B v. United Health Grp. Co.

LAURA B, Plaintiff, v. UNITED HEALTH GROUP COMPANY, et al., Motion Pictures.

Case No.16-cv-01639-JSC

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

August 25, 2017

ORDER DENYING MOTION FOR SUMMARY JUDGMENT

Re: Dkt. Nos. 43, 44, 45

Plaintiff Laura B sues Defendant Motion Picture Industry Health Plan ("Motion Picture" or "MPIHP") for the denial of coverage for Plaintiff's mental health inpatient care. (Dkt. No. 27.) Motion Picture moves for summary judgment arguing Plaintiff failed to exhaust her administrative remedies, the denial decision is reviewable only for an abuse of discretion, and the Court's review is limited to the administrative record. (Dkt. No. 44.) Because the plan documents do not require a second level appeal to Motion Picture to exhaust administrative remedies and Motion Picture has not met its burden to show that abuse of discretion review applies, Motion Picture's motion for summary judgment is DENIED.

BACKGROUND

I. Denial of Plaintiff's Benefits Claim.

Plaintiff participated in Motion Picture's employee welfare benefit plan (the "Plan") sponsored by Plaintiff's employer and administered by Optum Health Behavioral Solutions, Inc. ("Optum"). (Second Amended Complaint "SAC" ¶ 5, Dkt. No. 43-2 ¶ 4.) At all relevant times, the Plan was a self-funded. (SAC at 2 ¶ 6.) Plaintiff was diagnosed with and suffers from major depressive order, generalized anxiety disorder, and post-partum depression. (SAC ¶ 8.) On approximately September 30, 2013, Plaintiff stopped working due to her disability. (SAC ¶ 10.) Between October 28, 2014 through November 3, 2014 and January 7, 2015 through January 20, 2015, Plaintiff was hospitalized and received inpatient mental health treatment at Resnick Neuropsychiatric Hospital at the University of California, Los Angeles. (Dkt No. 43-11 at 100-105.) Plaintiff filed behavior health claims for this treatment, which was approved by Optum. (Id. at 90-99.)

Plaintiff sought further inpatient services at Balance Treatment Center on January 16, 2015. (Dkt. No. 43-10 at 167-168.) Optum denied coverage for treatment at Balance, instead authorizing Mental Health Acute Inpatient Unit as an alternate service. (Id.) Plaintiff submitted an urgent appeal to Optum on January 21, 2015. (Id. at 161.) By letter dated January 22, 2015, Optum wrote to Plaintiff advising that it had completed the appeal review for residential treatment at Balance. (Id. at 161-65.) Optum denied benefit coverage for treatment at Balance and instead authorized Mental Health Partial Hospitalization as an alternate service. (Id.)

A document entitled "Important Information About Your Right to Request a Second-Level Review of a Non-Coverage Determination" was enclosed with the January 22 Optum denial letter and includes the following two paragraphs:

Under the terms of your benefit with Motion Picture Industry Pension & Health Plans, you have a right to request a Second-Level appeal review of any decision not to provide you a benefit or pay for an item or service (in whole or in part). The decision of the Benefits/Appeals Committee shall be final and binding upon all parties, including the Participants and any person claiming under the Participant, subject to the right to bring a civil action under 502(a) of ERISA.

(Dkt. No. 43-10 at 164-165.) On February 13, 2015, Plaintiff's provider at the Balance Treatment Center, medical director Dr. Ronald D. Sager, submitted a letter to Optum stating that Plaintiff "continues to meet medical necessity for residential care" due to her depression and anxiety. (Dkt. No. 47-1 at 14.) According to Plaintiff this letter was not contained in the initial disclosures or administrative record produced by Motion Picture. (Dkt. No. 47-1 at 2 ¶ 4.)

II. The Plan Documents

A. The Agreement and Declaration of Trust ("Trust Agreement")

The Trust Agreement under which the Plan operates provides discretionary authority to thePlan's Directors. Art. IV, Section 1 grants the Directors the power to construe the Trust Agreement. (Dkt. No. 43-4 at 16.) The Directors have full authority to determine the benefits the Plan will provide and final and binding authority to determine claims and appeals. (Dkt. No. 43-5 at 7, 10.) The Trust Agreement also grants the Directors the authority to interpret the plan of benefits. (Id. at 11.)

