United States District Court, D. Arizona
ORDER
HONORABLE JOHN J. TUCHI UNITED STATES DISTRICT JUDGE.
Plaintiff
Russell Keith Howard seeks judicial review of Defendant Blue
Cross Blue Shield of Arizona's (“BCBSAZ”)
denial of insurance coverage under Plaintiff's employee
health insurance plan (“the Plan”), pursuant to
ERISA, 29 U.S.C. § 1132 et seq. (Doc. 33, TAC.)
Both Plaintiff and Defendant submitted Opening Briefs (Doc.
77, Pl.'s OB; Doc. 60, Def.'s OB) and Defendant filed
a Response Brief (Doc. 72, Def.'s RB).[1]
I.
BACKGROUND
Plaintiff
is an employee of Sunstate Equipment Co., LLC
(“Sunstate”). (TAC ¶ 8.)
Defendant[2] is the medical insurance provider for
Sunstate employees, including Plaintiff. (TAC ¶ 8.) In
March 2014, Plaintiff was diagnosed with prostate cancer that
required radiation treatment. Plaintiff was medically
eligible to receive either photon or proton beam radiation
therapy. (TAC ¶10.) Plaintiff alleges that through
consultation with his treating oncologist, he determined that
proton beam radiation therapy (“PBRT”) would
likely be more effective. (TAC ¶ 12.) Plaintiff sought
precertification of PBRT, which was denied in May 2014 when
Defendant explained in a decision letter that PBRT
“does not meet the BCBSAZ medical necessity
standards.” (Doc. 63-1 at 3.) Plaintiff subsequently
paid out of pocket for the projected cost of the
treatment-$105, 625.00. (TAC ¶¶ 12-13.)
Plaintiff
underwent PBRT from June 2014 through September 2015. (TAC
¶ 14.) Plaintiff's medical provider submitted claims
for the radiation costs to Defendant, who denied them. (TAC
¶ 15.) In April 2015, the provider appealed
Defendant's decision and Defendant again denied
Plaintiff's claim on the grounds that PBRT (as opposed to
photon beam therapy) was not medically necessary. (TAC ¶
16.) Plaintiff and his provider filed a second appeal, which
was reviewed by a third-party independent reviewer retained
by Defendant. (TAC ¶ 17.) Defendant again denied
Plaintiff's claim on August 12, 2015. (TAC ¶ 17.)
Plaintiff filed his Complaint seeking judicial review of that
denial on August 29, 2016.[3] (Doc. 1.)
On
November 2, 2018, the Court issued an Order (Doc. 81, Nov. 2
Order) denying in part and granting in part Plaintiff's
Motion to Admit Non-Record Documents (Doc. 78). In that
Order, the Court determined that it must review the denial of
Plaintiff's benefits under the abuse of discretion
standard. (Nov. 2 Order at 5.) As the parties' briefs
were filed before the Court entered the November 2 Order, a
significant portion of each brief is devoted to arguments
about which standard of review the Court must apply. The
Court need not address those arguments again.
After
viewing Plaintiff's Opening Brief in light of an abuse of
discretion review, the Court will address the following
arguments: 1) Defendant abused its discretion by applying an
outdated set of Medical Coverage Guidelines
(“MCG”) that failed to consider the improved
outcomes of PBRT or any individualized clinical assessment of
Plaintiff's condition; and 2) Defendant similarly abused
its discretion by ignoring the opinions of Plaintiff's
treating oncologists, instead relying largely on the opinions
of physicians who specialize in internal medicine and the
opinion of one oncologist who was constrained by the rote
application of the MCG.
Further,
Plaintiff argues that Defendant operated under a conflict of
interest because: 1) Defendant controls the contents of the
MCG and thereby dictates what treatments are medically
necessary; and 2) Defendant both administers claims and is
financially obligated to fund those claims when they exceed
the $200, 000 stop loss limit funded by Sunstate.
II.
LEGAL STANDARD
Under
29 U.S.C. § 1133, every ERISA-covered insurer must
“provide adequate notice in writing” of a denial
of benefits and must “[set] forth the specific reasons
for such denial.” 29 U.S.C. § 1133(1). Further,
the insurer must “afford a reasonable opportunity . . .
for a full and fair review by the appropriate named fiduciary
of the decision denying the claim.” Id. Under
§ 1132(a)(1)(B), an insurance beneficiary whose claim
has been denied may bring suit “to recover benefits due
to him under the terms of his plan, to enforce his rights
under the terms of the plan, or to clarify his rights to
future benefits under the terms of the plan.” Such an
appeal requires a court to interpret the insurance policy as
it would any other contract, “in an ordinary and
popular sense as would a [person] of average intelligence and
experience.” Allstate Ins. Co. v. Ellison, 757
F.2d 1042, 1044 (9th Cir. 1985). If there is ambiguity in the
terms of the contract, it must be resolved in favor of the
insured. Kunin v. Benefit Trust Life Ins. Co., 910
F.2d 534, 539-41 (9th Cir. 1990).
