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Your ERISA Watch – Blue Shield Must Face Lawsuit for Denied Proton Beam Radiation Therapy Claim Despite Paying Provider Directly

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This week’s notable decision, Rois-Mendez v. California Physicians’ Service dba Blue Shield of California, Case No. 20-cv-02227, 2021 WL 242906 (N.D. Cal. Jan. 25, 2021), is a proton therapy cancer treatment denial case with a twist. Rois-Mendez was covered under a fully-insured Blue Shield plan when he was diagnosed with parotid gland cancer. He sought coverage from Blue Shield for proton beam radiation therapy (PBRT) at California Protons Cancer Therapy Center (“California Protons”). Blue Shield denied his prior authorization requests for PBRT in June 2019 and by July 2019 he was forced to start treatment due to the medical exigency of his condition even despite Blue Shield’s denials. He privately paid for his treatment.

Blue Shield denied Alek’s claims on the grounds that Blue Shield considered PBRT to be experimental or investigational for his diagnosis. Months after treatment, on January 23, 2020, he submitted, to Blue Shield, a post-service claim for his out-of-pocket payments. As of the date the operative Complaint was filed, April 3, 2020, Alek had not received any response from Blue Shield regarding his post-service claim.

It was discovered that Blue Shield started paying a certain amount of Alek’s claims directly to the provider (contrary to the operative plan’s terms) after he submitted his post-service claims to Blue Shield and after he filed his complaint in federal court.

Since a portion of these claims were paid to the provider after suit was filed (and months after his treatment was over), Blue Shield moved to dismiss Alek’s complaint for lack of subject matter jurisdiction. Blue Shield argued that Alek lacked standing because Blue Shield had already paid California Protons “for the majority of the PBRT [he] has received,” and has denied the “small number of remaining unpaid claims . . . for reasons other than the investigative/experimental exclusion.”

The Court disagreed with Blue Shield’s argument noting that Blue Shield did not dispute Alek’s allegation or supporting evidence that it initially denied prior authorization for Alek’s PBRT treatment or that it did so on the basis that such treatment is “investigational,” nor did it dispute that it later upheld such decision on appeal. Blue Shield also did not dispute that Alek paid the provider directly for his PBRT treatment and that, as of the date of the operative Complaint, he had not received from Blue Shield a response to his post-service claim nor any reimbursement from Blue Shield for the costs of his PBRT treatment. The Court denied Blue Shield’s motion to dismiss holding that the undisputed facts showed, contrary to Blue Shield’s assertions, that Alek had suffered an injury, specifically, out-of-pocket payments for his PBRT treatment, and that such injury is “fairly traceable” to Blue Shield’s above-described conduct as well as “likely to be redressed by a favorable judicial decision.”

Plaintiff is represented by Timothy J. Rozelle, Lisa Kantor, Stacy Monahan Tucker of Kantor & Kantor, LLP.

This week’s notable decision summary was prepared by Timothy J. Rozelle. Tim is thankful to focus his career on helping patients obtain health benefits for a range of health conditions and more recently has focused specifically on denials of life-saving cancer treatment. If you or a loved one have been denied proton beam therapy radiation claims by an insurance carrier, please give our office a call as we handle these types of claims all over the country. You can also visit our Proton Therapy page at https://www.kantorlaw.net/practice-areas/denials-to-proton-therapy/.

Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.

Attorneys’ Fees

Ninth Circuit

Villasenor v. Cmty. Child Care Council of Santa Clara Cnty., Inc., Case No. 18-cv-06628-BLF, 2021 WL 242906 (N.D. Cal. Jan. 25, 2021) (Judge Beth Labson Freeman). After finding that Plaintiff was entitled to retirement benefits under an ERISA plan, Plaintiff asked the court to determine the amount owed to him. The Plan calculated the amount based on years of employment. Plaintiff argued that the phrase “period of employment with the Company” included his entire employment with the company, while Defendant argued it meant only the employment period since the plan was established. The court held that it included all years of employment. Where the online calculator referenced in the Plan and provided by the employer also included a longevity bonus, the court concluded Plaintiff was entitled to that as well. He was also awarded back benefits and interest at 4.76%, the average rate during the litigation. The court awarded attorneys’ fees as well and held that partner rates of $650 were reasonable and awarded $128,868 in fees.

