Kwasnik v. Oxford Health Insurance, Inc.

Background

Fiana Kwasnik was insured under a large-group medical policy issued by Oxford Health Insurance, Inc. through her employer. The policy covered infertility treatment. In 2017, before she was insured by Oxford, Kwasnik had paid to have eggs retrieved and frozen. In 2021, her doctor recommended in-vitro fertilization treatment involving both those previously frozen eggs and newly retrieved eggs, followed by genetic testing before embryo transfer.

Oxford denied coverage for the requested treatment, stating that the treatment was not medically necessary because Kwasnik still had the 2017 eggs and had to use them before Oxford would cover another egg retrieval. Kwasnik paid for an egg retrieval herself, pursued Oxford’s internal appeals, and obtained an external review by Island Peer Review Organization, Inc. (IPRO). Oxford later approved limited coverage related to thawing the 2017 eggs and transferring embryos created at Kwasnik’s expense, but continued to deny coverage for the egg retrieval and genetic testing. IPRO upheld Oxford’s denial of the new egg-retrieval treatment.

Kwasnik brought the case under Sections 502(a)(1)(B) and 502(c) of the Employee Retirement Income Security Act (ERISA), seeking benefits, statutory penalties, declaratory relief, and other relief. She also asserted claims concerning IPRO’s external-review decision under New York law. The court had previously denied her request to return the case to state court, concluding that ERISA completely displaced her claims. After Kwasnik filed an amended complaint, Oxford and IPRO separately moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim.

Oxford’s Motion

The court granted Oxford’s motion as to Kwasnik’s ERISA Section 502(c) claim. That provision can impose daily penalties on an ERISA plan administrator that fails to provide certain required plan documents after a participant requests them. The court held that Oxford was not the plan administrator. The plan identified the employer group, or a third party appointed by that group, as the plan administrator and expressly stated that Oxford was not the ERISA plan administrator.

The court rejected Kwasnik’s argument that Oxford became the plan administrator by deciding coverage claims or telling her about documents she could request. Kwasnik also had not alleged that Oxford controlled plan assets or that the documents she requested were documents that ERISA required a plan administrator to provide. The court therefore dismissed the Section 502(c) portion of Count One.

The court also granted Oxford’s motion to dismiss the Second Cause of Action for declaratory relief. Kwasnik sought a declaration that Oxford could not consider the 2017 eggs when deciding whether the new treatment was medically necessary. The court held that the state-law provision she cited was a procedural remedy the federal court could not grant. It further held that, even if the claim were treated as a request under federal declaratory-judgment law, it duplicated her claim seeking payment of benefits for the allegedly wrongfully denied treatment.

Oxford had not moved to dismiss Kwasnik’s claim for money damages based on an alleged wrongful denial of benefits under ERISA Section 502(a)(1)(B). The court’s ruling therefore did not dismiss that remaining benefits claim. The court also stated that Oxford’s motion concerning a possible ERISA Section 502(a)(3) claim was denied as moot because Kwasnik had not pleaded such a claim in the amended complaint.

IPRO’s Motion

The court granted IPRO’s motion to dismiss all claims against it. Kwasnik challenged IPRO’s external-review decision and sought declarations concerning IPRO’s alleged immunity from suit. New York’s external-review law limits an external review agent’s liability for its opinions, absent bad faith or gross negligence. A related regulation requires an insured who requests external review to agree not to bring a legal proceeding against the external review agent, subject to specified exceptions.

Kwasnik did not allege bad faith or gross negligence. She argued instead that the regulation exceeded the authority of the New York State Department of Financial Services because the statute expressly referred to damages, while the regulation barred any legal proceeding. The court did not decide that challenge because IPRO was not the proper defendant for a claim seeking to invalidate a regulation adopted by the Department. The court explained that such a challenge would have to be brought against the regulatory body that issued the rule, not IPRO.

The court separately held that Kwasnik had waived the right to sue IPRO in connection with its review of Oxford’s denial when she requested external review. It concluded that IPRO was protected from the claims asserted in this case and dismissed Kwasnik’s claims against IPRO.

Disposition

The court granted both defendants’ motions to dismiss. IPRO was dismissed as a party. The order did not dismiss Kwasnik’s remaining ERISA claim for benefits against Oxford; the court directed Oxford and Kwasnik to meet and confer about the next steps for that claim. The court also granted IPRO’s request to file certain medical-review exhibits under seal and directed the clerk to close the listed motions, including the sealing motion.