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Health Plan Coverage

Batas v. Prudential Ins., 281 A.D.2d 260 (N.Y. App. Div. 2001)

Also under Managed care payments and Payment issues (for patients)

Outcome:     Very favorable

Issue
The issue in this case was whether a health insurer’s promise in its policy to provide medical benefits consistent with prevailing medical opinion legally obliged it to do so, rather than relying on guidelines published by a third party.

AMA interest
The AMA supports the full and appropriate provision of health care services.

Case summary
The class action complaint charged that Prudential Insurance, through its PruCare policy, had promised to provide insurance benefits for medical care that were consistent with “prevailing [medical] opinion.”  Rather than providing such benefits, however, PruCare relied on guidelines created by Milliman & Robertson (M & R).  The M&R guidelines allegedly were not based on proper clinical standards and did not reflect the generally accepted standard of care in the medical community.  By relying on these and other guidelines not supported by good medical practice, the insurer denied needed treatment as not “medically necessary.” 

The complaint alleged a variety of legal theories, including breach of contract, breach of fiduciary duty, fraud, and improper interference with contractual relationships.  It also alleged a violation of the New York consumer fraud statutes.

The trial court upheld the principal claims of the complaint against Prudential Insurance’s motion to dismiss.  Prudential Insurance appealed that ruling.  The Appellate Division held that the complaint alleged a valid claim, affirming the trial court.

Litigation Center involvement
The Litigation Center submitted an amicus curiae  brief in the Appellate Division to support the trial court decision.

Black & Decker v. Nord, 538 U.S. 822 (2003)

Also under Employment

Outcome:     Very unfavorable

Issue
The issue in this case was whether the administrator of an employee benefit plan, operating under a conflict of its own interests with the interests of the plan beneficiaries, must give a reason if it is to overrule the medical evaluation of a treating physician.

AMA interest
The AMA believes that employee benefit plans should be administered for the benefit of the employees in the plan. 

Case summary
Kenneth Nord had degenerative disc disease in his back.  As a result, his primary treating physician determined that he was incapable of performing his job duties.  Nord applied for disability benefits under the Black & Decker Disability Plan, which Black & Decker both funded and administered.  Metropolitan Life Insurance Company (MetLife) helped Black & Decker evaluate claims.

Black & Decker initially denied Nord's disability claim, and Nord appealed.  In conjunction with the appeal, MetLife had an independent neurologist review Nord's claims.  The neurologist agreed with the diagnosis of Nord's disease but found that Nord could perform his job, provided that he took pain reduction medication.  After the review, MetLife recommended denial of Nord's claim, and the plan administrator accepted that recommendation.  No reason was given for following the evaluation of the neurologist, rather than that of Nord's treating physician. 

Nord brought suit in the United States District Court for the Central District of California, claiming that the denial of disability benefits violated ERISA §404, which requires that "a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries."  Nord contended that, because the plan administrator was conflicted and, without explanation, disregarded the recommendation of Nord's treating physician, it had violated this statute.  The district court granted summary judgment in favor of the disability plan, holding that it was within its discretion to deny the disability benefits.  Nord appealed to the Ninth Circuit Court of Appeals.

The Ninth Circuit reversed the district court and ordered the disability payments.  The Ninth Circuit noted that Black & Decker was operating under a conflict of interests, in that it was both the funding source and, through its employee, the plan administrator.  Consequently, it said, the administrator must defer to the claimant's treating physician unless it gives "specific, legitimate reasons for doing so that are based on substantial evidence in the record."

Black & Decker appealed to the Supreme Court of the United States, which reversed the Ninth Circuit.  The Court held that neither the ERISA statute nor its regulations required the treating physician rule, as articulated by the Ninth Circuit.  Further, the Court stated that the establishment of such a rule should be within the prerogative of the United States Department of Labor, rather than the courts.

Litigation Center involvement
The Litigation Center filed an amicus curiae brief in the Supreme Court, arguing that under accepted principles of law and of medical practice, the plan administrator should, in this situation, have been required to justify his decision to overrule the treating physician.

United States Supreme Court brief.

Doe v. Blue Cross/Blue Shield of Maryland, Inc., 173 F.Supp.2d 398(D. Md. 2001)

Also under Managed care payments and Payment issues (for patients)

Outcome:  Very Unfavorable

Issue

The issue in this case was whether a health insurance company’s internal guidelines for the determination of “medical necessity” of mental health benefits by a managed care organization were consistent with the insurance policy provisions.

AMA interest

The AMA supports the full and appropriate provision of health care services, including mental/behavioral health care services, and in connection with that, the AMA supports third party payors’ approval of payment for those services, when medically necessary.

Case summary

The plaintiffs, beneficiaries under standard Blue Cross/Blue Shield of Maryland, Inc. (“Maryland Blue”) health insurance policies, sought mental health or substance abuse benefits pursuant to the policy terms.  Maryland Blue denied these claims, contending that the treatment sought was not medically necessary.  The lawsuit alleged that Maryland Blue applied a different definition, in practice, for medical necessity than that set forth in its policies.

The court determined that the plaintiffs lacked standing to maintain their lawsuit, and dismissed the case in its entirety.

Litigation Center involvement

The Litigation Center contributed to the plaintiff’s legal expenses.

New York State Psychiatric Association v. UnitedHealth Group (2nd Cir.)

Also under Medical society advocacy, Patient rights

Issues

The substantive issue in this case is whether beneficiaries of employee benefit health plans received proper payment for mental health and substance abuse benefits from the third part administrator (“TPA”) of several employee benefit health plans. However, the immediate issue of concern to the AMA and the Litigation Center is whether the New York State Psychiatric Association (“NYSPA”) has legal standing as a medical association to represent the interests of its members and its members’ patients in this dispute.

