A federal district court blocked an effort to force an ERISA health plan to pay secondary for an expensive specialty drug that was excluded from coverage because it wasn’t filled at an in-network provider as required by plan terms. The U.S. District Court for Northern Illinois rejected the plaintiff‘s argument that whenever Medicare covered a claim excluded by the plan, plan exclusions were wiped out and the plan had to pay secondary.
Also, plan language giving the plan sponsor final say over claims administrator decisions weakened the plaintiff’s argument that the claims administrator could be sued under ERISA and forced to pay benefits.
Facts
Warren Ingram was a plan participant under his employer (Air Tran)’s, self-funded employee health plan, and American Service and Product, Inc. is a supplier of specialty drugs. Aetna Health administered claims for Air Tran.
Ingram was a hemophiliac being treated with a self-injectable specialty drug called Kogenate.
Note: Kogenate treats a rare form of hemophilia affecting just 15,000 American males. The average wholesale price of Kogenate FS ranges from $1,400 to $1,700 for a 1000IU vial. Since the drug is given daily and indefinitely, it can cost more than $150,000 a year.
Starting Jan. 1, 2005, the plan was amended to require refills of Kogenate and certain other self-injectable drugs be obtained only from Aetna-owned pharmacies. Self-injectable drugs that were not obtained from Aetna’s specialty pharmacy network would not be payable.
Ingram received a letter notifying him prior to the policy change, Ingram nevertheless called Aetna requesting out-of-network coverage of Kogenate. On March 21, an Aetna representative allegedly told Ingram that the plan would cover Kogenate on an out-of-network basis from the pharmacy of his choice.
On three occasions in April 2005, Ingram obtained Kogenate from ASAP, which was not part of Aetna’s network. Aetna denied the claims, saying ASAP was out of network.
Four years later, ASAP revisited the issue. Medicare had paid primary for the three claims in the meantime, but ASAP claimed Aetna Health owed it the unpaid 20 percent. On May 20, 2009, Aetna rejected ASAP’s claim for the remaining 20 percent. ASAP and Ingram sued the plan.
The Charges
ASAP and Ingram initially asserted claims for:
- estoppel based upon Ingram’s communications with the plan representative;
- failure to produce plan documents as required under ERISA; and
- wrongful denial of benefits.
Court Rejects
The court rejected the plaintiffs’ argument for estoppel, because:
- their allegations about the substance of the conversation were unclear; and
- they didn’t allege the representative made his statements in writing, a necessary element of an ERISA estoppel claim.
It dismissed the second claim for lack of evidence of a written request for plan documents. That left only the wrongful denial of benefits charge.
The court ruled that Aetna as administrator only was an improper party to the suit; the plaintiffs should have sued the plan for benefits payment, even though Aetna made the claims decision. The following plan language clearly established the distinction between the plan and its claims administrator:
These benefits are not insured with [Aetna] but will be paid from the Employer’s funds. Aetna will provide certain administrative services under the Plan as outlined in the Administrative Services Agreement between Aetna and the Customer.
Therefore, Aetna was an improper party to the lawsuit.
Secondary Payer Status Doesn’t Change Denial
A second area of ambiguity in the plan might have been the “Effect of Medicare” section of the plan document, the plaintiffs alleged.
ASAP and Ingram argued when Medicare became primary payer, the Air Tran plan’s secondary payer provisions bound the plan to covering secondary expenses on any claim Medicare approved and paid. In other words, plan exclusions (including the requirement that the list of specialty drugs be obtained at an Aetna pharmacy) would be overridden if Medicare approved a claim and paid primary.
But the court rejected this as well, stating that the definitions of “Plan Expenses” and “Expenses covered under the Plan,” excluded Kogenate if it were purchased at an out-of-network pharmacy. An expense had to be covered in the first place in order for it to be paid secondarily, even after Medicare (or another payer) covered it. The plan’s own coverage exclusions were not overridden by Medicare’s (or any other payer’s) more liberal payment policy, the court concluded.
The case is American Service and Product v. Aetna Health, 2013 WL 182812 (N.D. Ill., Jan. 17, 2013).