In Eugene v. Horizon Blue Cross Blue Shield of New Jersey, No. 10-4225 (10th Cir. 2011), the plaintiff, Eugene S. (“Eugene”), was appealing the district court’s grant of summary judgment to the defendant, Horizon Blue Cross Blue Shield of New Jersey (“Horizon”). In this case, Eugene had sought health care coverage for his son’s residential treatment costs from his employer’s benefits insurer, Horizon, under a plan subject to ERISA. Horizon’s delegated third-party plan administrator, Magellan Behavioral Health of New Jersey, LLC (“Magellan”), denied the claim for health care coverage of these costs for periods after November 2, 2006. Horizon-as plan administrator as well as insurer-adopted this decision. This suit ensued under ERISA for the denied coverage. The questions for the Tenth Circuit Court of Appeals (the “Court”): Is Horizon’s decision to deny Eugene’s claim for health care coverage entitled to an “arbitrary and capricious” review, and if so, does the decision pass this review?
In analyzing the case, the Court said that when, as here, a plan is subject to ERISA, a decision to deny coverage is to be reviewed under a de novo standard, unless the plan gives the plan administrator discretionary authority to determine eligibility for benefits or to construe the terms of the plan. In this case, the plan’s summary plan description, or “SPD”, is the governing plan document. This obtains because the SPD proclaims itself to be a part of the Plan. Nothing in the recent Supreme Court Amara case changes this result. The Court found that, in several instances, the SPD’s language was sufficient to grant Horizon discretion in reviewing benefits claims. Therefore, Horizon ‘s decision to deny Eugene’s claim for health care coverage is entitled to an arbitrary and capricious review. The Court noted that the deference to be accorded Horizon’s decision would not be reduced due to a conflict of interest under the Supreme Court’s Glenn case. The conflict could obtain here because Horizon both pays benefits and determines benefit claims. However, the Court found that Horizon’s delegation of authority to review claims to Magellan-a third party administrator-mitigates any conflict of interest.
As to Horizon’s decision to deny Eugene the coverage he claimed for his son, the Court said that Horizon’s decision will not be treated as arbitrary and capricious, and will therefore be upheld, if it is reasonable and made in good faith, and supported by substantial evidence. Here, there was no reported information that Eugene’s son could not care for himself due to a psychiatric disorder, nor that he required round-the-clock supervision to develop basic living skills. The information showed that Eugene’s son went home on a pass and did well with his parents. Thus, the information supports the conclusion that the son’s remaining in residential treatment was not necessary and therefore was not covered by the plan. Further, Horizon’s decision was not arbitrary and capricious, merely because it failed to defer to the son’s treating physicians. A court is not required to provide such deference. The Court concluded that Horizon’s decision was not arbitrary and capricious, so that its decision to deny coverage must be upheld. As such, the Court affirmed the district court’s summary judgment in Horizon’s favor.