Breach of Fiduciary Duty

Sixth Circuit

Sec’y of U.S. Dep’t of Labor v. Kavalec, No. 1:19-CV-00968, 2021 WL 243595 (N.D. Ohio Jan. 25, 2021) (Judge Pamela Barker). The Department of Labor alleged Defendants in this case breached their fiduciary duties by authorizing the payment of their own compensation and personal expenses by the Fund, allowing an ineligible person to participate in Fund, and violations of HIPAA and the ACA. The DOL filed a motion for a preliminary injunction to prevent Defendants from paying themselves wages from the Fund. The court granted the injunction, determining it was likely the DOL would succeed on the merits of its breach of fiduciary duty action, that irreparable harm was likely because Defendants kept transferring money from the Fund to themselves, that the injunction would not cause substantial harm to others, and that it was in the public interest. The court was unpersuaded that Kavalec needed to be paid a salary or he would resign, stating that if he chose to resign an independent fiduciary could easily be appointed by the court.

Seventh Circuit

Hensiek v. Bd. of Directors of Casino Queen Holding Co., Inc., No. 3:20-CV-377-DWD, __F.Supp.3d__, 2021 WL 267655 (S.D. Ill. Jan. 25, 2021) (Judge David W. Dugan). Plaintiffs allege Defendants concealed two transactions which served to benefit the selling shareholders who orchestrated the transactions while acting as fiduciaries. Defendants filed a motion to compel arbitration. The court reviewed caselaw regarding ERISA and arbitration provisions and assumes for purposes of the motion that the Seventh Circuit will determine that statutory ERISA claims are arbitrable. Plaintiffs argue that there is no valid agreement for arbitration and even if agreement was reached, it is unenforceable. The court found that the arbitration provision lacks necessary consideration and therefore is not a valid and enforceable contract provision for the purposes of the Federal Arbitration Act. The court denied the motion.

Disability Benefit Claims

Third Circuit

Haggerty v. Metro. Life Ins. Co., No. 2:19-CV-1067, 2021 WL 243037 (W.D. Pa. Jan. 25, 2021) (Judge William S. Stickman IV). In this dispute over long-term disability benefits, the court granted MetLife’s Motion for Summary Judgment and denied Plaintiff’s Motion for Summary Judgment as moot. After careful review of the Plan and its provisions the record establishes the futility of a remand because it is clear from the terms and interpretation of the Plan that Haggerty is not entitled to the payment of long-term disability benefits. He never applied for those benefits, and any application in the future would be untimely. The original deadline to file a claim for payment of long-term disability benefits was on February 14, 2017. Because no claim was ever submitted, to comply with the Certificate, Haggerty is required to show that it was not reasonably possible to comply with the deadline, and once it became reasonably possible to comply, he subsequently gave notice and Proof as soon as he reasonably could have. As Haggerty has withdrawn his breach of fiduciary duty claim under § 1132(a)(3), and he does not otherwise address his continued failure to apply, any application made for the payment of long-term disability benefits would be untimely according to the express terms of the Certificate. Therefore, the court holds that an equitable remand for the processing of an application for long-term disability benefits would be futile.

Eleventh Circuit

Wright v. Reliance Standard Life Insurance Company, No. 19-14643, __F.App’x__, 2021 WL 303428 (11th Cir. Jan. 29, 2021) (Before Martin, Newsom, and Branch, Circuit Judges). On August 7, 2017, Wright stopped working. She brought claims for benefits under the long-term disability policy and for a waiver of premiums under the life-insurance policy. After she stopped working, Wright sought medical care multiple times per month for four months. The medical reports arising from those months presented a mixed picture of health. On the one hand, Wright complained of pain and fatigue and was diagnosed with a constellation of health problems, including fibromyalgia, dysautonomia, and Postural Orthostatic Tachycardia syndrome. On the other hand, repeated physical exams found her to exhibit normal strength, range of motion, and neurological and psychological condition. Defendant denied Plaintiff’s claims because it determined that her evidence was insufficient to establish disability. Reliance did not arbitrarily and capriciously deny either claim. Although Wright’s own preferred doctors asserted that she was unable to work, they repeatedly noted that her gait, range of motion, strength, and many other physical conditions were normal during that period. She complained of a wide range of symptoms and ailments, but doctors noted that she was exercising and seemed to think they could prescribe her even more rigorous exercise programs. And while some doctors said that she was totally disabled, others said she was able to work. The decision was affirmed on appeal because it was not arbitrary and capricious.

