Alexandra H. v. Oxford Health Ins. Inc.

833 F.3d 1299

Alexandra H., Plaintiff–Appellant,

v.Oxford Health Insurance Inc. Freedom Access Plan, Defendant,Oxford Health Insurance, Inc., Defendant–Appellee.

No. 15-11513

United States Court of Appeals, Eleventh Circuit.

August 16, 2016

Lisa S. Kantor, Peter S. Sessions, Kantor & Kantor, LLP, Northridge, CA, Alicia Paulino–Grisham, Maggie M. Walsh–Smith, Disability Insurance Law Group, Hollywood, FL, for Plaintiff–Appellant.

Michael H. Bernstein, Sedgwick Detert Moran & Arnold LLP, New York, NY, Jeannine Cline Jacobson, Kenneth Eugene White, Sedgwick, LLP, Fort Lauderdale, FL, John T. Seybert, Sedgwick, LLP, New York, NY, for Defendant–Appellee.

Before HULL, JULIE CARNES, and CLEVENGER,^* Circuit Judges.

CLEVENGER, Circuit Judge:

Plaintiff Alexandra H. appeals from the district court's grant of Defendant Oxford Health Insurance, Inc.'s motion for summary judgment on Alexandra's claim under the Employee Retirement Income Security Act of 1974, 259 U.S.C. § 1001 (“ERISA”). Alexandra sought benefits for continued partial hospital treatment for her anorexia, which were denied on the ground that the level of care she sought was not medically necessary. After her claim was initially denied through internal reviews by Oxford, she sought and obtained further review through an external process provided by the insurance contract between her employer and Oxford, of which she is a beneficiary. When the external review proved adverse to her claim, she initiated her ERISA suit in the district court.

Alexandra argues that the district court erred in holding that she is barred from litigating the issue of medical necessity in her ERISA case on the ground that the adverse external review of her medical necessity claim already and finally decided the issue against her. She challenges the district court's decision on several grounds. First, she asserts that the record of the external review should be excluded from the ERISA proceedings. Second, she argues that the contract in suit must be interpreted pursuant to choice of law stated in the contract (New York), and that under New York law, the adverse external review decision is not binding on the medical necessity issue in her ERISA case. And third, she contends that if the record of the external review is properly in the record before the ERISA court, and if the result of the external review is deemed to bar her ERISA remedy, then the external review process is preempted by ERISA, with the effect of the preemption being that she may proceed with her ERISA case in district court as if the external review had not occurred.

Understandably, Oxford maintains that the record of the external review should be before the ERISA court, that the adverse decision of the external review should preclude further litigation of the medical necessity issue in the ERISA case, and that the external review process if thusly enforced in the district court is not preempted by ERISA.

Common in ERISA appeals, the answers to the questions presented can be found by interpreting the contract that creates the relationships of the parties. Sometimes, the interpretation process is simple and direct. In other cases, such as this one, the interpretation process is more complex.

After careful consideration of the parties' briefs, the record in the case, and with the benefit of oral argument presented to the court, we conclude that the district court correctly decided that the record of the external review is properly before the district court in this ERISA case, but erred in holding that the adverse external review decision barred Alexandra from presenting her challenge to the adverse medical necessity determination. Because the external review process does not conflict with ERISA, it is not preempted. Accordingly, we affirm in part, reverse in part and remand for further proceedings.

I. BACKGROUND

While Alexandra was a second grade teacher at St. Ann's School in Brooklyn, New York, she was enrolled in an employee benefits plan that provided healthcare services. The benefits plan was sponsored by her employer and insured by Oxford. Because the plan relates to employee welfare benefits, it is governed by ERISA.

A. Employee Benefits Plan and Appeal Process

Alexandra's benefit plan covers various medical services, including mental health services. The plan specifically covers “diagnosis and treatment of Biologically Based Mental Illnesses for adults and children received on an inpatient, partial hospitalization or outpatient basis.” One of the listed “Biologically Based Mental Illnesses” that the plan covers is “bulimia and anorexia.” The plan does not cover services that Oxford determines are not “Medically Necessary.” The plan defines “Medically Necessary” to mean:

Medically Necessary: Services or supplies as provided by a Hospital, Skilled Nursing Facility, Physician or other provider required to identify or treat your illness or injury and which, as determined by Our [i.e., Oxford's] Medical Director, are:

1. Consistent with the symptoms or diagnosis and treatment of your condition;

2. Appropriate with regard to standards of good medical practice;

3. Not solely for your convenience or that of any provider; and

4. The most appropriate supply or level of service which can safely be provided. For inpatient services, it further means that your condition cannot safely be diagnosed or treated on an outpatient basis.

