EUGENE S. v. Horizon Blue Cross Blue Shield
663 F.3d 1124
10th Cir.2011Background
- Eugene S. sought ERISA benefits for his son A.S.'s residential treatment; Horizon delegated to Magellan to administer claims.
- Magellan initially denied residential benefits, deeming only intensive outpatient care appropriate, with multiple appeals denying residential care.
- Magellan approved residential treatment from Aug 10 to Nov 2, 2006, then again asserted eligibility for intensive outpatient from Nov 3, 2006 to Jun 12, 2007, denying residential benefits in that period.
- After exhausting administrative remedies, Eugene filed suit under ERISA § 1132(a)(1)(B) on July 24, 2009.
- The district court denied Eugene’s motion to strike the Vendor Services Agreement (VSA) and granted Horizon summary judgment, applying an arbitrary-and-capricious review.
- On appeal, Eugene challenged the admissibility of the VSA, the standard of review, and Horizon’s denial under the plan terms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the VSA was properly admitted. | Sought strike; VSA improperly admitted. | VSA properly admissible to show dual-role conflict. | District court properly admitted VSA; harmless error analysis applied. |
| What is the proper standard of review for Horizon's denial of benefits? | Amara suggests SPD terms may not be part of the Plan; de novo review required or diminished deference. | Plan grants discretion; AR review appropriate. | Deferential (arbitrary-and-capricious) review applied; Amara not requiring de novo here. |
| Does the Plan (SPD integrated with the Plan) grant Horizon discretion to determine benefits? | SPD may not be part of the Plan or grant discretion if not supported by governing documents. | SPD is part of the Plan and grants discretion to Horizon and Magellan. | SPD is part of the Plan and grants Horizon/Magellan discretion; deference applies. |
| Did Horizon suffer a conflict of interest that requires reducing deference due to dual-role? | Horizon’s dual role as insurer affects impartial review. | Delegation to Magellan mitigates dual-role conflict; standard remains pure arbitrary and capricious. | Conflict of interest not enough to reduce deference; review remains arbitrary-and-capricious. |
| Was Horizon/Magellan's denial of residential benefits supported by substantial evidence? | Record showed continued need for residential treatment. | Record shows continued stay criteria not met; variation supported by evidence of improvement and shift to less restrictive care. | Magellan acted with substantial evidence; denial sustained. |
Key Cases Cited
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (Supreme Court 1989) (establishes default de novo vs discretionary review framework for ERISA.)
- Amara v. Cigna Corp., 131 S. Ct. 1866 (Supreme Court 2011) (SPD terms not necessarily enforceable as plan terms; governing plan documents govern discretion.)
- Glenn v. MetLife, 554 U.S. 105 (Supreme Court 2008) (conflict-of-interest considerations in ERISA review of benefits.)
- Geddes v. United Staffing Alliance Emp. Med. Plan, 469 F.3d 919 (10th Cir. 2006) (delegation to third-party administrator does not alter standard of review.)
- Gaither v. Aetna Life Ins. Co., 394 F.3d 792 (10th Cir. 2004) (recognizes third-party administration can be part of review framework.)
- Murphy v. Deloitte & Touche Group Ins. Plan, 619 F.3d 1151 (10th Cir. 2010) (limits of record supplementation in ERISA appeals.)
- Nance v. Sun Life Assurance Co. of Canada, 294 F.3d 1263 (10th Cir. 2002) (liberal construction of language triggering deferential review.)
- McGraw v. Prudential, 137 F.3d 1253 (10th Cir. 1998) (example of construed plan language triggering discretion.)
- Chambers v. Family Health Plan Corp., 100 F.3d 818 (10th Cir. 1996) (recognizes discretion in plan terms for 'medically necessary' determinations.)
- Nord v. Black & Decker Disability Plan, 538 U.S. 822 (Supreme Court 2003) (rejects treating-physician rule in ERISA mental health claims; honors reliability.)
- Phelan v. Wyo. Associated Builders, 574 F.3d 1250 (10th Cir. 2009) (arbitrary-and-capricious standard applied to plan administrator decisions.)