Halo v. Yale Health Plan, Director of Benefits & Records Yale University
819 F.3d 42
| 2d Cir. | 2016Background
- ERISA authorizes DOL to regulate claims procedures; the regulation at issue is 29 C.F.R. § 2560.503-1; Halo alleged Yale Health Plan failed to follow these procedures when denying benefits; the district court applied the substantial-compliance doctrine; the panel overruled that doctrine and held de novo review unless full compliance or inadvertent harmless deviation; civil penalties for regulation noncompliance were not authorized; court remanded for further proceedings; issues involve standard of review, penalties, and evidence admission.
- Halo was a Yale University student with claims for non-network treatments; Yale Health Plan denied several claims; Halo sued under ERISA § 502(a)(1)(B) challenging the denials and the plan’s notice; the district court denied relief under the substantial-compliance framework; Halo sought de novo review and potential penalties; the Second Circuit vacated and remanded for proper application of the rules.
- Regulation 2560.503-1 was revised in 2000 to impose an exhaustion-like consequence for failure to establish or follow reasonable procedures; the preamble clarifies such failures should not be entitled to deference; the regulation’s history shows a push to strengthen procedural fairness in light of managed care changes.
- The court considers whether de novo review is appropriate when procedures are not followed, and whether the preamble interpretation deserves deference under Auer; it also discusses whether good-cause evidence can be admitted outside the administrative record.
- The opinion also addresses whether civil penalties are available under ERISA for violations of the claims-procedure regulation, concluding they are not; the court emphasizes a balance between encouraging plans to provide benefits and protecting participants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standard of review when procedures are not followed | Halo seeks de novo review due to noncompliance | Yale argues deference under Firestone applies | De novo review unless full compliance or harmless inadvertent deviation |
| Civil penalties for regulation violations | Halo argues penalties should deter noncompliance | Yale contends penalties are not provided by regulation or ERISA | No civil penalties available under ERISA or the regulation |
| Regulatory interpretation deference | Preamble interpretation should govern | Regulation text alone should control | Regulation’s preamble entitled to substantial deference under Auer context |
| Good-cause/admission of extra-record evidence | Evidence should be allowed if adverse effect on record | Evidence should be limited to administrative record | District court may consider extra-record evidence for good cause on remand |
Key Cases Cited
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (U.S. 1989) (established standard of review framework for ERISA claims)
- Eastman Kodak Co. v. STWB, Inc., 452 F.3d 215 (2d Cir. 2006) (addressed exhaustion and administrative record concepts in ERISA cases)
- Varity Corp. v. Howe, 516 U.S. 489 (U.S. 1996) (discussed balancing purposes of ERISA and trust-law analogies)
- Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355 (U.S. 2002) (default rule is de novo review; tailoring to ERISA purposes)
- Krauss v. Oxford Health Plans, Inc., 517 F.3d 614 (2d Cir. 2008) (cases on exhaustion and deference under 1977 regulation)
- Nichols v. Prudential Ins. Co. of Am., 406 F.3d 98 (2d Cir. 2005) (deference dependent on actual exercise of discretion)
- DeFelice v. Am. Int'l Life Assurance Co., 112 F.3d 61 (2d Cir. 1997) (good cause for admitting extra evidence in ERISA review)