Wednesday, January 28, 2026
Page 3
Dissenter Accuses Majority of Ignoring Insurer’s Conflict
Ninth Circuit Judge Says Panel Opinion Gave Lip Service to Skepticism Required as to Health Provider’s Decision to Deny Benefits Where Treating Physicians, Parents of Patient Provided Contrary Evidence
By Kimber Cooley, associate editor
The Ninth U.S. Circuit Court of Appeals held yesterday that the heightened scrutiny called for by case law as to a health insurance company’s decision to deny a claim all but vanished where the insurer retained an independent physician who opined that the treatment was not medically necessary and the plaintiffs failed to adequately raise the issue, drawing a dissent that characterized the majority’s approach as applying “no skepticism at all.”
Senior Circuit Judge Carlos T. Bea and Circuit Judge Danielle J. Forrest signed yesterday’s memorandum decision affirming an order granting summary judgment to California Physicians’ Service, operating as Blue Shield of California, as to claims by a Contra Costa County resident that the defendant failed to provide coverage for his son’s inpatient mental health care in violation of the terms of his Employee Retirement Income Security Act (“ERISA”) plan.
Bea and Forrest said that “[t]he deference we grant Blue Shield” to construe the provisions of a plan for which it is given express interpretative authority “is ‘tempered by skepticism,’…because Blue Shield, which acts as both the administrator that decides claims and the insurer that pays benefits, has a conflict of interest.”
Independent Physician Review
However, they opined:
“Blue Shield…retained an independent physician to review [the] appeal, and she concluded that [the minor’s] stay at [the facility] was not medically necessary….This ‘neutral, independent review process,’…combined with Plaintiffs’ failure to meet their burden of production, makes Blue Shield’s conflict ‘less important’ to our analysis, ‘perhaps to the vanishing point.’ ”
Applying the highly deferential abuse-of-discretion test, they concluded that “Blue Shield’s determination that E.R. did not meet the criteria for medical necessity…was not ‘illogical or implausible.’ ”
Dissenting, Senior Circuit Judge Richard A. Paez wrote:
“I agree with the majority’s decision to apply a ‘tempered’ abuse of discretion standard of review. The majority, however, misapplies [case law] by ignoring Blue Shield’s failure to credit Plaintiffs’ reliable evidence and failure to engage in a meaningful dialogue in the internal appeals process. These factors do not ‘vanish[,]’…they warrant heightened skepticism of Blue Shield’s decision to deny Plaintiffs’ request for benefits.”
ERISA Plan
Seeking reimbursement for the inpatient care was a man identified only as “R.R.” and his minor son, referred to in the proceedings as “E.R.” According to the plaintiffs, Blue Shield was the insurer and claims administrator of the father’s ERISA plan for which E.R. was a beneficiary during a period in which the minor sought mental healthcare at an inpatient facility, Innercept LLC, between February 2020 and May 2021.
They filed a complaint in the U.S. District Court of Utah in 2022 after Blue Shield denied their request for coverage, but the case was transferred to the Northern District of California by joint stipulation that August. In the operative pleading, they asserted a claim under 29 U.S.C. §1132(a)(1)(B), which provides that “[a] civil action” may be brought “by a participant or beneficiary” to “recover benefits due to him under the terms of his plan.”
R.R. and E.R. alleged that “the Plan failed to provide coverage for E.R.’s treatment in violation of the express terms of the Plan, which promise benefits to employees and their dependents for medically necessary treatment of mental health…disorders” and that “it was the opinion of all of E.R.’s treating professionals that he required the level of care he was receiving at Innercept.”
Psychiatrist Recommendation
The pleading cited, among other evidence, a March 30, 2020 letter signed by Dr. Kirk Hartman, a board-certified psychiatrist, who said that he “strongly recommend[ed]” residential care for E.R., who suffers from a schizoaffective disorder and other maladies, after aggressive behavior toward his family continued despite multiple attempts at less intensive interventions.
District Court Judge James Donato of the Northern District of California granted summary judgment to Blue Shield on Aug. 8, 2024, saying:
“The Court is sympathetic to the challenges E.R. and his family have faced. The record before the Court reflects a years-long struggle to obtain effective treatment for E.R.’s condition….But…the Court cannot say that Blue Shield abused its discretion in denying coverage of E.R.’s treatment at Innercept.”
Donato also ordered the plaintiffs to file “a statement identifying themselves, or a request to proceed pseudonymously that complies with the governing standards.” They complied, filing a motion saying that “E.R. is a young adult whose records of struggling with severe mental health struggles are highly personal.”
No ruling has yet been rendered on that request.
Not Enough
Quoting from the court’s 2009 decision in Montour v. Hartford Life Accident Insurance Company, Paez wrote:
“Where ‘the same entity that funds an ERISA benefits plan also evaluates claims,’ we have held that ‘[s]imply construing the terms of the underlying plan and scanning the record for medical evidence supporting the plan administrator’s decision is not enough[.]’…I address two areas below where the majority’s analysis is ‘not enough.’”
Saying that the majority’s conclusion that Blue Shield’s conflict was “less important” because the defendant “retained an independent physician to review E.R.’s appeal” was in error, he opined that “this overlooks” the rule from jurisprudence that a court may weigh the significance of a conflict more heavily if the administrator fails to give credit to a claimant’s evidence. He explained:
“[T]here are no indicia that the opinions of E.R.’s treating physicians, as provided in four letters, are anything but reliable. Rather, these letters show that four highly qualified medical professionals with decades of experience, who had treated E.R. for years, agreed that residential treatment was medically necessary for him….The majority does not address the reliability of Plaintiffs’ evidence at all when determining the level of skepticism warranted in this case. Blue Shield’s failure to credit this evidence demonstrates that its inherent conflict should be weighed more heavily in determining whether the denial of benefits was an abuse of discretion.”
Meaningful Dialogue
Acknowledging that he agreed that “Blue Shield did not commit procedural violations so ‘wholesale and flagrant’ as to warrant de novo review,” he argued that “even less flagrant…irregularities,” such as the company’s failure to engage in a meaningful dialogue, are still to be weighed in deciding whether a decision was an abuse of discretion.
Applying that principle, he asserted:
“Blue Shield’s denial letters do not constitute a ‘meaningful dialogue’ because the meaningful communication is flowing in only one direction: from Plaintiffs to Blue Shield. Worse, Blue Shield’s failure to consider the evidence of E.R.’s failed treatment at lower levels of care raises questions as to its appropriate application of the [governing medical] criteria, which are supposed to consider whether the treatment is ‘not feasible at [a] lower level of care’….This irregularity warrants additional skepticism of Blue Shield’s decision.”
He declared:
“[U]nder a less-deferential standard, I would hold that Blue Shield abused its discretion. At minimum, I would remand to the district court to reconsider Plaintiffs’ claim for benefits under a less-deferential standard of review.”
The case is R.R. v. California Physicians’ Service, 24-6337.
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