Caldwell v. UnitedHealthcare Insurance Company

Background

Mary Caldwell received medical insurance through her husband’s employer, Oracle. Oracle funded the insurance, while UnitedHealthcare Insurance Company administered the plan. Caldwell sought liposuction to treat lipolymphedema, which the opinion describes as the late-stage form of lipedema, a chronic and progressive condition involving abnormal fat deposits that can become painful, immobilizing, and cause other health consequences.

Caldwell sought coverage for liposuction beginning in 2017. United denied her requests in 2017 and 2019 under the plan’s exclusion for “experimental, investigational, or unproven services.” United upheld both denials after Caldwell used the first level of internal appeal. The opinion describes the lawsuit as brought by a class of medical-insurance beneficiaries seeking coverage for liposuction to treat lipedema, with Caldwell serving as the class representative.

Exhaustion of appeals

United argued that Caldwell’s entire Employee Retirement Income Security Act lawsuit was barred because she had not completed all available administrative remedies. The court rejected that argument. Federal regulations provide that a group health plan’s claims procedures are reasonable only if they do not require more than two appeals before a claimant may bring a civil action.

The court found that the Oracle plan required three levels of review: two internal appeals and a federal external review. The plan’s “Your Final Recourse” section required a claimant to exhaust “all steps” in the claims and appeals sections above before filing suit. Because the external-review program appeared immediately before that section, the court concluded that the plan made external review mandatory. The court held that this three-level appeal system violated the regulation.

The court also stated that the regulation did not automatically approve requiring two levels of appeal. In this case, the court said, United treated liposuction as “unproven” across the board, making one appeal sufficient and a second appeal burdensome and futile.

Misleading denial and appeal letters

The court found that United’s letters to Caldwell were misleading about her rights and obligations. The letters repeatedly used permissive words such as “may” when describing appeals, external review, and the right to file a civil action. They did not clearly tell Caldwell that failing to pursue additional reviews could prevent her from suing in court. The court characterized this wording as an unfair trap for an unwary claimant and declined to enforce it against Caldwell.

Standard of review

The court held that the coverage dispute had to be reviewed de novo, meaning the court would independently evaluate the evidence rather than defer to United’s decision. United sought review under an abuse-of-discretion standard, which generally gives more weight to the plan administrator’s decision when supported by a proper administrative record.

United did not submit an administrative record showing the materials considered when it denied Caldwell’s claims. Instead, it submitted a new record containing evidence about liposuction and expert testimony that could not have been before United when it made the original decisions. The court concluded that the necessary basis for abuse-of-discretion review was missing and that de novo review therefore applied.

Under the evidence then before the court, factual disputes remained about liposuction’s safety and effectiveness. The court said those disputes required denial of summary judgment in favor of a trial, where the experts could be cross-examined and their credibility assessed.

Meaning of the “unproven” exclusion

The court disagreed with United’s interpretation of the plan’s exclusion for “unproven” services. It read the exclusion as covering health services determined to be ineffective or not to provide a beneficial effect on health outcomes based on insufficient and inadequate clinical evidence from specified types of medical studies, including well-conducted randomized controlled trials or multi-institution cohort studies.

Relying on a prior decision involving nearly identical language, the court concluded that United bore the burden of showing through appropriate studies that the procedure was ineffective. The exclusion required evidence affirmatively suggesting that the treatment was ineffective and lacked beneficial health effects; a mere absence of evidence that the treatment worked was not enough. The court also noted that ERISA requires exclusions to be construed narrowly, plan terms to be enforced as written, and ambiguities to be resolved against the drafter.

Disposition

The court denied United’s motion for summary judgment. The opinion did not enter judgment for Caldwell on the coverage claim; instead, it found that the dispute presented factual questions requiring further proceedings.