ERISA Preemption

Fifth Circuit

ACS Primary Care Physicians Sw., P.A. v. UnitedHealthcare Ins. Co., No. 4:20-CV-01282, __ F.Supp.3d __, 2021 WL 235177 (S.D. Tex. Jan. 22, 2021) (Judge Andrew S. Hanen). Plaintiffs are emergency care physician groups in Texas, and Defendants are health care insurance companies. Unlike some other physicians, emergency care providers are obligated by law to serve all those who require emergent care. As a result of this duty, Plaintiffs are protected by Texas laws that require health care insurers to compensate nonpreferred and non-network emergency medical providers at usual and customary rates. Among many disputes was whether the statutes requiring payment at usual and customary rates were preempted by ERISA. The court held they were not. It explained the emergency care statutes before it are analogous to the Arkansas law considered in Rutledge v. Pharm. Care Mgmt. Ass’n, –– U.S. ––, 141 S. Ct. 474, –– L.Ed.2d –– (2020). In fact, it found them to be less intrusive than the Arkansas law, because they required only that an HMO, EPO, or PPO issuer reimburse at a “usual and customary” rate. Unlike the Arkansas law, the emergency care statutes did not provide for an appeals procedure or enable emergency care physicians to decline to treat the patient. The court could find no legally meaningful distinction, for purposes of express ERISA preemption, between an Arkansas law that regulated the rate at which PBMs reimburse pharmacies, and the Texas emergency care statutes, which regulate the rate at which insurers and insurance plan administrators reimburse emergency care physicians. In terms of “impermissible connection,” the statutes were alike because neither the Arkansas law nor the Texas emergency care statutes imposed a “scheme of substantive coverage.” As stated above, the emergency care statutes merely imposed a rate regulation on insurers and insurance plan issuers. Likewise, none of the statutes “refers” to ERISA because each statute encompassed non-ERISA plans. Nothing in the emergency care statutes placed requirements on an ERISA plan as opposed to a Medicaid, Medicare, military, marketplace or other plan. In other words, the emergency care statutes, like the Arkansas law, applied to insurance plans and issuers regardless of whether they are tethered to an ERISA plan. Thus, there was no ERISA preemption.

Medical Benefit Claims

Ninth Circuit

Rois-Mendez v. California Physicians’ Service dba Blue Shield of California, Case No. 20-cv-02227, 2021 WL 242906 (N.D. Cal. Jan. 25, 2021) (Judge Maxine M. Chesney). See Notable Decision summary.

Caldwell v. UnitedHealthcare Ins. Co., et al., Case No. 19-02861 WHA, 2021 WL 275467 (N.D. Cal. Jan. 27, 2021) (Judge William Alsup). Before the Court was United health plan administrators’ motion for summary judgment on all claims brought by a class of medical insurance plan beneficiaries seeking coverage for liposuction to treat lipedema. Caldwell sought treatment of her lipolymphedema, the late-stage form of lipedema, a chronic progressive condition causing the abnormal accumulation of fat deposits in the trunk and appendages that can possibly become painful, immobilizing, and lead to other health consequences. Since 2017, Caldwell sought to treat her lipolymphedema with liposuction, a surgical procedure which uses suction to remove fatty tissue from the body. Caldwell requested that United approve coverage for liposuction and was twice denied on the basis that her request fell under United’s “unproven” exclusion. Caldwell appealed both denials to United’s first level of internal appeals and United upheld both its 2017 and 2019 denials. On summary judgment, Judge Alsup expressed displeasure with United’s positions claiming that United was “cherry-picking” facts “playing cute and hiding in the weeds.” Alsup criticized United’s failure to provide an administrative record to the court and cited ambiguities in its administrative appeal process. The Caldwell class was certified encompassing individuals who were denied liposuction for lipedema as unproven between the start of 2015 through 2019. Judge Alsup denied United’s motion for summary judgment finding that United had the burden of proof to prove that liposuction was an unproven treatment for lipedema and failed to do so.

Tenth Circuit

Mark C., et al. v. United Healthcare Ins. Co., et al., No. 2:20-CV-00012-DBB, 2021 WL 288578 (D. Utah Jan. 28, 2021) (Judge David B. Barlow). Plaintiff claims Defendants improperly denied benefits for mental health treatment under ERISA and the Parity Act. Defendants moved to dismiss the Parity Act claim. The court found that Plaintiffs made only conclusory allegations about any medical or surgical analogue. The court found that without facts about actual, as-applied, coverage for analogous medical or surgical treatment, there can be no comparison and thus no claim. The court granted the motion to dismiss without prejudice.

Pension Benefit Claims

Sixth Circuit

Pynkala v. Blake Enterprises, LLC, No. 2:19-cv-02366, 2021 WL 261695 (W.D. Tenn. Jan. 26, 2021) (Judge Samuel H. Mays, Jr.). In 2008, Plaintiff became a covered participant in Defendants’ unfunded retirement plan. The Plan provided for early retirement benefits, with the written consent of the company, at age 62 and retirement benefits at age 65. In 2018, the company terminated the retirement plan and Plaintiff was not yet 62 years of age. Plaintiff filed a claim for benefits, exhausted her administrative remedies and filed this lawsuit. The court determined that it did not need to reach a decision as to the standard of review, because even under a de novo standard of review, Plaintiff is not entitled to retirement benefits. The court explained that because the Plan was unfunded, Plaintiff had not accrued any benefits and there was no language in the Plan, nor the statutory requirements of ERISA that would permit Plaintiff to receive benefits before the age of 62.

