Managed Care Outlook 2025

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As we reported in the last Managed Care Outlook, 2023 was a rough year for the managed care industry with respect to denial letters – and 2024 was no better. 2025 is likely going to continue the trend now that the Fifth Circuit has taken the Tenth Circuit’s hard line on denial letters, and with the Ninth Circuit potentially following suit. If you haven’t updated your denial letters with additional details as outlined below, now’s the time.

Why 2024 was no better than 2023

As we reported at the end of 2023, the Tenth Circuit opinion in D.K. v. UBH, 67 F.4th 1224, 1240 (10th Cir. 2023) set the bar for denial letters by requiring them to provide detailed information about the reasons for denials of requests for coverage, including responses to issues raised by providers – and even non-treating “experts.” Additional Tenth Circuit opinions followed this approach, burdening managed care organizations and health plans in defending lawsuits in that forum.

The D.K. line of reasoning spread beyond the Tenth Circuit in 2024. District courts around the country issued numerous opinions on denial letters, with some toeing the D.K. line in finding them insufficient. See, e.g., Demarinis v. Anthem Ins. Co., 2024 U.S. Dist. LEXIS 66106, at *62 (M.D. Pa. Apr. 10, 2024) (finding the lack of explanations in the denial letters “troubling”).

In late September, the Fifth Circuit, in Dwyer v. United Healthcare Insurance Company, 2024 U.S. App. LEXIS 23866 (5th Cir. Sep. 19, 2024), joined the Tenth Circuit in finding that denial letters must contain detailed information, such as references to medical records, to satisfy ERISA’s “meaningful dialogue” standard. In coming to this conclusion, the Fifth Circuit engaged in similar reasoning found in D.K. in analyzing the denial letter, which stated:

You were admitted for treatment of anorexia nervosa, restricting type. After talking with your doctor, it is reported that you have made progress and no longer need the type of care and services provided in this setting. You are better. You have achieved 100% of your ideal body weight. You are eating all of your meals. You are not trying to harm yourself. You are not trying to harm others. Your primary care physician is involved in your treatment. Your care could continue at the intensive outpatient level of care.

Dwyer, 2024 U.S. App. LEXIS 23866, at *12. The Fifth Circuit criticized phrases from the letter like “[y]ou are better” as they had “no medical significance,” calling instead for “particularized evaluation” of a member’s medical needs and alternative treatments to meet those needs. Id. at *16. The court further noted that claims administrators must “weigh the evidence” provided by plaintiffs in their appeals, including responding to “potential counterevidence from medical opinions” provided by treating providers. Id. at *21. The court did not consider that managed care organizations are hamstrung by accreditation requirements that limit the language level the industry can use in drafting these letters.

Key takeaways
  • Tenth Circuit’s D.K. v. UBH decision set a new standard requiring detailed denial letters
  • Other courts follow suit, with Fifth Circuit (and potentially the Ninth Circuit) adopting similar standards
  • Trend of overruling denials based on inadequate denial letters broadens
  • Substantiate denial letters by referencing medical records, providing detailed explanations and ensuring consistent rationales over time in response to appeals
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