Doe v. Blue Shield of California

Background

The plaintiffs brought claims under the Employee Retirement Income Security Act of 1974 (ERISA) concerning mental-health benefits for Jane Doe’s residential treatment at Avalon Hills Treatment Center. The opinion identifies John Doe as seeking benefits for his daughter Jane Doe’s treatment under an employee benefit plan administered by California Physicians’ Service, doing business as Blue Shield of California.

Jane had anorexia nervosa, severe anxiety including panic attacks, panic disorder, and obsessive-compulsive disorder. Blue Shield approved residential-treatment benefits from December 10, 2020, through January 6, 2021. After a peer-review call on January 6, Blue Shield denied approval for residential care beginning January 7 and recommended daytime treatment instead. Blue Shield denied the plaintiffs’ expedited appeal on January 22. Jane remained in residential treatment through July 31, 2021, and the plaintiffs paid for that care themselves.

Standard of Review

The parties disagreed about whether the court should review the denial from the beginning or defer to Blue Shield’s decision. The court held that abuse-of-discretion review applied because the plan gave the administrator discretion to interpret the plan. The court also held that California Health and Safety Code section 1367.045, which can invalidate discretionary provisions in health-care-service-plan contracts, did not apply because the plan was issued before that statute’s January 1, 2021 effective date.

Under abuse-of-discretion review, the court considered whether Blue Shield’s decision was illogical, implausible, or unsupported by reasonable inferences from the record. The court also considered Blue Shield’s structural conflict of interest because it both administered the plan and paid benefits.

Merits

The court concluded that Blue Shield abused its discretion in denying residential treatment from January 7 through January 18, 2021. The denial letter was largely conclusory: although it referred to clinical guidelines, it did not explain what evidence Blue Shield relied on or how it reached its conclusions that Jane was not a danger to herself or others, was cooperative, and did not need round-the-clock care.

The court found that Blue Shield failed to address evidence submitted by Jane’s treatment team, including reports of increased suicidal thoughts, self-harm thoughts and conduct, difficulty managing eating, and a risk of relapse if she moved to a lower level of care. The court also found that parts of Blue Shield’s review conflicted with Jane’s documented history of earlier treatment that had not fully resolved her eating disorder. Given these omissions and contradictions, the court found the decision illogical and unsupported by the record. Blue Shield’s conflict of interest made these errors more significant.

Remedy and Disposition

The court awarded benefits for the period that Blue Shield had actually evaluated: January 7 through January 18, 2021. It remanded to the plan administrator the question whether any benefits were due for residential care from January 19 through July 31, 2021, because Blue Shield had not made a factual determination concerning that later period.

The plaintiffs also invoked ERISA section 1132(a)(3), which permits certain equitable relief. The court stated that it was unclear whether the requested remand was properly characterized as equitable relief or was instead required because the administrator had not decided the later period. The court nevertheless concluded that remand was appropriate. It retained jurisdiction until the remand review was complete and directed the parties to request a case-management conference if further court proceedings were necessary. The court did not decide whether additional benefits should ultimately be awarded for the later period.