When a
court reviews a benefits decision for abuse of discretion, it
must determine whether it is “‘left with a
definite and firm conviction that a mistake has been
committed,' and [it] may not merely substitute [the
court's] view for that of the fact finder.”
Salomaa v. Honda Long Term Disability Plan, 642 F.3d
666, 676 (9th Cir. 2011) (quoting United States v.
Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009)). Under
this deferential standard, “even decisions directly
contrary to evidence in the record do not necessarily amount
to an abuse of discretion.” Boyd v. Bert Bell/Pete
Rozelle NFL Players Retirement Plan, 410 F.3d 1173, 1178
(9th Cir. 2005). In fact, “[a]n ERISA administrator
abuses its discretion only if it (1) renders a decision
without explanation, (2) construes provisions of the plan in
a way that conflicts with the plain language of the plan, or
(3) relies on clearly erroneous[4]findings of fact.”
Id. (citing Bendixen v. Standards Ins. Co.,
185 F.3d 939, 944 (9th Cir. 1997)). In short, courts
“will uphold the decision of an ERISA plan
administrator ‘if it is based upon a reasonable
interpretation of the plan's terms and was made in good
faith.'” Id. (quoting Estate of
Shockley v. Alyeska Pipeline Serv. Co., 130 F.3d 403,
405 (9th Cir. 1997)).
While
the abuse of discretion standard typically allows for
consideration of less extrinsic evidence than does its more
lenient de novo counterpart, courts are still
required to consider the potential effects of an alleged
conflict of interest. Lukas v. United Behavioral
Health, 504 Fed.Appx. 628, 629 (9th Cir. 2013) (“A
procedural irregularity, like a conflict of interest, is a
matter to be weighed in deciding whether an
administrator's decision was an abuse of
discretion”). In examining a potential conflict of
interest, courts may “consider evidence outside the
administrative record to decide the nature, extent, and
effect on the decision-making process of any conflict of
interest; the decision on the merits, though, must rest on
the administrative record once the conflict (if any) has been
established.” Abatie v. Alta Health & Life Ins.
Co., 458 F.3d 955, 967 (9th Cir. 2006). “While [a]
conflict does not displace the deferential standard of
review, it is one of the several, case-specific factors the
Court considers in determining whether a plan administrator
abused its discretion in denying a benefits claim.”
Puccio v. Standard Ins. Co., 80 F.Supp.3d 1034, 1040
(N.D. Cal. 2015). Even if a court identifies a conflict of
interest, “[t]he level of skepticism with which a court
views a conflicted administrator's decision may be low if
a structural conflict of interest is unaccompanied, for
example, by any evidence of malice, of self-dealing, or of a
parsimonious claims-granting history.” Id. at
970.
Normally,
“a plaintiff suing under [§ 1132] bears the burden
of proving his entitlement to contractual benefits.”
Horton v. Reliance Standard Life Ins. Co., 141 F.3d
1038, 1040 (11th Cir. 1998). The Ninth Circuit has
specifically adopted this burden standard in the de
novo context, and the Court sees no reason why this
burden would not apply in the more deferential abuse of
discretion review. See Muniz v. Amec Const. Mgmt.,
Inc., 623 F.3d 1290, 1295 (9th Cir. 2010) (citing
Horton, 141 F.3d at 1040). However, “if the
insurer claims that a specific policy exclusion applies to
deny the insured benefits, the insurer generally must prove
the exclusion prevents coverage.” Horton, 141
F.3d at 1040 (citing Farley v. Benefit Trust Life Ins.
Co., 979 F.2d 653, 658 (8th Cir. 1992)).
Where
an insurer denies coverage for treatment because it finds the
treatment is not medically necessary, “[t]he Ninth
Circuit has not considered whether the requirement of medical
necessity is a term of coverage or an exclusion.”
Baxter v. MBA Grp Ins. Trust Health & Welfare
Plan, 958 F.Supp.2d 1223, 1229 (W.D. Wash. 2013). At
least one district court of the Ninth Circuit has concluded,
based on opinions from three other circuit courts, that
“medical necessity” does not constitute an
exclusion, and thus the burden remains with the plaintiff.
Id. at 1229-30 (citing Farley, 979 F.2d at
658; Fuja ...