Unless otherwise indicated in this Certificate, determinations as to Medical Necessity are made by Us [i.e., Oxford], and such determinations are solely within Our [i.e., Oxford's] discretion.

The plan thus grants Oxford the sole discretion to determine internally if a particular kind of healthcare service is medically necessary and therefore covered by the plan. If a plan beneficiary disagrees with an adverse medical necessity determination by Oxford, she has two different review processes available to her. She must first appeal the decision internally, meaning that Oxford itself reviews the initial adverse medical necessity determination. If Oxford decides to uphold the adverse determination, the participant can go through a second appeal. The participant can choose between two second appeal options: 1) a second internal appeal conducted by Oxford, or 2) an external appeal administered by the State of New York. If the participant chooses to do a second internal appeal through Oxford and Oxford upholds the adverse determination for a second time, the participant may then choose to pursue an external review. As mandated by New York Insurance Law § 4914, and as enshrined in Oxford's plan, the external review process shall:

- be conducted only by one or a greater odd number of Clinical Peer Reviewers.

- be accompanied by a notice of Appeal determination which will include the reasons for the determination. Where the FAD [i.e., final adverse determination] is upheld on Appeal, the notice will include the clinical rationale (if any) for the determination.

- be subject to the terms and conditions generally applicable to benefits under your Certificate.

- be binding on Us [i.e., Oxford] and you [i.e., the participant].

- be admissible in any court proceeding.

Further, and as will be explained later, importantly, the plan states that it is governed by the laws of the State of New York.

B. Alexandra H's Benefits Claim

Alexandra has a history of an eating disorder called anorexia nervosa, starting when she was 14 years old. According to an intake assessment form from November of 2009, she has been hospitalized approximately 15 times and participated in numerous day treatment programs. Alexandra has also been hospitalized for two suicide attempts.

On December 14, 2010, Alexandra was admitted to Oliver–Pyatt Centers (“Oliver–Pyatt”), an eating disorder treatment facility in Miami, Florida. She was 5 feet, 6 inches tall and weighed 110 lbs., which was 15 lbs. less than the ideal body weight of 125 lbs. Alexandra was severely depressed and was restricting and binging her food. Oliver–Pyatt admitted her for partial hospitalization level of care to treat her depression and anorexia.

Oxford initially approved Alexandra's claim for benefits to cover her partial hospitalization level of care at Oliver–Pyatt from December 14 to December 16. On December 17, Oxford spoke with Angie Gonzalez, a therapist at Oliver–Pyatt, who reported that Alexandra weighed 111.4 lbs. and was eating 50-75% of her daily 1,200-calorie meal plan, but was not cooperating with the treatment plan. After talking with Dr. Lawson, a physician at Oliver–Pyatt, Oxford approved Alexandra's partial hospitalization treatment from December 14 to December 26. After checking in with Oliver–Pyatt on December 27, Oxford approved coverage for Alexandra's continued care at this level through January 3, 2011. There is no dispute about the coverage from December 14, 2010 through January 4, 2011.

On January 4, 2011, Dr. Lawson reported to Oxford that Alexandra weighed 113 lbs. and was eating 100% of her daily 1,500-calorie diet. Dr. Lawson said that Alexandra was compliant with the treatment, but continued to have depressive episodes. Oxford then advised Alexandra that her claim for continued treatment at the partial hospitalization level of care was denied as of January 5, 2011, because the treatment was not medically necessary. Oxford explained that Alexandra had “shown improvement in symptoms and functioning with no severe symptoms at [that] time” and any ongoing treatment could “be addressed in a[n] intensive outpatient level of care.” Oxford further informed Alexandra that she could appeal the decision and gave her a detailed explanation of her appeal rights.

C. Alexandra's Internal Appeals

On January 5, 2011, Alexandra requested an expedited appeal of the decision and Oxford's Medical Director, Dr. Lee Becker, who is board certified in psychiatry, reviewed the appeal. Dr. Becker also determined that partial hospitalization was not medically necessary as of January 5, 2011, and notified...