Christine S. v. Blue Cross Blue Shield of N.M., Case No. 2:18-cv-00874-JNP-DBP

428 F.Supp.3d 1209

CHRISTINE S., James A., individually and on behalf of T.A., a minor; Plaintiffs,

v.BLUE CROSS BLUE SHIELD OF NEW MEXICO, and the Los Alamos National Security, LLC Health Plan; Defendants.

Case No. 2:18-cv-00874-JNP-DBP

United States District Court, D. Utah.

Signed December 19, 2019

Brian S. King, Brent J. Newton, Nediha Hadzikadunic, Brian S King PC, Salt Lake City, UT, for Plaintiffs.

Maralyn M. English, Snow Christensen & Martineau, Salt Lake City, UT, Martin J. Bishop, Rebecca R. Hanson, Reed Smith, Chicago, IL, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS

Jill N. Parrish, United States District Court Judge

Defendants Blue Cross Blue Shield of New Mexico ("BCBSNM") and Los Alamos National Security, LLC Health Plan (collectively, "Defendants") move to dismiss the Amended Complaint filed by plaintiffs Christine S., James A., and T.A. (collectively, "Plaintiffs") for failure to state a claim. Plaintiffs' Amended Complaint alleges healthcare insurance coverage violations of the Employee Retirement Income Security Act of 1974 ("ERISA") and the Mental Health Parity and Addiction Equity Act of 2008 (the "Parity Act"), an amendment to ERISA. Having considered the parties' briefs and argument advanced at a hearing on December 16, 2019, the court grants in part and denies in part the Defendants' Motion to Dismiss (the "Motion").

I. BACKGROUND

Plaintiff Christine S., an employee at Los Alamos National Security, LLC, maintained a healthcare insurance policy through a self-funded employee welfare benefits plan (the "Plan"). BCBSNM operates in New Mexico as an unincorporated division of Health Care Service Corporation, a Mutual Legal Reserve Company, and is the third-party claims administrator for the Plan. The Plan covered Christine S. as the Plan participant and James A. and T.A. as eligible beneficiaries. T.A. is a minor and Christine S. and James A. are his parents.

From an early age, T.A. has been treated for mental health and behavioral conditions, including severe anxiety, attention-deficit/hyperactivity disorder ("ADHD"), depression, and emotional dysregulation. T.A. has also been diagnosed on the autism spectrum. Throughout his life, T.A. has had difficulty with structured activities and has struggled to maintain healthy relationships with peers and family. T.A. would sometimes self-harm by cutting himself and banging his head. When T.A. was around ten or twelve years old, he first attempted suicide by hanging himself in his closet.

T.A. began seeing a therapist and taking medications, but with limited effect. Instead, his social interactions became more strained. As a child, T.A. ran away from home on multiple occasions. He was disruptive and got into fights at school, which led to multiple disciplinary actions including suspensions. T.A. continued self-harming by cutting and would draw on himself to disguise the severity of his injuries. He started refusing to go to school and withdrew from social activities. In May 2015, T.A. got into a disagreement with his parents and again attempted to commit suicide by hanging. T.A. then began seeing a different psychiatrist and his parents conferred with an educational consultant, who recommended that T.A. seek professional inpatient care at a residential treatment center.

Plaintiffs admitted T.A. to a therapy program at Elevations/Seven Stars Residential Treatment Center ("Elevations") on November 23, 2015. Elevations is a "licensed residential treatment facility located in Utah that specializes in treating individuals on the autism spectrum" and "provide[s] sub-acute treatment to adolescents with mental health, and/or behavioral problems." Am. Compl. ¶ 4. T.A.'s Elevations admission notes state in part that he was "suicidal with urges to self-harm" and he appeared "hopeless, ... scared at time[s], frantic with his retorts, reports hearing voices at night with bad dreams," and had "judgment severely impaired in context to [his] developmental age." Id. ¶ 17. Elevations staff immediately placed T.A. in suicide and self-harm precaution protocols. Id. During his time at Elevations, T.A.'s challenges continued and he "threw frequent tantrums, ignored his responsibilities, destroyed property, and attacked other residents." Id. ¶ 24. On February 8, 2016, Dr. Gordon Day conducted a multidisciplinary evaluation of T.A., in which he observed that T.A. still "appears to be very vulnerable to emotional distress" and that "[h]is safety would be at risk if he were to return home to attend a public school." Id. ¶ 18. Dr. Day recommended "[a] very high level of residential therapeutic and academic support." Id. Accordingly, T.A. continued to receive care at Elevations until April 15, 2016.

