Because an employer health plan gave a full and fair review resulting in a reasonable benefits decision, a federal court upheld the plan’s lifetime limit on obesity services and its prohibition on payments to treat complications from earlier gastric bypass surgeries. The plan also weathered an allegation that it was not properly segregating plan funds.
In Wesson v. Phillips Medical Center Employee Group Healthcare Plan, 2012 WL 1536458 (N.D. Okla., April 30, 2012), the federal court said EOBs and replies to plan appeals may have been sketchy, but did not fail to explain: the reason for the denial and appeal options for the participant.
The participant: (1) showed she understood the reasons for the denial in correspondence; and (2) failed to demonstrate any plan mishap harmed her.
Susan Wesson worked for Jane Phillips Medical Center and participated in its self-funded group health plan. In April 2005, She underwent “Roux-en-Y” gastric bypass surgery for weight loss. The plan covered Wesson’s 2005 surgery, and paid $15,000 — the plan’s lifetime limit for morbid obesity. The plan had a policy under which it refused to pay to cure complications for earlier gastric work.
In 2008, Wesson experienced health problems related to her bypass and needed surgery to reverse the 2005 procedure. The plan denied that claim, invoking the lifetime limit and the exclusion for complications from bypass surgery.
Operative notes from the July 2008 described the procedure as a “Takedown of the gastrojejunostomy with reconstruction.”
JPMC sought independent medical reviews from two experts, both of which determined the 2008 services were to cover complications from the 2005 gastric surgery. Note: The plan failed to enclose the records of the 2005 procedure to both outside reviewers. (The plan’s decision would be upheld in spite of this.)
Wesson appealed to JPMC, asserting that the repair procedures did not result from a complication of the original 2005 gastric bypass. She argued instead that stress and conditions that predated the 2005 surgery created her gastric obstruction and GERD. After the plan denied her on two appeals, Wesson sued in federal court for benefits due under the plan and for breach of fiduciary duty.
Wesson first contended initial explanation-of-benefits and claim-denial letters failed ERISA procedures.
Initial Review
Wesson complained she was unable to discern the reason for the denial on the letter. While some plan communications to Wesson did lack specifics, the court said, Wesson’s legal argument was undercut by her own initial appeal letter to BMI and the plan. That letter showed she understood that the coverage limit was the operating factor for her denial.
Appeal
She then contended that in her Oct. 8, 2008 denial-on-appeal letter, BMI did not show her how it concluded that the 2008 procedures resulted from complications from her 2005 operation.
The court decided that the denial of appeal letter, while not particularly informative, did set out: (1) that the decision was arrived at after a review of the claims history; (2) the reviewer concluded the 2008 claim resulted from complications of the 2005 procedure; and (3) the plan prohibited that kind of claim.
Wesson said BMI’s letter was improper because it failed to identify documents that “might help” her make her claim.
But the court rejected this. ERISA does not require plan administrators or TPAs to tell claimants about “documents that might be helpful,” the court said. It requires them to identify “appropriate materials necessary to perfect an appeal” to the plan. Furthermore, the plan did not need to ask Wesson for more information because it had all it needed to make its determination. The fact it did not request more was not a violation of ERISA’s requirement that a “meaningful dialog” take place between plan and claimant.
Plan’s Decision Was Reasonable
The court then examined the plan’s decision itself, and found it to be reasonable in spite of flaws in one reviewer’s work.
The plan probed outside reviewers on whether the symptoms that led to the 2008 procedure could have occurred in the absence of a Roux-en-Y procedure. As noted above, the plan failed to enclose the records of the 2005 procedure to both outside reviewers.
As a result of not having the 2005 records, one of the reviewers, Dr. Freeman, referred to the 2005 procedure as not a gastric bypass when it was a Roux-en-Y gastric bypass, and ignored the plan’s question before ultimately concluding that the 2008 surgery “was done for a condition that was the result of the prior gastric bypass procedure.” The court concluded that Dr. Freeman’s review was too flawed to be the basis of a reasonable plan denial.
But the plan also based its conclusion on another reviewer’s input and on other evidence. Notes from the 2008 procedure showed it was to remove an implanted device and it was a “takedown of the gastrojejunostomy with reconstruction,” both of which resulted from the 2005 procedure, the court decided.
For those and other reasons, the court held that the denial was reasonable. Because the denial was reasonable, no breach of fiduciary duty resulted from it.
Breach of Fiduciary Duty Charge Fails
Wesson alleged that JPMC violated its duty as a fiduciary because it failed to segregate employee contributions to the plan in a separate interest-bearing trust account, and she alleged the plan was putting them in the corporation’s general fund. JPMC’s finance officer testified that plan funds were not being intermingled with general funds, so the court considered whether ERISA requires a separate trust account. It said ERISA doesn’t create a duty to keep plan funds in a separate interest-bearing trust account.
ERISA requires employers to hold plan assets for the exclusive benefit of plan participants, but assets don’t have to be segregated into a separate trust account, the court stated.
JPMC’s decision not to segregate plan funds into a separate trust account appeared to comport with standard industry practice with regard to welfare plans, the court said.
Furthermore, Wesson failed to demonstrate harm from the plan’s failure to segregate funds. The court upheld the plan’s determination and denied Wesson’s breach of fiduciary duty claim.