The Meaning of "Usual and Customary"
Another interesting issue in Geddes v. United Staffing Alliance deals with the ERISA plan's interpretation of "usual and customary" charges from healthcare providers. When Andrew Geddes dove into shallow water and suffered a serious spinal cord injury at Lake Powell, he was miles from any medical help. He was flown by helicopter to Grand Junction, Colorado, for emergency treatment at St. Mary's Hospital. St. Mary's was a non-contracted provider with Geddes' self funded plan. The terms of the Plan required it to pay the contracted amount for participating providers but for non-participating providers such as St. Mary's the Plan was obligated to pay "the usual and customary amount as determined by the Plan." The Plan claimed that this amount was what it paid, on average, for in-network services. Based on that rationale, it paid about $37,000 of St. Mary's bill of over $85,000.
The Geddeses claimed this was a violation of the terms of the Plan and the Tenth Circuit ruled in their favor. The decision states that the Plan's interpretation of the "usual and customary" language was arbitrary and capricious. First, the court noted that the language in the Plan was ambiguous. To interpret the phrase, the court looked to other cases where usual and customary charges were based on average charges from other healthcare providers in a given geographic area. In Geddes there was no evidence that the Plan administrators had taken that type of information into account to any degree.
More fundamentally, in specifically distinguishing between how contracted and non-contracted providers would be treated, the court stated that Plan participants would reasonably expect that something other than the contracted rates would be paid to non-contracted providers. "[B]y juxtaposing the 'contracted amount' for in-network providers with the 'usual and customary' charge levied by out-of-network physicians--and promising to cover both--the text of the Plan directly implies the two rates are distinct, and that out-of-network expenses will be covered at the prevailing market rate." To make the rate at which non-network providers are paid the same as what contracted providers receive "renders 'usual and customary' virtually meaningless."
The court concludes its analysis on this point by saying the Plan's reading of the usual and customary clause "has the effect of misleading Plan members and denying them necessary medical coverage. Given its departure from industry custom and its deleterious effect on Plan beneficiaries, we find [the Plan's] interpretation of 'usual and customary' arbitrary and capricious."