R. v. Blue Shield of California

Background

R.R. participated in an employee welfare benefits plan issued to Fehr & Peers and administered by California Physicians’ Service, doing business as Blue Shield of California. His son, E.R., was a covered dependent. The plaintiffs alleged that Blue Shield violated the Employee Retirement Income Security Act (ERISA) and the plan by refusing to cover E.R.’s treatment at Innercept, a 24-hour residential treatment facility. They sought approximately $225,000 in unreimbursed medical expenses.

The parties agreed to dismiss the claim under the Mental Health Parity and Addiction Equity Act. The remaining claim sought recovery of benefits under ERISA. The plaintiffs moved for summary judgment, and Blue Shield filed a combined opposition and cross-motion for summary judgment.

Coverage Decision and Administrative Review

The plan covered services considered medically necessary and gave Blue Shield discretion to interpret the plan and determine eligibility and benefits. Blue Shield denied coverage because it determined that residential treatment was not medically necessary under the Magellan Care Guidelines. Those guidelines allowed 24-hour residential treatment when a patient presented specified dangers to self or others, or had a behavioral health disorder with moderately severe conditions and serious dysfunction in daily living.

Blue Shield initially denied coverage beginning February 13, 2020, and later denied coverage through May 7, 2020, with discharge on May 8, 2020. The plaintiffs appealed through E.R.’s anticipated discharge. The court found the administrative record ambiguous about the coverage period but concluded that the appeal covered treatment through E.R.’s actual discharge on May 4, 2021. The court also rejected the plaintiffs’ request to disregard record material that Blue Shield cited during litigation, finding that Blue Shield consistently relied on medical necessity and the same guidelines during the administrative process.

Standard of Review

The court held that the abuse-of-discretion standard applied. Although ERISA benefit claims are generally reviewed without deference, the plan unambiguously gave Blue Shield discretionary authority to interpret the plan and determine benefits. The court also concluded that a California insurance-law provision cited by the plaintiffs did not apply to this health care service plan.

Under the abuse-of-discretion standard, the denial would be overturned only if it were illogical, implausible, or unsupported by reasonable inferences from the record.

Merits

The court concluded that Blue Shield complied with ERISA’s procedural requirements. The initial denial identified medical necessity as the basis for the decision, applied the guidelines, and explained the clinical reasoning. The final denial considered the submitted records and included review by an independent physician, who concluded that E.R. did not meet the guidelines for residential treatment.

The court also rejected the plaintiffs’ argument that Blue Shield was required to explain specifically why it rejected the opinions of E.R.’s treating professionals. It declined to impose that requirement because the Ninth Circuit had not adopted the approach relied on by the plaintiffs, and the Supreme Court had rejected a rule requiring special treatment of treating-physician opinions in this context.

On the substance of the coverage decision, the court recognized E.R.’s serious psychiatric condition and the significant difficulties experienced by E.R. and his family. It nevertheless found adequate record support for Blue Shield’s conclusion that E.R. did not have persistent thoughts of suicide or serious harm to himself or others, command hallucinations, persecutory delusions, severe paranoia, or the level of dysfunction required by the guidelines. The court acknowledged evidence of aggression, hallucinations, and recommendations from treating professionals for residential treatment, but concluded that this evidence did not establish that Blue Shield’s decision was an abuse of discretion.

Disposition

Blue Shield’s motion for summary judgment was granted, and the plaintiffs’ motion was denied. The court ordered the plaintiffs to file by September 6, 2024, either a statement identifying themselves or a request to proceed pseudonymously that complied with governing standards. Judgment was to be entered separately after the pseudonym issue was determined.