Prying Open An Insurer's Black Box, Part II
Courtesy of the Employee Benefits Institute of America and their free e-mail newsletter comes word of another good example of the lengths ERISA plans and their administrators will go to prevent disclosure of information to claimants that allow meaningful appeal of denied claims. The case, Mondry v. American Family Mut. Ins. Co., 2006 U.S. Dist. LEXIS 85159 (W.D. Wisc. 2006), from Judge John C. Shabaz of the U.S. District Court for the Western District of Wisconsin, involves the denial of speech therapy by a self funded medical plan.
The third party administrator, CIGNA, told the patient’s parents that expenses for the child’s speech therapy were denied based on CIGNA’s internal medical necessity guidelines. The family wrote both CIGNA and the employer, the plan sponsor, and asked for a copy of the guidelines along with a copy of other plan documents. CIGNA wrote back and produced some additional information but not the internal guidelines. The family was persistent and asked again. And again. And again. All told, the family and its attorney wrote six times over a period of many months asking for the internal criteria. At first, CIGNA told the family it would not produce the internal guidelines because they were proprietary. Finally, CIGNA produced part of the guidelines before litigation but the entire set of criteria was not provided until after suit was filed.
The case provides an interesting discussion of what documents constitute “instruments under which the [ERISA] plan is established or operated” under 29 U.S.C. §1024(b)(4). It’s an important point because under 29 U.S.C. §1132(c) when an ERISA administrator fails to produce documents that fall into this category within 30 days after they are requested, the court, in its discretion, may award penalties against the administrator of up to $110 per day.
You would think this potential penalty would provide a significant spur to administrators to provide timely responses to requests for documents under which the plan is established or operated. Sometimes the statute undoubtedly prods prompt reaction to requests. But I’m surprised at how often administrators and insurers thumb their noses at claimants who seek basic information that will allow a claimant to intelligently appeal a denied claim. I chalk that up to a combination of ignorance on the part of ERISA plan administrators and insurers, conscious stonewalling on their part and the unwillingness of the federal judiciary to be aggressive in exercising their discretion to get after the stonewallers.
One good aspect of Mondry is the court’s rejection of the plan sponsor’s argument that it should not be held accountable for the lack of responsiveness of its administrator, CIGNA. The court ruled that CIGNA’s bad acts should be charged to the plan sponsor. Ironically, the plan sponsor, the employer, is an insurance company!