What happened in the Tenth Circuit?
Typically, under ERISA, courts have found that claims administrators have no duty to “explain a decision or to credit medical evidence that conflicts with the report of a treating physician.” Black & Decker Disability Plan v. Nord, 538 U.S. 822, 834, 123 S. Ct. 1965, 155 L. Ed. 2d 1034 (2003). Further, ERISA case law has noted that courts should not impose on administrators a discrete burden of explanation when they credit reliable evidence that conflicts with a treating physician’s evaluation. Id. at 824. Of course, claims administrators cannot arbitrarily refuse to credit a claimant’s reliable evidence, including the opinions of a treating physician. Id. at 834. However, such administrators have not been required to accord special deference to the opinions of treating physicians.
In short, claims administrators have not been required to explain all bases for disagreeing with a member’s treating physicians in their denial letters and did not have to give any extra weight to the opinions of plaintiff’s treating physicians, nor did they have a “discrete burden of explanation.” Id. at 824. Indeed, courts have found that denial letters did not have to give the “reason behind the reason” and that claims administrators did not have to “pin cite” to the record in the letters. Instead, in other circuits, “[a] denial letter is substantially compliant with the regulations when the claimant is provided a statement of reasons that, under the circumstances of the case, permitted a sufficiently clear understanding of the administrator’s position to permit effective review.” Morningred v. Delta Family-Care & Survivorship Plan, 790 F. Supp. 2d 177, 194 (D. Del. 2011), clarified on denial of reconsideration (June 30, 2011), aff’d, 526 F. App’x 217 (3d Cir. 2013).
In some recent cases, the Tenth Circuit has set a new standard for denial letters because in defending litigation, claims administrators would be limited to the information contained in denial letters (and perhaps other information, so long as it was provided to the member during the administrative process). The court was hyper-focused on ERISA’s requirement for a “meaningful dialogue,” noting that administrators must “engage with” opinions of treating providers and discuss medical records/ history. The court has taken this principle a step beyond how it has been traditionally interpreted in the courts by essentially finding that information not shared with the member in the administrative process cannot be relied upon by the claims administrator in litigation. In short, the court found that denial letters must be “comprehensive” to establish a “meaningful dialogue” with the member.
The Tenth Circuit’s position is troublesome for defending medical necessity decisions in litigation. In litigation claims, administrators often rely on clinical notes and medical records outside of the denial letters to defend medical necessity decisions. Under the Tenth Circuit’s view, in order to demonstrate that a payor provided a “full and fair review,” the only information the payor can point to is that which was provided to the member during the administrative process, and in most cases, that will limit payors to what is contained in the denial letter.
While the Tenth Circuit’s position remains somewhat of an outlier as compared to other circuits’ positions, it is not unreasonable to think that the Tenth Circuit’s position could spread to other parts of the country. Cases with sympathetic plaintiffs, like behavioral health cases, provide fertile conditions for courts to depart from traditional principles in order to find in favor of the member. While not all denial letters will be scrutinized, it is a certainty that the plaintiffs’ bar will attempt to get other courts around the nation to adopt the Tenth Circuit’s reasoning, making it worthwhile for claims administrators to consider changes to their denial letters sooner rather than later.
How denial letters can be better
Most denial letters do not meet the Tenth Circuit’s standard. While most of those letters likely do meet ERISA’s “full and fair review” requirements, claims administrators might consider providing more detail to make the appeals process more transparent to members. Claims administrators can meet the twin goals of making the administrative process smoother for members and guard against the litigation pitfall embodied by the Tenth Circuit’s precedent by bolstering their denial letters. Below, we provide some pointers for meeting the Tenth Circuit’s standard, along with some additional thoughts on how to improve denial letters.
If the goal is to meet the Tenth Circuit’s standard, claims administrators should consider the following tips:
- Medical directors could address treating physician opinions in the denial letter. This would include both providers with whom reviewers have peer-to-peer discussions and providers who provide medical necessity letters in support of the patient (which are often attached to appeal letters). Medical directors could provide an explanation for rejecting or not following these opinions.
