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.
In what could portend bad news for 2025, a Ninth Circuit panel recently expressed concern during oral argument on appeal about a purported vague denial letter that the court surmised might fail to meet ERISA’s meaningful dialogue requirements. A panel member asserted that the denial letter seemed to fail to elucidate what information the family needed to provide to perfect their appeal and questioned whether they had received a “meaningful dialogue” as required by ERISA.
Other Ninth Circuit district courts have raised similar concerns. See, e.g., Oksana B. v. Premera Blue Cross, 2023 U.S. Dist. LEXIS 224983, at *26 (W.D. Wash. Dec. 18, 2023) (finding the claims administrator failed to provide sufficient detail in its denial letter as to why coverage for wilderness therapy treatment was not available under the plan); Dan C. v. Anthem Blue Cross Life & Health Ins. Co., 2024 U.S. Dist. LEXIS 64811, at *19 (C.D. Cal. Apr. 9, 2024) (finding the denial letter did not engage with the “voluminous medical record” or treating physicians’ positions).
Courts do remain split on the issue, however. Some courts have held denial letters to pre-D.K. standards, focusing on whether the letters provided sufficient information for an appeal without requiring the extensive detail mandated by the Tenth Circuit. For example, in Carl A.B. v. Blue Cross Blue Shield of N.C., 2024 U.S. Dist. LEXIS 148193, at *32 (M.D.N.C. Aug. 19, 2024), the court found that the denial letter statements, which notably were not unlike those in D.K. and Dwyer, had “substantial support” in the administrative record and did not violate ERISA. See also R.R. v. Blue Shield of Cal., No. 3:22-cv-07707-JD, 2024 U.S. Dist. LEXIS 141364, at *15 (N.D. Cal. Aug. 8, 2024) (similar); W.H. v. Allegiance Ben. Plan Mgmt., No. CV 22-166-M-DWM, 2024 U.S. Dist. LEXIS 99272 (D. Mont. June 4, 2024) (similar); E.L. v. Hartford Life & Accident Ins. Co., 2024 U.S. Dist. LEXIS 55546, at *78 (N.D. Cal. Mar. 27, 2024) (noting that the denial letter “reflected in plain language the reasons for its denial”); Burris v. First Reliance Standard Life Ins. Co., 2024 U.S. Dist. LEXIS 24029, at *23-24 (D. Nev. Feb. 9, 2024) (similar).
In short, the D.K. rationale is spreading, albeit slowly, across the country, so if you haven’t already reevaluated your denial letters, make it your New Year’s resolution for 2025.
Possible de novo review exception
Not all of 2024’s developments were negative. A district court in Utah found that the D.K. approach does not apply in de novo review cases. The court found that “[e]ven assuming [the claims administrator] failed to provide a ‘full and fair review,’ neither ERISA’s implementing regulations nor binding precedent state that the court is required to simply order benefits, no matter the record evidence, when a court is reviewing a benefits decision de novo. Instead, the court is required to determine whether a plaintiff’s claim for benefits is supported by a preponderance of the evidence based on the district court’s independent review of the administrator’s decision.” See S.M. v. United Healthcare Oxford, No. 2:22-cv-00262-DBB-JCB, 2024 U.S. Dist. LEXIS 158498, at *39 (D. Utah July 26, 2024)The court then used the record – even though it was not referenced in the denial letter – to make its determination instead of focusing only on the denial letters, which it still found “inadequate” for a full and fair review. We hope to see other courts adopt this reasoning in de novo review cases in 2025, containing the impact of D.K. to the arbitrary and capricious standard of review.
What should you do?
If you haven’t already improved your denial letters, now is the time. Most denial letters we’ve seen do not meet D.K.’s standard. Here is a brief summary of possible actions to improve your letters in 2025. For more detail, please refer to our 2024 Managed Care Outlook.
- Add an explanation for rejecting the reasons given by providers in medical necessity letters or peer-to-peer reviews.
- Reference medical records to support the denial.
- Attach comprehensive internal case notes and the administrative record to the denial letter, for reference in litigation.
- Take an analytical approach by addressing each decision point in the medical necessity criteria in the letter and explaining whether the member met the criteria.
- Ensure consistency across denial letters and appeals, explaining any changes in decisions made over time, and consider offering members additional appeal rights.