Lyn M. v. Premera Blue Cross, 2020 WL 4249129 (10th Cir. 2020)
The parents of a teenage girl sued a plan administrator in a case involving the denial of residential mental health treatment benefits. Applying the deferential “arbitrary and capricious” judicial standard of review, the trial court ruled that the plan’s medical necessity criteria were properly applied, and the parents appealed. The plan administrator claimed that because it was granted discretionary authority in a document called the “plan instrument,” deferential review was appropriate. However, the only document provided to participants was the summary plan description (SPD) which did not disclose the discretionary authority or the existence of the plan instrument. With respect to the application of the medical necessity criteria, the plan administrator claimed it considered criteria in both the SPD and a separate medical policy. The parents disputed this by pointing to the denial notice, which included an analysis of only SPD criteria with no mention of the medical policy.
After thoroughly analyzing the plan instrument and SPD language, the Tenth Circuit found that while the plan instrument contained a discretionary authority provision, the SPD ignored discretionary authority and failed to indicate that other documents could affect the scope of judicial review. The plan administrator argued that because the parents were informed in the SPD of their right to examine other documents, and could have asked to review the plan instrument, it had satisfied its disclosure obligations under ERISA. Noting that participants could not possibly identify for inspection a document “kept secret” by the plan administrator, or be bound by a policy of which they had no notice, the Tenth Circuit held the plan administrator was not entitled to deferential review. Additionally, the court found the plan administrator’s decision arbitrary and capricious because it relied on a medical opinion that disregarded the medical policy—that is, even if deferential review were appropriate, the trial court erred in concluding that the medical necessity criteria were properly applied. The case was sent back to the trial court for reevaluation under the nondeferential “de novo” standard of review.
EBIA Comment: Plan language dictates the applicable standard of review. Unless the plan document grants the decisionmaker discretionary authority to interpret and administer the plan and to make factual determinations, the less favorable de novo standard of review applies. And, as shown here, even if discretionary authority language appears in the formal plan document, deferential review may be lost if the discretionary authority provision is not disclosed in the SPD. The language in the SPD and plan document should be carefully reviewed to avoid conflicts between the two documents. For more information, see EBIA’s ERISA Compliance manual at Sections XI.B (“Discretionary Authority to Interpret Plan and Determine Facts”), XXIV.J.8.b (“Disclosures Regarding Discretionary Authority”), and XXXVI.C (“Standard of Judicial Review Applied to Benefit Decisions Under ERISA Plans”). See also EBIA’s Self-Insured Health Plans manual at Section IX.E (“Recommended Plan Provisions”).
Contributing Editors: EBIA Staff.