ERISA-Ninth Circuit Upholds A Plan’s Denial Of Health Benefits Despite Procedural Errors In Reviewing the Benefit Claim

In Lafferty v. Providence Health Plans, No. 10-35688 (9th Cir. 2011) (unpublished memorandum), the plaintiff, Joan Lafferty (“Lafferty”), had filed suit under ERISA against the defendant, Providence Health Plans (“Providence”), after Providence refused to pay for the treatment of Lafferty’s rare, malignant brain tumor. Lafferty had requested preauthorization for Interarterial chemotherapy with blood brain barrier disruption (“BBBD”). Providence denied coverage because the sought BBBD treatment was “experimental/investigational.” The district court granted judgment in favor of Lafferty, and Providence appealed. The Ninth Circuit Court of Appeals (the “Court”) reversed the district court’s judgment.

In analyzing the case, the Court found that the district court had erred by reviewing de novo Providence’s decision to deny the coverage. A deferential review was required (presumably, the plan’s decision maker had authority which entitled it to a deferential review). The exception to deferential review for procedural irregularities by the plan administrator does not apply in this case. The Court noted some troubling aspects to Providence’s review of Lafferty’s initial complaint and subsequent appeals. However, those irregularities did not amount to the “wholesale and flagrant disregard of ERISA procedural requirements” that the Ninth Circuit has identified as warranting de novo review.

Applying the deferential review, the Court found that Providence did not abuse its discretion in refusing to pay for Lafferty’s treatment. The Court said that-when deferential review applies- it may not disturb a plan administrator’s decision if it is reasonable. In testing for reasonableness, a court must consider whether the decision was: (1) illogical, (2) implausible, or (3) without support in inferences that may be drawn from the facts in the record. A higher degree of skepticism of the plan administrator’s decision is appropriate when the administrator has a conflict of interest. In this case, the Court did not find Providence’s decision to be implausible or illogical. Providence’s conclusion that Lafferty’s treatment was experimental, and therefore not covered, is supported by facts in the record. As such, the Court concluded that, even factoring in the irregularities in Providence’s review process, its decision to deny coverage was not unreasonable, and the district court’s judgment must be reversed.

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