AMA interest

The AMA believes that physicians are to serve as their patients’ advocates. Also, the AMA supports parity of insurance coverages for mental illness and substance abuse.

Case summary

The plaintiffs in this case were beneficiaries of employer-sponsored health insurance plans, two providers of mental health services (one of whom is a psychiatrist), and NYSPA. The defendants were United HealthGroup (“UHG”) and three UHG subsidiaries, all of whom were TPAs of the beneficiaries’ plans. The plaintiffs sought to bring the case as a class action.

The complaint alleged that the defendants had failed to pay proper mental health and substance abuse benefits under the beneficiaries’ plan documents and under various laws, such as the Mental Health Parity and Addiction Equity Act, the New York Parity Act, and the New York prompt pay statute. The suit sought monetary damages and an injunction.

The trial court dismissed the case without reaching the merits. It held that the case was procedurally insufficient, primarily because (according to the court)

  • The beneficiaries’ rights were governed by ERISA, but UHG and its subsidiaries, being TPAs, could not properly be sued under ERISA; and
  • NYSPA lacked standing to sue, partly because the case would require participation of individual NYSPA members (not merely an association representing those members) and partly because the members of NYSPA themselves lacked standing to enforce their patients’ rights to receive benefits.

The plaintiffs appealed to the United States Court of Appeals for the Second Circuit.

Litigation Center involvement

The Litigation Center filed an amicus brief to support the associational standing of NYSPA.

United States Court of Appeals for the Second Circuit brief

North Jersey Brain & Spine Center v. Aetna (3rd Cir.)

Also under Payment issues for physicians

Issue

The issue in this case is whether a patient’s assignment of out-of-network health insurance benefits to the patient’s physician is sufficient to confer legal standing in the physician to sue the patient’s health insurance company for additional benefits under the health insurance policy.

AMA interest

The AMA supports the right of physicians to receive full payment for their services.

Case summary

North Jersey Brain & Spine Center (NJBSC) is a medical practice specializing in neurosurgical procedures and treatment of the brain and spinal cord. It has its patients sign “Insurance Authorization and Assignment” forms. Under these forms, the patient “assigns to [NJBSC] all payment for medical services rendered.”

Three of NJBSC’s patients are covered under the employer-provided Aetna health insurance plans, but NJBSC is outside the Aetna network. After the patients signed the NJBSC assignment forms, NJBSC obtained confirmation from Aetna that Aetna would cover the patients’ surgeries. NJBSC surgeons then operated on these patients. Following the surgeries, NJBSC presented its bills to Aetna, but Aetna refused to pay.

NJBSC sued Aetna in the United States District Court for New Jersey. It asserted the above facts and claimed (a) Aetna had breached its health insurance policies, (b) as a result of such breach, Aetna had violated the Employment Retirement Income and Security Act (ERISA), and (c) by virtue of the assignments, NJBSC was under ERISA, empowered to collect the amounts properly due to the patients.

Aetna moved to dismiss the lawsuit. It asserted that the assignment forms were insufficient to vest standing in NJBSC. According to Aetna, the assignment forms effectively assigned such payments as Aetna may have made for the surgeries, but they did not assign a right in NJBSC to sue Aetna for additional benefits that might be claimed under the health insurance policies.

The district court judge held in favor of Aetna and dismissed the case without prejudice. However, the district court judge acknowledged that there was a difference of opinion among various judges on this issue, and the Third Circuit had not issued a definite ruling.

NJBSC asked the district court to allow NJBSC to petition the Third Circuit for an interlocutory appeal of the sufficiency of the assignments to sue for additional benefits under ERISA. This request was based, primarily, on the admitted differences of opinion among the district court judges. The trial court granted this request and stayed further proceedings until the Third Circuit rules.

The Third Circuit granted the NJBSC request for an interlocutory appeal, and briefing is underway.

Case summary

The Litigation Center, along with the Medical Society of New Jersey filed an amicus brief supporting NJBSC.

United States Court of Appeals for the Third Circuit brief

Pennsylvania Psychiatric Society v. Green Spring Health Services, 280 F.3d 278 (3d Cir. 2002)

Also under Patient rights

Outcome:     Very favorable

Issue

The issue in this case was whether a medical society of psychiatrists could prosecute claims against a managed care organization for systematic mishandling of the claims for mental health benefits of the psychiatrists’ patients.

AMA interest

The AMA supports the full and appropriate provision of health care services, including mental/behavioral health care services, and the AMA supports third party payors’ approval of payment for those services.

Case summary

This case, filed against Green Spring Health Services, Magellan Health Services, and four insurance companies, alleged that the defendants systematically refused to authorize and otherwise restricted the provision of medically necessary behavioral health care, in violation of the Pennsylvania Quality Health Care Accountability and Protection Act, the physicians’ provider contracts, the insurance policies themselves, and various non-contractual obligations.

The trial court dismissed the case, holding that the Pennsylvania Psychiatric Society (“PPS”) lacked associational standing to file the suit and that an arbitration clause in the provider contract precluded a lawsuit in court. PPS appealed.

The United States Court of Appeals for the Third Circuit reversed the dismissal, holding that PPS was potentially entitled, based on the pleadings, to sue on behalf of its members and their patients.  The court remanded the case to the trial court for consideration of the remaining issues, including the arbitration clause.

Litigation Center involvement

The Litigation Center and the Pennsylvania Medical Society filed an amicus brief to support PPS in its appeal.  They also contributed financially to the PPS legal expenses.

United States Court of Appeals for the Third Circuit brief.