K. v. California Physicians' Service

Background

E.K., through her father Josef K., was covered by a group health plan issued by Blue Shield of California. The plan was governed by the Employee Retirement Income Security Act (ERISA). It covered services that were medically necessary, including services established as safe and effective, furnished under generally accepted professional standards, consistent with Blue Shield’s medical policy and the patient’s condition, and provided at the most appropriate safe and effective level of care. The plan also allowed Blue Shield to use medical consultants and peer-review organizations to evaluate claims.

E.K. had a history of behavioral and mental-health difficulties, including diagnoses of attention deficit hyperactivity disorder, autism spectrum disorder, depression, and anxiety. She received residential treatment at the Aspiro Wilderness Program from September 12, 2015, to December 1, 2015, and at Maple Lake Academy from December 1, 2015, to December 15, 2016.

Blue Shield denied claims for both stays because it determined that residential treatment was not medically necessary. Blue Shield and outside reviewers concluded that E.K.’s care could have been provided safely and effectively at less restrictive levels, such as intensive outpatient treatment or partial hospitalization. The California Department of Managed Health Care adopted Maximus’s independent medical-review decisions upholding the denials.

Standards and Analysis

The parties agreed that the court would review Blue Shield’s benefit decisions for abuse of discretion. Under that standard, a plan administrator abuses its discretion if it gives no explanation, interprets the plan contrary to its plain language, or fails to develop facts necessary to its decision. The court treated the parties’ motions as motions for summary judgment because summary judgment was the procedure used to present the legal question to the court under this deferential standard.

The court rejected plaintiffs’ argument that the Magellan guidelines used in reviewing the claims failed to reflect generally accepted standards of care. The court stated that the record did not contain the expert testimony and other evidence needed to make that determination and that plaintiffs had not shown the Magellan guidelines were identical to guidelines criticized in another case.

The court then rejected plaintiffs’ challenges to Blue Shield’s handling of the Aspiro and Maple Lake claims. The plan allowed Blue Shield to use outside reviewers, and the record showed that Blue Shield personnel reviewed the claims, medical records, and applicable guidelines. The court also found that Blue Shield’s letters identified or described the relevant guidelines sufficiently, even though the claims process was sometimes sloppy.

The court considered evidence concerning E.K.’s past suicidal comments, self-harm, threats, outpatient treatment, and treating doctors’ opinions. It concluded that the record did not show that Blue Shield abused its discretion by treating those facts as insufficient to require residential treatment. The court also found that the reviewers’ CALOCUS guideline scores were below the score the guidelines treated as supporting residential care, and that plaintiffs’ disagreement with those assessments did not establish an abuse of discretion.

Rulings

As to Blue Shield, the court held that Blue Shield did not abuse its discretion in denying the Aspiro and Maple Lake claims. Blue Shield was therefore entitled to judgment on plaintiffs’ ERISA claim for benefits.

As to TriNet, the court held that plaintiffs had presented no evidence about TriNet’s role in the claims or that TriNet could be liable even if the claims against Blue Shield failed. TriNet was entitled to judgment in its favor.

As to Maximus, the court held that plaintiffs had not established that Maximus was a functional fiduciary. A functional fiduciary is an entity that exercises the relevant discretionary authority or control while taking the action challenged under ERISA. The court found that Maximus conducted medical-necessity reviews under its contract with the Department of Managed Health Care, did not make the actual coverage decisions under the plan, and did not interpret the plan. Maximus was therefore entitled to judgment on the fiduciary-duty claim. The court also denied plaintiffs’ request for additional discovery concerning Maximus.

Judge Yvonne Rogers denied plaintiffs’ motion for judgment as to all defendants, granted Blue Shield and TriNet’s cross-motion for judgment, and granted Maximus’s cross-motion for judgment. The court separately granted the unopposed motions to seal the administrative record, the names of the physicians who reviewed E.K.’s claims, and portions of the briefs referring to that information.