- Denial letters should include reasoning and references to evidence in the administrative record. Under Tenth Circuit logic, the court does not need to look beyond the denial letter for support for the medical necessity decision. The court held that ERISA requires that denial letters be comprehensive and include requests for additional information, steps claimants may take for further review, and specific reasons for the denial. This practically means that the letter has to refer to evidence in the administrative record that supports the medical necessity decision, rather than a high-level summary of the member’s condition. Here, medical directors might use more detail from the notes they make while analyzing medical necessity and refer to medical records for evidence.
- Consider attaching internal case notes to denial letters. The Tenth Circuit noted that the claims administrator’s internal case notes were more thorough than the vague denial letters that were sent to plaintiffs. While these notes may not satisfy regulators’ and accrediting bodies’ reading level requirements for denial letters, the denial letters themselves could be written in a manner to satisfy these types of requirements and the notes could be attached as evidence. It may be worth reaching out to those that impose reading requirements to get their view on attaching the notes to denial letters. Note, however, that the internal notes themselves must be robust and contain specific references to the medical records and must grapple with treating providers’ opinions. Further, it would be prudent to make denial letters themselves more robust than they currently are, even if attaching the internal notes.
Regardless of whether the goal is to meet the Tenth Circuit’s standard, claims administrators should consider these tips:
- Specifically mention the factors considered from the relevant medical necessity criteria. The Tenth Circuit has found that a denial letter was sufficient where the letter discussed the specific factors from the relevant medical necessity criteria and why the member did not meet those factors. The court has found that letters that summarize the criteria used are sufficient, insofar as they accurately capture the essence of the decision-making points. Further, where the reason for denial is the absence of symptoms that meet those criteria, claims administrators are not required to point to medical records. Thus, mentioning the criteria and explaining what evidence there is (or is not) to support the criteria will help bolster arguments that the denial letter provides a sufficiently “full and fair review.”
- Denial letters should align with internal notes and records. Regardless of whether more information will be included in the denial letter, claims administrators should take care to ensure that statements made in the denial letter are not contradicted by internal notes and records. For example, if the denial letter indicates that the member does not require residential treatment level of care because the member had no self-harm, but the medical records indicate there was some degree of self-harm happening, the courts will reject the reasoning provided in the letter. Statements about the member’s condition should be nuanced to indicate that the intensity of the member’s symptoms (which should be identified specifically) do not require the level of care requested, rather than making absolute statements about the absence of such symptoms, particularly if the records indicate they are present to some degree.
- Care should be given to harmonize decisions across time. Decision-making should make sense across time and facilities. For example, in the case where a member goes directly from one facility to another, if the claims administrator denied coverage for the last part of treatment at the first facility, but allowed coverage for care at the second facility, care must be taken to show why the decision was made to allow coverage.
- Denial letters should address all diagnoses and concerns. Courts have criticized denial letters that do not address a diagnosis, such as when a denial focuses on the member’s depression or other mental health condition, but ignores substance use disorder issues that are raised by the provider. A review of admission reasons and treatment plans can be useful in ensuring that all relevant issues are included in the denial letter rationale.
- Medical directors should be careful to explain why the member’s symptoms do not warrant the level of care being sought and should not appear to be “cherry-picking” the record. Laypersons like judges do not readily understand that mental health care is provided on a continuum of intensity of services and that mental health symptoms vary in terms of their intensity, as well. Judges are often swayed by statements made by members that they suffer from suicidal ideation, without understanding that such symptoms are not always severe enough to be treated in an intensive setting like a residential treatment facility. Medical directors should take care to explain why the member’s current symptoms are not severe enough to warrant the level of care being sought. Further, because mental health symptoms can change significantly over time, it is important to provide context. For example, a member may be admitted because they have intense suicidal ideation, but over time the member may improve to where they only have passive thoughts of suicide. The denial letter should explain the improvement by citing evidence in the record and should not ignore the fact that suicidal symptoms still persist, while including context to explain that one does not have to be free of suicidal thoughts to be treated on an outpatient basis outside of a 24-hour setting.
An additional item to consider
While claims administrators are considering changes to their denial letters, it is worth considering adding information about any contractual limitations on filing a lawsuit. A number of circuits have disallowed arguments in litigation about contractual limitations clauses if the limitation is not included in the denial letter. Providing notice of the limitations period in the denial letter will allow claims administrators to argue that the case should be dismissed in instances where the limitations period was not met, which might help resolve cases at the pleadings stage.