After T.A. left Elevations, Christine S. and James A. then enrolled him in a different residential treatment program at Cherry Gulch on April 18, 2016. Id. ¶ 28. Cherry Gulch "is a therapeutic boarding school located in Idaho that is licensed by the state as a residential care facility." Id. ¶ 4. Cherry Gulch also provides sub-acute level of care for mental health and behavioral conditions. Id. During T.A.'s first week at Cherry Gulch, he attempted to run away from the program. Id. ¶ 28. When Cherry Gulch staff found him walking along a road toward a dam, T.A. admitted he was intending to jump off of the dam to commit suicide. Id. Cherry Gulch staff immediately placed T.A. on suicide watch. Id. During the course of his treatment at Cherry Gulch, evaluators consistently reiterated that T.A. "greatly needs to be in [an] intensive recommended ‘residential therapeutic environment’ so that he can heal, learn, and succeed in being his best self." Id. ¶ 33. After several months at Cherry Gulch, on November 9, 2016, T.A. again ran away and attempted suicide by jumping from a high rock. Id. ¶ 35. He suffered injuries including a broken wrist and stated after the incident that he "just wanted to die." Id. Cherry Gulch again placed T.A. on suicide watch. Id.

A. BCBSNM'S INSURANCE COVERAGE OF T.A.'S TREATMENT

Plaintiffs filed insurance claims with BCBSNM for coverage of T.A.'s treatment at Elevations and Cherry Gulch. BCBSNM denied paying benefits for approximately two months of T.A.'s residential care at Elevations and covered one week of his treatment at Cherry Gulch. Plaintiffs exhausted internal and external appeals of BCBSNM's initial coverage denials, all of which BCBSNM rejected. Plaintiffs allege that BCBSNM's denial of benefits for T.A.'s treatment at Elevations and Cherry Gulch caused Plaintiffs to incur over $243,000 in medical expenses. See id. ¶ 37.

1. Denial of Coverage for Elevations Treatment

On February 12, 2016, BCBSNM sent Plaintiffs a letter denying payment for T.A.'s treatment at Elevations from that day forward. Id. ¶ 19. This denial occurred four days after T.A.'s evaluator at Elevations, Dr. Gordon Day, opined that T.A.'s "safety would be at risk if he were to return home to attend a public school" and he recommended "[a] very high level of residential therapeutic and academic support" such as that provided by Elevations. Id. ¶ 18. However, the BCBSNM reviewer stated that BCBSNM had conducted a medical necessity review and found that T.A. "did not meet [Milliman Care Guidelines ("MCG")¹ ] for continued treatment" at a "mental health acute inpatient level of care." Id. ¶ 19. The reviewer concluded that T.A. was "not an acute danger to [himself] or others," that he was "not psychotic" and "ha[s] a supportive family," and that he could "be safely treated in a less restrictive setting," such as outpatient care. Id.

Plaintiffs submitted a level one appeal of BCBSNM's benefits denial on August 10, 2016. Id. ¶ 20. Plaintiffs asked for various clarifications regarding the basis for BCBSNM's denial, including what version of the MCG that BCBSNM used to make its decision. Id. Plaintiffs included copies of T.A.'s medical records in their appeal and contended that BCBSNM violated ERISA by "not making specific references to the medical records it had used to come to the decision to deny care," "by not providing the name and qualifications of the reviewer," and by not taking into account the medical opinions of those who evaluated T.A. and recommended continued residential treatment. Id. ¶¶ 21, 23, 24. Plaintiffs also stated in their appeal that BCBSNM improperly used acute inpatient criteria to evaluate coverage for the "strictly sub-acute" nature of care T.A. received at Elevations. Id. ¶ 22.

On August 22, 2016, BCBSNM sent Plaintiffs a letter upholding the denial of benefits for T.A.'s treatment at Elevations. Id. ¶ 25. It stated that T.A. had not meet care guidelines for continued residential treatment because he was "not a danger to [himself] or others," "not noted to be psychotic or manic," was "medically stable," was "compliant with [his] medication regime," and was "not violent or aggressive." Id. On November 1, 2016, Plaintiffs requested that BCBSNM's denial of continued coverage at Elevations be evaluated by an external review agency. Id. ¶ 26. Plaintiffs argued that BCBSNM wrongfully denied their benefits because T.A.'s treatment "was medically necessary and in accordance with generally accepted standards of medical practice." Id. Plaintiffs emphasized that they had attempted "lower levels of treatment ... numerous times without significant effect," and that T.A.'s mental health providers recommended residential treatment. Id. On December 26, 2016, the external review agency upheld BCBSNM's denial of continued coverage at Elevations, finding that T.A. had not met the standard for residential treatment because he did not show symptoms of "suicidal or homicidal ideation," "self-harming behaviors," "serious physical aggression," or "out of control disruptive behavior which cannot be safely managed" at a lower level of care. Id. ¶ 27.

2. Denial of Coverage for Cherry Gulch Treatment

On April 26, 2016, eight days after T.A. was admitted to...