group service agreement, the CRT and the BIRT to Mondry when she had requested “the total and complete copy of my Plan documents.”

The Seventh Circuit did think that Mondry had a viable claim against American Family for the lost time value of the money she had so spend on her son’s speech therapy up until she had obtained the CIGNA guidelines that allowed her to prevail on her claim. Because the Plan was self-funded, American Family arguably benefited from the delay in CIGNA’s decision as it had full use of money that should have been used to pay Mondry’s claim much sooner than it was.

The Court, thus entered summary judgment against American Family for failing to provide Mondry with the relevant Plan documents, even though they were in CIGNA’s possession, and remanded to the District Court the determination of the penalty to be imposed. The Seventh Circuit also remanded her breach of fiduciary duty claim to the District Court for trial on whether American Family had in fact breached its duties. The Court also awarded Mondry the costs of her appeal.

This decision clearly holds that the administrative service agreement between the TPA and the plan sponsor is a plan document that is subject to disclosure under ERISA ~ 104(b)(4), and that a claims administrator’s internal guidelines are also subject to disclosure if the claims administrator relied on them, and communicated this reliance to the claimant, in rejecting the claim.

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This entry was posted by Adam V. Russo on Thursday, April 23rd, 2009 at 7:58 am and is filed under 7th, Summary Plan Description. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.