1. Case Name: Joseph & Gail F. v. Sinclair Services Company and Sinclair Service Company Point of Service Basic Plan
2. Type of Treatment Services Denied: Long-term residential treatment services for depression
- Plaintiff: Brian S. King & Laura C. Nielson, Law Firm of Brian S. King
- Defendant: Landon A. Allred, Stoel Rives
4. Format: Memorandum Opinion and Order issued by the United States District Court for the District of Utah, Central Division
- ERISA Claim? Yes
- Class Action/or Individual Action: Individual action
- Defendant: Sinclair’s Plan Administrator
- Type of Insurance Plan: Sinclair Services Company Point of Service Basic Plan
- Type of Coverage Denial: Medical Necessity
6. Legal Pointer: This Court remanded the matter back to the Administrator to reconsider denial of benefits incurred on or after January 1, 2013 rather than awarding Plaintiff the benefits incurred.
7. Legal Issues and Causes of Action: Plaintiffs filed suit against Sinclair Services Company and Sinclair Services Company Point of Service Basic Plan after Sinclair’s Plan Administrator denied the family’s claim for benefits relating to long-term residential treatment services rendered to the family’s minor daughter, N.F., for depression. Plaintiffs argued it was due benefits under the Plan for two reasons: first, the Administrator abused its discretion when it denied the F. Family’s claim for benefits incurred before January 1, 2013, based on an unreasonable interpretation of the Plan’s terms and second, the family was entitled to benefits incurred on or after January 1, 2013, because the 2013 amendment to the Plus Plan excluded coverage for residential treatment services violated the Party Act.
Ruling: The F. Family and the Plan Administrator cross-moved for summary judgment on the F. Family’s claim for benefits. Both Motions were granted in part and denied in part.
8. Narrative Case Description: N.F. suffered from serious mental, emotional, and behavioral health conditions. In early 2012, N.F. spent six weeks in an acute psychiatric hospital in Texas for suicidal ideation. Before discharging N.F., staff at the Texas facility recommended that she receive long-term treatment at an all-girls facility. The staff warned that placed her in an inappropriate facility would worsen her condition and the staff therefore recommended a program similar to Moonridge Academy or New Haven Residential Treatment Center. Both programs, however, were non-network facilities in Utah. Following those recommendations, the F. Family admitted N.F. at Moonridge on May 23, 2012. After Moonridge discharged N.F., the F. Family admitted her at New Haven. The F. Family withdrew N.F. from New Haven on March 2, 2013.
While N.F. received treatment at Moonridge and New Haven, the F. Family worked with the Administrator to determine what coverage was available for N.F.’s treatment. The Administrator initially told the F. Family that because they traveled to Utah, a network area, coverage would be available only for treatment provided at Youthcare, a network facility in Salt Lake City, Utah. Youthcare, however, only provided coed treatment. The Administrator denied coverage for treatment N.F. received at Moonridge and New Haven.
The F. Family appealed the denial of coverage in May 2012, arguing that Youthcare was inappropriate for N.F. based on recommendations from the Texas facility’s staff. The F. Family also noted that Moonridge was willing to consider a single-case agreement with the Plan. The Administrator again denied coverage in June 2012, maintaining that the Plan did not cover out-of-network care.
The F. Family submitted a second appeal in December 2012, stating that there were no network providers of all-girls residential care within fifty miles of their home in Wyoming and that the Plan should cover the expenses because the Out of Area Program provision stated that the Plan covered services rendered by non-network providers when there were no network providers within a fifty-mile radius of the beneficiary’s principal residence. The F. Family also argued that the Plus Plan’s post-January 1, 2013 residential treatment exclusion violated the Parity Act. The Administrator again denied the claim in February 2013, reiterating that the Plan did not cover out-of-network care and concluded that if a “Plan participant travels to an area to obtain health care services and a network provider is available, the participant must utilize a network provider” to receive benefits. In response to the Parity Act argument, the Administrator stated that the Plus Plan no longer provided benefits for residential treatment under an amendment that took effect on January 1, 2013.
The F. Family submitted a third appeal in March 2013, disputing the Administrator’s interpretation of the Out of Area Program provision and arguing that the amended Plus Plan violated the Parity Act by imposing an improper nonquantitative treatment limitation. The Administrator issued its denial in May 2013. The Administrator explained that because N.F. traveled to Utah, where there was a network residential treatment facility, to receive treatment and that the F. Family’s claims were for services provided by non-network providers, the Plan provided no benefits. The Administrator also refuted the F. Family’s argument that the exclusion of residential treatment violated the Parity Act, stating that the Plus Plan “does not make impermissible distinctions between its payment of claims for Medical/Surgical benefits and Mental Health/Substance Abuse (MH/SUD) benefits.”
The Court first turned to the Plan Administrator’s interpretation of the term “area” to mean a state to determine whether the term “area” as used in the Use of Network Providers During Travel provision was ambiguous. The Court concluded that the Administrator’s interpretation of “area” to mean a state was consistent with a reasonable person’s understanding of the term and opined that the Administrator’s denial of the F. Family’s claim for benefits incurred before January 1, 2013, based on that interpretation, was not arbitrary and capricious.
The Court then evaluated Plaintiff’s Party Act violation argument. The Court opined that by its terms, the Plus Plan’s residential treatment exclusion ran afoul of the Parity Act. Like the Basic Plan, the Plus Plan defined a residential treatment facility as “[a] child-care institution that provides residential care and treatment for emotionally disturbed children and adolescents.” This definition showed that, before the Plus Plan’s amendments went into effect on January 1, 2013, residential treatment benefits were available only for mental health conditions. When the Plus Plan eliminated coverage for residential treatment services, it imposed a treatment limitation that applied only to mental health conditions, thus it violated the language of the Parity Act. Although the Administrator argued that the exclusion applied across the board, there was no evidence to suggest that coverage for residential treatment was available for medical or surgical conditions but for the exclusion. Without evidence to that effect, the Administrator’s argument that it would have also denied residential treatment benefits for medical or surgical conditions under the exclusion was illusory.
The Court found that remanding the matter to the Administrator was appropriate. On remand, the Administrator would have an opportunity to evaluate in the first instance whether it owed the F. Family benefits incurred on or after January 1, 2013, based on the Administrator’s interpretation of the Plus Plan’s terms.
9. Additional Comments: The Plaintiff argued that the Court should review the denial under a less deferential standard because of an alleged conflict of interest, procedural irregularity, and breach of fiduciary duty. The Court concluded that the F. Family failed to offer proof that a conflict could have plausibly jeopardized the plan administrator’s impartiality. The Court further concluded that the F. Family failed to prove that the Administrator committed a serious procedural irregularity justifying de novo review. Lastly, the Court opined that it could not conclude that a plan administrator breached its fiduciary duty to a plan beneficiary simply by interpreting a plan provision in a manner that resulted in a denial of the beneficiary’s claims. As such, the Court applied an arbitrary and capricious standard of review.
11. Practical Implications and Lessons Learned: Rather than awarding benefits, the Court remanded the matter to the Administrator for re-evaluation. The Court also discussed the burden of proof to establish a conflict of interest claim for a claims administrator.
12. All Legal Theories Presented in Case: Conflict of interest, procedural irregularity, breach of fiduciary duty, and Parity Act violation
13. Successful Legal Theories in Case: Parity Act violation