Pleading Issues & Procedure

Sixth Circuit

Hawkins v. Cintas Corp., No. 1:19-cv-1062, 2021 WL 274341 (S.D. Ohio Jan. 27, 2021) (Judge Timothy S. Black). The court denied a motion to compel arbitration and stay proceedings in a putative class action brought by plan participants against their former employer for alleged breaches of fiduciary duty with respect to the investment options in their defined contribution pension plan. The court held that because the participants asserted claims under ERISA Sections 502(a)(2) and 409 for relief to the pension plan, and their claims were based on alleged mismanagement to the entire plan, not to specific individual accounts, the arbitration provisions in the participants’ individual employment contracts could not bind the plan.

Ninth Circuit

Anderson v. Intel Corp. Inv. Policy Comm., No. 19-CV-04618-LHK, 2021 WL 229235 (N.D. Cal. Jan. 21, 2021) (Judge Lucy H. Koh). Plaintiffs brought this class action under ERISA against Intel’s retirement plan administrators, alleging that they breached their fiduciary duties under ERISA by investing in “non-traditional investments” such as private equity, hedge funds, and commodities, which resulted in the plan incurring higher fees and performing worse than comparable funds. Plaintiffs also alleged that Defendants’ investments were self-interested because Defendants invested in private equity funds that in turn helped to fund Intel’s venture capital division. This case was stayed while the Supreme Court ruled that a related case, Sulyma v. Intel, was not barred by the relevant statute of limitations. After that case was decided, the two cases were consolidated, and Defendants filed a motion to dismiss. The court granted Defendants’ motion. The court found that Plaintiffs had not alleged meaningful benchmarks or comparisons in support of their allegations that the Intel funds performed poorly and had excessive fees. The court further found that Defendants’ alleged deviation from industry allocation standards, and their investments in private equity and hedge funds, were insufficient on their own to establish a breach of fiduciary duty. The court also rejected Plaintiffs’ duty of loyalty allegations, finding their conflict of interest and self-dealing arguments to be conclusory and “devoid of even minimal factual support.”

Unite Here Retirement Fund, et al. v. City of San Jose, et al., No. 5:20-CV-06069-EJD, 2021 WL 292533 (N.D. Cal. Jan. 28, 2021) (Judge Edward J. Davila). The court denied a hotel manager’s motion to dismiss a union’s withdrawal liability suit over $1.1 million in unpaid retirement funds. “This Court sees no reason to depart from the holding in Irigaray Dairy and from the numerous circuit and district courts that support the proposition that, under ERISA, a party’s status as an employer, including for the purposes of withdrawal liability, is appropriate for judicial review, not arbitration.”

Retaliation Claims

Seventh Circuit

Clapper v. United Airlines, Inc., No. 20 CV 2635, 2021 WL 260232 (N.D. Ill. Jan. 26, 2021) (Judge Manish S. Shah). The court denied dismissal of Plaintiff’s Section 510 claim where Plaintiff alleged that she was terminated, at least in part, to prevent her from relying on United-provided benefits. Here, Plaintiff, a 67-year-old flight attendant, took home (and never used) an iPad that a passenger left behind and allegedly forgot to return it as she was dealing with health issues. “Where Clapper specifically asked United not to take any action that could interfere with her medical leave, it’s a reasonable inference that United’s desire to prevent Clapper from relying on United-provided benefits was at least a motivating factor in the decision. The way United fired her also supports an inference of intent—Clapper alleges United did so quickly, without allowing her to access the employee grievance process or giving her another chance to explain herself. Finally, Clapper alleges that United intended to phase out the Rush employee benefits program. Given that United knew about Clapper’s upcoming surgery, declined her request to postpone any action until after her surgery, fired her before the surgery in contravention of its normal procedures, and intended to phase out the benefits program she was relying on, Clapper has adequately alleged that United intended to interfere with her benefits.” Clapper’s request for reinstatement as a flight attendant is equitable relief. The court also found that equitable relief under ERISA would not be impermissibly duplicative of the equitable relief Clapper could obtain under Title VII, the ADA, and the ADEA.

Your ERISA Watch is made possible by the collaboration of the following Kantor & Kantor attorneys:  Brent Dorian Brehm, Sarah DemersElizabeth GreenAndrew Kantor, Anna Martin, Michelle RobertsTim Rozelle, Peter Sessions, Stacy Tucker, and Zoya Yarnykh.

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