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Ninth Circuit:
Insurer’s Failure to Explain Refusal to Pay Defeats Judgment
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals has held that a District Court judge who found that a health-care insurer furnished an inadequate explanation for declining to pay for procedures to repair the hiatal hernias of two insureds, but nonetheless ruled that the company’s decision did not constitute an abuse of discretion, erred procedurally.
A memorandum opinion by a three-judge panel—comprised of Chief Judge Mary H. Murguia and Judges Ryan D. Nelson and Jennifer Sung—so declared in a memorandum opinion filed Tuesday.
It recites that Judge Stephen V. Wilson of the Central District of California had determined that UnitedHealthcare Insurance Company failed to set forth “specific reasons” for denying coverage and neglected to cite “specific plan provisions” that were relied upon, in violation of the Employee Retirement Income Security Act of 1974 (“ERISA”). In light of that finding, the panel said, Wilson “committed legal error by not allowing for augmentation of the administrative record” by the plaintiffs, Jannet Solis and Michael Ortega.
Both were employees of T-Mobile USA, Inc., which sponsored a health-care plan administered by United; both were obese and suffered from acid reflux. Each went to Advanced Weight Loss Surgical Associates for help and each underwent a session at which both a weight loss operation (known as a “gastric sleeve procedure”)—involving removal of about 80% of the stomach—and hiatal-hernia repair were performed.
United denied coverage. The plan generally excluded obesity treatment and, according to the National Council on Compensation Insurance (“NCCI”) manual, “[a]n incidental hernia repair is not medically reasonable and necessary.”
Wilson, in ruling for the insurer on March 14, 2024, said that given his determination that United’s explanations were inadequate, “the question then becomes, in essence, so what?”
He explained:
“…Plaintiffs’ appeals contained the following language: ‘My understanding of your denial of Ms. Solis’ claim is that it is based on the hiatal henna procedure not being medically necessary, distinct, and incidental to another service performed that had an exclusion.’…That argument is directly tailored towards the language of the NCCI Manual. It therefore cannot be said that United’s failure to properly explain its decisions resulted in a failure to put Plaintiffs on proper notice of the underlying rationale for those decisions.”
The judge said that mere “slight procedural irregularities” on the part of United were reflected by the record.
Ninth Circuit’s Opinion
Disagreeing, the panel wrote:
“United’s explanatory deficiencies during the administrative process failed to provide meaningful engagement and denied Plaintiffs the opportunity to address the specific bases for United’s denials. This violated ERISA’s requirements….By contrast, if, for example, United’s denial of the appeal had specified that the administrator determined the hernia repair was incidental to the gastric sleeve procedure because there was only a single incision point, then Plaintiffs could have responded by providing additional evidence of different incision points. But United, by failing to provide such specificity, denied claimants the opportunity to adequately respond during the administrative claims process.”
The judges noted that Wilson “asked during the conclusion of the bench trial for post-trial briefing in part because United’s explanations for denial remained unclear,” remarking:
“The fact that United’s basis for denial was still not clear to the district court at the end of the bench trial further supports the conclusion that Plaintiffs had not received adequate notice of United’s denial explanations.”
Outcome Not Decided
Solis and Ortega sought a direction that, on remand, the District Court be ordered to enter judgment in their favor. The panel rebuffed that request, saying:
“[I]t is possible that United may produce sufficient evidence in response to Plaintiffs’ evidence to show that the denials were not an abuse of discretion. But further factfinding is necessary before the district court can decide….The district court, in its discretion on remand, can retry the case after proper augmentation of the administrative record…or alternatively, the district court may remand the case back to the United plan administrator to reevaluate the merits.”
The case is Solis v. Mobile U.S., Inc. 24-2412.
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