ERISA-First Circuit Holds That An Administrator’s Claim Denial Is Not Entitled To A Deferential Review When The Plan Does Not Grant Discretionary Authority To The Adminstrator

In Stephanie C. v. Blue Cross Blue Shield of Massachusetts HMO Blue, Inc., No. 15-1531 (1st Cir. Feb. 17, 2016), Stephanie C. (“Stephanie”), individually and on behalf of her minor son M.G., challenges a decision of the claims administrator, Blue Cross Blue Shield of Massachusetts HMO Blue, Inc. (“BCBS”), partially denying her claim for benefits. The denial related to some charges incurred during M.G.’s stay at a residential/educational mental healthcare facility. The district court upheld the partial denial.

In this appeal, Stephanie asserts that the district court erred in failing to find that BCBS committed procedural violations (such as failing to engage in dialogue with her, to answer her questions, and to take into account the materials that she submitted); that the court appraised her benefits-denial claim through the wrong lens; and that the court, in all events, erroneously upheld the partial denial of benefits.

Upon reviewing the case, the Court of Appeals for the First Circuit (the “Court”) rejected Stephanie’s claims that BCBS committed procedural violations. It then said that from that point forward, however, the case raises important questions concerning what a claims administrator must do to reserve discretion in the handling of benefits claims. Specifically, in order for the decision of the claims administrator-here BCBS- to be given discretion by the courts, the plan must reflect a clear grant of discretionary authority to the claims administrator to determine eligibility for benefits. Here, in the Court’s view, the plan did not do so, stating only that BCBS “decides which health care services and supplies that you receive (or you are planning to receive) are medically necessary and appropriate for coverage.”

However, believing the language was sufficient to grant discretion, the district court reviewed BCBS’s partial denial of the benefits claim by allowing discretion to BCBS, instead of reviewing the decision de novo, and thus employed the wrong standard of review when considering the partial denial of benefits. Accordingly, the Court vacated the district court’s judgment and remanded the case for further proceedings consistent with this opinion.

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