B. The 2013 Summary Plan Description ("SPD")

The SPD recites the Motion Picture's Board of Directors "full discretion and authority to interpret the Plan and to decide any factual questions related to eligibility for and the extent of benefits provided by the Plan." (Dkt. No. 43-9 at 14.) The SPD includes a section titled: "CLAIMS APPEALS PROCEDURES." Under the subheading "Filing An Appeal with MPIHP," the SPD states: "if you feel that your Claim has not be processed correctly by MPIHP, you have 180 days following the receipt of your Explanation of Benefits or other initial adverse determination to make a formal request for review." (Dkt. No. 43-10 at 70.) Appeals must be addressed to the "Benefits/Appeals Committee" of MPIHP. (Id.) Under the same subheading, the SPD states that the Committee's decision "shall be final and binding upon all parties, including the Participants and any person claiming under the Participant, subject to the right to bring a civil action under Section 502(a) of ERISA." (Id. at 70.) It goes on to warn that "[t]he failure to file such an appeal within 180 days from your receipt of the initial Adverse Benefit Determination shall constitute a waiver of the right to review the decision." (Id.)

Under the same "CLAIMS APPEALS PROCEDURES" section, is a separate subheading entitled "Filing Appeals with MPIHP Contract Providers." There the SPD states that appeals for health care services made through contract providers are "generally handled by the entities themselves, rather than by [Motion Picture]." (Id.)

DISCUSSION

Motion Picture makes three summary judgment arguments: (1) this Court must review the benefits determination for abuse of discretion, (2) Plaintiff failed to exhaust her administrative remedies as the Plan requires; and (3) the Court's review of the benefits decision is limited to the administrative record of Plaintiff's claim. (Dkt. No. 44 at 5.)

I. Standard of Review

"The default standard for evaluating a claim for benefits under ERISA is de novo." Wiley v. Cendant Corp. Short Term Disability Plan, 631 F.Supp.2d 1221, 1224 (N.D. Cal. 2009) (citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)). However, when an ERISA plan "grants discretionary authority to the plan administrator to determine plan eligibility, the court will ordinarily review a committee's decision to deny benefits for an abuse of discretion." Bergt v. Retirement Plan for Pilots Employed by MarkAir, Inc., 293 F.3d 1139, 1142 (9th Cir. 2002) (citing Firestone, 489 U.S. at 115). The plan documents must "grant this discretionary authority unambiguously; if the plan fails to do this, the district court must review a committee's decision de novo." Id. (citing Kearney v. Standard Ins. Co., 175 F.3d 1084, 1090 (1999)).

A. California Insurance Code Section 10110.6 Does not Apply

Plaintiff first argues that the Court need not even look at the Plan language because California Insurance Code Section 10110.6 voids insurance provisions that reserve discretionary authority to the insurer or its agent to determine eligibility for benefits or interpret the terms of the policy. Cal. Ins. Code § 10110.6. This argument fails, however, because ERISA preempts state laws that regulate self-funded plans and it is undisputed that "at all relevant times, the Plan was a self-funded plan." (SAC at 2 ¶ 6.)

"ERISA contains one of the broadest preemption clauses ever enacted by Congress." Evans v. Safeco Life Ins. Co., 916 F.2d 1437, 1439 (9th Cir. 1990). Except as provided in 29 U.S.C Section 1144(b), ERISA supersedes "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). ERISA's "savings clause" contains an exception: "[N]othing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance." Id. § 1144(b)(2)(A). However, "[i]n FMC v. Holliday, 498 U.S. 52, 111 S.Ct. 403, 112 L.Ed.2d 356 (1990), and Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985), the Supreme Court recognized that ERISA—specifically the interaction of the savings and deemer clauses with the general preemption clause—treats insured plans and self-funded plans differently for preemption purposes." PM Group Life Ins. Co. v. Western Growers Assur. Trust, 953 F.2d 543,545 (9th Cir. 1992). "ERISA's 'deemer clause' provides that self-funded ERISA plans may not be deemed to be insurers or insurance companies for purposes of the savings clause." Vrijesh S. Tantuwaya MD, Inc. v. Anthem Blue Cross Life and Health Insurance Company, 169 F.Supp.3d 1058, 1071 (S.D. Cal. Mar. 11, 2016) (citing FMC, 498 U.S. at 61); see also PM Group, 953 F.2d at 545-46 (holding that because that the defendants were self-funded plans, ERISA preempted the application of California law to the plans).

Because the Plan was self-funded, it falls under ERISA's deemer clause and may not be considered an insurance company for purposes of the savings clause. See FMC, 498 U.S. at 61. As such, ERISA preempts the application of California Insurance Code Section 10110.6 to the Plan. See Martin v. Aetna Insurance Company, 223 F.Supp.3d 973, 981-82 (C.D. Cal. 2016). Plaintiff's reliance on Standard Ins. Co. v. Morrison, 584 F.3d 837 (9th Cir. 2009) is misplaced as the case does not address the application of the ERISA savings clause to self-funded plans. Although not raised by Plaintiff, the Court notes that the Ninth Circuit recently held in Orzechowski v. Boeing Co. Non-Union Long-Term Disability Plan, 856 F.3d 686 (9th Cir. 2017) that Insurance Code section 10110.6 was saved from ERISA...