Fifth Circuit Defers to Plan Administrator’s Claim Appeal Decision Involving Competing Medical Opinions
In Rittinger v. Health Alliance Life Insurance Company, the U.S. Court of Appeals for the Fifth Circuit, whose jurisdiction includes Texas, analyzed the claims decision-making process of a group health plan administrator that had been granted discretion under the terms of the employer’s group health plan. The court determined that, based on such grant of discretion, the plan administrator’s decision regarding a participant’s benefits claim appeal was entitled to judicial deference, even with respect to the plan administrator’s selection of competing medical providers’ opinions. Background regarding Grant of Discretion under ERISA Under general standards, a court will consider denials of appealed benefits claims under an employer-sponsored employee benefit plan (including a group health plan) that is subject to ERISA on a “de novo” basis, which means that the court will not give any deference to the plan administrator’s prior decision on a benefit claim appeal, but instead can substitute its… Continue Reading
In Manuel v. Turner Industries Group, L.L.C., the U.S Circuit Court of Appeals for the Fifth Circuit (whose jurisdiction includes Texas) considered various claims under ERISA that were brought by Michael Manuel, a former employee of Turner Industries (“Turner”). His claims were brought against Turner and Prudential, the insurer and claims fiduciary under Turner’s long-term disability benefits plan, and related to a denial of benefits to Manuel under that plan. One of his claims was for breach of fiduciary duty asserted against Turner under Section 502(a)(3) of ERISA (the “Equitable Relief Provision”) based on Manuel’s argument that the plan’s SPD omitted the pre-existing condition exclusion contained in the plan document that was the basis for Prudential’s denial of his benefits claim, and thus Manuel relied to his detriment on a deficient SPD. Citing Fifth Circuit and U.S. Supreme Court precedent under ERISA, the Fifth Circuit reiterated the standing rule that… Continue Reading
The U.S. Court of Appeals for the Fifth Circuit (whose jurisdiction includes Texas, Louisiana, and Mississippi) vacated the entire final Fiduciary Rule that was issued by the DOL in April 2016. The Fifth Circuit held that the definition of “fiduciary” in the final Fiduciary Rule conflicts with the plain text of ERISA and the common law definition of fiduciary. The Fifth Circuit further held that the DOL overstepped its authority in applying ERISA’s fiduciary standards to individual retirement accounts and that the DOL’s interpretations fail the reasonableness test under the standard set out in Chevron U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837 (1984). In response to the Fifth Circuit’s decision, the DOL announced that it will not be enforcing the rule at this time. Chamber of Commerce of the USA v. U.S. Dep’t of Labor, No. 17-10238 (5th Cir. Mar. 15, 2018).
Generally, when discretionary authority is delegated to the plan administrator of an ERISA plan, a court reviewing the denial of a benefits claim is limited to determining whether the plan administrator abused its discretion in denying the claim. In a prior seminal case, Firestone Tire & Rubber Co. v. Bruch, the U.S. Supreme Court held that, when there is no delegation of discretionary authority, a denial of benefits is to be reviewed de novo (i.e., without deference to the plan administrator’s previous decision). The U.S. Court of Appeals for the Fifth Circuit (whose jurisdiction includes Texas, Louisiana, and Mississippi) interpreted Firestone to only require de novo review of a denial of benefits based on an interpretation of plan language, but not denials based on factual determinations. The Fifth Circuit recently overturned its longstanding precedent in order to bring its interpretation of Firestone in line with eight other federal circuit courts… Continue Reading
In Connecticut General Life Insurance Company v. Humble Surgical Hospital, L.L.C., the U.S. Court of Appeals for the Fifth Circuit, whose jurisdiction includes Texas, reversed a district court’s award to Humble Surgical Hospital, LLC, an out-of-network medical provider (“Humble”), of (i) over $11 million based on underpaid medical benefit claims administered by Cigna under ERISA-governed group health plans and private insurance policies, and (ii) over $2 million in penalties based on Cigna’s failure to comply with ERISA’s plan documentation disclosure requirements. (See our prior newsletter article regarding the district court’s decision in this case, including a discussion of background facts.) The Fifth Circuit found that the district court failed to apply ERISA’s required “abuse of discretion” analysis to Cigna’s decisions regarding benefit claims for Humble’s services, which decisions were based on exclusionary language in the plan documents and insurance policies. The Fifth Circuit stated that other courts had upheld Cigna’s… Continue Reading
The U.S. Court of Appeals for the Fifth Circuit reiterated its prior determination that a Summary Plan Description (“SPD”) for an employer-sponsored, group medical plan subject to ERISA could also serve as the plan document, provided it contains all of ERISA’s written plan document requirements. The court further held that in this case the SPD’s reference to a non-existent plan document was not material or detrimental to the participant under the plan. Historically, “plan booklets” for medical plans have contained the relevant SPD provisions regarding the benefits payable and the procedures for filing claims for benefits. However, many of those booklets did not contain all of ERISA’s requirements for an SPD or for the written plan document, including claims appeals procedures and certain other provisions, such as funding sources, amendment and termination provisions, and other required details. As a result, we have consistently recommended that the plan booklet be carefully… Continue Reading
Fifth Circuit Addresses ERISA Fiduciary Duty of Appointing Fiduciary to Monitor an Appointed Fiduciary
The U.S. Court of Appeals for the Fifth Circuit, which includes Texas, upheld a district court judgment that the former owner of a privately-held company engaged in a prohibited transaction and breached his fiduciary duties of loyalty and prudence when selling shares of company stock to his former company’s leveraged employee stock ownership plan (“ESOP”) at prices in excess of the stock’s fair market value. Specifically, the court found that the owner influenced the outcome of the appraiser’s valuation of the stock to achieve a higher stock price, which resulted in the ESOP overpaying for the stock. The Fifth Circuit disagreed with the district court’s holding that the owner, who was also a trustee of the ESOP, breached his fiduciary duty to monitor the other two plan trustees whom he had appointed and whom he knew had breached their duties of loyalty and care. Perez v. Bruister, No. 14-60811 (5th… Continue Reading
The Texas Prompt Pay Act (the “Act”) requires healthcare insurers to make coverage determinations and pay claims within a specified time or face penalties. The parent of Blue Cross Blue Shield of Texas (“BCBSTX”) challenged, in part, whether the Act would apply to self-funded plans in which BCBSTX acts as the third-party administrator. The federal district court held that the Act does not apply to self-funded plan administrators. The U.S. Court of Appeals for the Fifth Circuit upheld the decision. The court’s opinion in Health Care Service Corp. v. Methodist Hosp. of Dallas, No.15-10154 (5th Cir. Feb. 10, 2016) is available here.
Fifth Circuit Remands Case to Determine Whether Out-of-Network Provider Discounts to Participants May Reduce the Plan’s Payments to the Provider
Cigna, as both an insurer and a third-party administrator of employer sponsored health plans, did not pay the out-of-network coinsurance percentage for claims based on the out-of-network provider’s charged amount in cases where the provider did not charge participants the plan’s full coinsurance percentage. Cigna based its denials on the plans’ exclusion of “charges for which the participant is not obligated to pay or for which the participant is not billed.” North Cypress Medical Center, an out-of-network hospital in Texas, sued on behalf of participants to obtain the full out-of-network coinsurance percentage based on the provider’s full charged amount. Although the U.S. Court of Appeals for the Fifth Circuit did not address the claim on its merits, the Court remanded the claim to the district court for full consideration as to whether Cigna had discretion to interpret the exclusion in this manner. Issues for the district court to consider include… Continue Reading