Krysten C. v. Blue Shield of California
16-16958
| 9th Cir. | Jan 9, 2018Background
- Krysten C. sued Blue Shield under ERISA after Blue Shield denied continued coverage for residential treatment and approved only partial hospitalization; district court granted summary judgment to Blue Shield and Krysten appealed.
- Krysten has a contractual obligation with her treatment provider (Monte Nido) to pay for treatment if insurance denies coverage; Blue Shield pointed to a separate provider-administrator agreement that barred charging Krysten, but the court found that irrelevant to Krysten’s standing.
- The Plan grants the administrator discretionary authority to determine benefits; therefore the court reviewed Blue Shield’s decision for abuse of discretion.
- Blue Shield initially denied Krysten’s expedited appeal quickly (under two hours) without consulting Monte Nido, a procedural irregularity; Blue Shield later allowed submission of records and reconsidered the appeal.
- The Plan defines “medically necessary” and prioritizes the most cost-effective appropriate level of care; the administrator concluded partial hospitalization met the Plan’s criteria.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to sue under ERISA | Krysten can recover because her contract with Monte Nido makes her ultimately responsible for unpaid treatment costs | Blue Shield: provider agreement prevents Monte Nido from charging Krysten, so she lacks a concrete injury | Held: Krysten has standing; provider-administrator agreement doesn't negate her contractual obligation to pay Monte Nido |
| Standard of review | Krysten argued procedural irregularities and conflict required heightened scrutiny | Blue Shield argued ERISA allows administrator discretion and the process complied with regs | Held: Abuse-of-discretion applies; procedural irregularity existed but was harmless because Blue Shield later allowed a full record and reconsideration |
| Procedural irregularity in appeals process | Krysten argued quick initial denial, same reviewers, and no live exam showed irregular procedure and bias | Blue Shield argued regs do not require new decisionmakers or live exams and reviewers consulted appropriate specialists | Held: No prejudicial procedural defect; use of same consultants and absence of live exam did not violate ERISA regs |
| Medical necessity and level of care | Krysten argued residential treatment remained medically necessary given prior approvals and clinical complexity | Blue Shield argued partial hospitalization satisfied Plan’s medical necessity criteria and was the most cost-effective appropriate level | Held: Administrator did not abuse discretion; partial hospitalization met the Plan’s definition of medically necessary care and summary judgment for Blue Shield affirmed |
Key Cases Cited
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (abuse-of-discretion standard when plan grants administrator discretionary authority)
- Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955 (need to weigh administrator conflict of interest and procedural irregularities in abuse-of-discretion analysis)
- Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666 (test for abuse of discretion described)
- Metropolitan Life Ins. Co. v. Parker, 436 F.3d 1109 (de novo review for plan interpretation and standards for fact review)
- Cisneros v. Unum Life Ins. Co. of Am., 134 F.3d 939 (standards for reviewing ERISA plan interpretation)
- Hinkson (United States v. Hinkson), 585 F.3d 1247 (framework for determining whether a decision is illogical, implausible, or without support)
- Dytrt v. Mountain States Tel. & Tel. Co., 921 F.2d 889 (standard for reviewing district court summary judgment)
- Pac. Shores Hosp. v. United Behavioral Health, 764 F.3d 1030 (concerns about thoroughness and accuracy of benefits determinations in complex medical cases)