Lucas Fritcher was born with serious physical problems. They included severe hypoxic encephalopathy, severe cerebral palsy, frequent daily seizures, cleft palate, cortical blindness, microcephaly, severe mental motor retardation, spastic quadriplegia, an inability to swallow and asthma. He required constant medical care or monitoring to live. His health insurer paid for home health care at the clip of about 18 hours a day for three years. But, as you can imagine, that got to be pretty expensive. So the insurer decided it had spent enough and announced that it would pay for no more than two hours of care a day for Lucas’ care stating that any more care than that was “custodial” and not medically necessary under the terms of the ERISA plan providing the coverage. The insurer’s in house physician, a part time practicing endocrinologist, provided the support for the insurer’s decision. However, he admitted that he made his decision without referring to Lucas’ need for medical care throughout the day or the frequency of his seizures (about 20 a day). His father filed suit against the insurer, Fritcher v. Health Care Service Corp., 301 F.3d 811 (7th Cir. 2002), and won. The court was not amused with the insurer’s denial, holding that the insurer’s decision to limit payment to two hours of care a day was “patently unreasonable.” Fritcher criticizes insurers for selective review of medical records, focusing only on information that supports denying the claim, without fairly reviewing the record as a whole. This “cherry-picking” of facts by insurers to support their claim denials is very common. Of course, often times, taking a look at the big picture demonstrates that the insurer is correct in denying the claim. But often, the insurer is simply saving itself money by focusing on a few facts that show a lack of medical necessity or give rise to some other exclusion or limitation when the patient’s records, viewed in their entirety, demonstrate the claim is valid. In that situation, there is no substitute for a painstaking review of all the records to demonstrate that, when viewed as a whole, the facts underlying a claim show it should be paid. Fritcher contains other holdings that are helpful to plaintiffs. The Seventh Circuit rejected the payer’s argument that discretionary language found in the administrative services agreement between the insurer and the employer of a self funded plan is sufficient to confer discretion on the insurer and requires the court to review the insurer’s decision under an arbitrary and capricious standard of review. The ASA is not a document that is distributed to the employees. Consequently, they have no notice of any discretionary language in that document. Without proper notice to the plan participants of discretionary authority, the court should not defer to the payer’s decision. Finally, the court awarded prejudgment interest and noted that compounding of that interest over time was a permissible component of that calculation.
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