Prying Open An Insurer's Black Box, Part Three
Nichols v. Wal-Mart Stores, Inc. Associates’ Health and Welfare Plan, 259 F.Supp.2d 1213 (D. Utah 2003), which you can find in the website library here, illustrates another angle of problems associated with the failure of a health benefit plan to provide information relating to denied claims upon request. The case is one my former partner, Marcie Schaap, and I handled a few years ago.
About 23 weeks into her pregnancy, testing revealed the Amy Nichols’ fetus suffered grave and fatal fetal abnormalities and was non-viable. After consulting with her physicians, husband and other family members, Amy decided to induce labor. The baby was still born. The Nichols submitted claims for payment of Amy’s medical expenses to Wal-Mart, her husband’s employer, for payment.
The Wal-Mart health benefits plan covered medically necessary healthcare but excluded payment for charges relating to any treatment or services for abortion as well as an exclusion for elective surgeries that were not preauthorized. Nichols retained a company specializing in appeals of denied medical claims, Claims Management Inc., to try to get the claim paid. CMI wrote to Wal-Mart, indicated it was the Nichols’ authorized representative and requested information about why the claim was denied. Wal-Mart wrote back that only the plan participant could appeal benefits, refused to consider CMI’s appeal and stated that the documents CMI requested would not be produced without a subpoena. In fact, ERISA’s regulations specifically state that plan participants and beneficiaries may have an authorized representative appeal their claims for them.
Wal-Mart’s stonewalling caused the Nichols to get in touch with us. Marcie wrote a detailed appeal letter to Wal-Mart. It included 15 questions asking about such things as the Plan’s definition of abortion, how similar circumstances had been treated in the past by Wal-Mart, and whether the decision-makers at Wal-Mart had any financial interest in the decision to deny the claim. Wal-Mart’s counsel wrote back stating that the Plan would not respond to the questions and the Nichols filed suit shortly thereafter in the U.S. District Court for Utah.
Immediately the parties asked the Court to consider whether the Wal-Mart plan was obligated to provide information about how it made its decision to deny the claim. Judge Paul G. Cassell’s opinion discusses the obligation of ERISA plans to provide, under 29 U.S.C. §1133, a “full and fair review” of any appeal of a denied claim. Judge Cassell ruled that Wal-Mart’s repeated refusal to respond to the Nichols’ relevant questions about the process by which it evaluated and denied the claim was improper. The decision refers to Wal-Mart’s responses to the Nichols’ inquiries as “unilluminating ‘form letters’” and “unspecific and generic ‘legalese.’” The court noted that its role in determining whether Wal-Mart had provided a full and fair review was impossible because “the court has little more than a ‘black box’ in front of it–a Committee that has denied benefits without any clear articulation of the reasons behind that denial. ERISA demands that the Plan be more forthcoming.” The order required Wal-Mart to provide complete responses to detailed questions outlined by the court.
I wish I could say ERISA plans and insurers were always or even usually forthcoming and open-handed about providing relevant information during the pre-litigation appeal process. But often they simply deal with appeals of denied claims as a nuisance and hope claimants will go away if they are ignored. But persistence pays dividends!