Opinion ID: 1917613
Heading Depth: 2
Heading Rank: 2

Heading: Touchpoint's Decision

Text: ¶ 65 A major objective of ERISA is to establish a uniform administrative scheme, which provides a set of standard procedures to guide processing of claims and disbursement of benefits. Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 9, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987). In furtherance of that goal, the United States Supreme Court has concluded that ERISA-governed plans must state the basis for the payment of benefits and that the administrator must administer the plan in accord with the plan's terms, and not on any other basis. Egelhoff, 532 U.S. at 147, 121 S.Ct. 1322. ERISA[] commands that a plan shall specify the basis on which payments are made to and from the plan, § 1102(b)(4), and that the fiduciary shall administer the plan in accordance with the documents and instruments governing the plan, § 1104(a)(1)(D). . . . Id. (citation omitted). Therefore, we must examine Touchpoint's explanation for denying benefits in light of the terms of the policy, because Touchpoint was obligated to conform its decisions in regard to payment, or the denial thereof, to the healthcare policy. Id.
¶ 66 Touchpoint interpreted the policy to determine whether Parker's treatment was a covered service under the policy. It denied coverage based on three factors: (1) the treatment is the subject of an ongoing Phase I or II clinical trial; (2) the policy defines such treatment as experimental treatment; and (3) experimental treatment is not a covered service within the terms of the policy. ¶ 67 It has never been disputed that high-dose chemotherapy with stem-cell rescue is the subject of an ongoing Phase I or II clinical trial. Therefore, the only dispute for our review is whether Touchpoint's decision that the treatment is experimental, as that term is used in the policy, is reasonable. Firestone, 489 U.S. at 111, 109 S.Ct. 948. ¶ 68 The majority opinion asserts that the Summers based their second request for coverage on a different theory. The majority opinion acknowledges that the treatment, itself, which Parker received, was the subject of an ongoing Phase II clinical trial. [8] However, the majority opinion asserts that as of the second request for coverage, Parker was not enrolled, personally, in a Phase I or II clinical trial when he received the treatment that is the subject of an ongoing clinical trial. [9] Based on this difference, the majority opinion contends that the definition of experimental is ambiguous. It asserts: it is unclear whether it is the treatment itself that is the subject of a Phase II trial, even if the claimant is not participating in the Phase II trial, or whether it is the claimant's receiving the treatment as a participant in the Phase II trial that triggers the exclusion. [10] The majority opinion then construes the ambiguity that it has created against the insurer. [11] The majority opinion cites Pitcher v. Principal Mutual Life Insurance Co., 93 F.3d 407 (7th Cir.1996), and Casey v. Uddeholm Corp., 32 F.3d 1094 (7th Cir.1994), as support for its conclusion. [12] ¶ 69 The majority opinion's conclusion is contrary to controlling precedent. The dispositive question is not whether the policy is ambiguous, as the majority opinion implies; but rather, whether Touchpoint's interpretation of the policy is reasonable. Firestone, 489 U.S. at 111, 109 S.Ct. 948. It is undisputed that Touchpoint has the power to interpret the terms in the policy. When the plan administrator has the power to interpret the policy, a court cannot overturn a plan administrator's interpretation of a policy term unless that interpretation is not reasonable. Id.; Dade v. Sherwin-Williams Co., 128 F.3d 1135, 1139 (7th Cir.1997); Halpin, 962 F.2d at 688. Accordingly, when a plan administrator has the power to interpret the policy, courts are not permitted to substitute their interpretations of the policy terms for that of the administrator. Booth, 201 F.3d at 344; Nelson v. Unum Life Ins. Co. of Am., 421 F.Supp.2d 558, 566-67 (E.D.N.Y.2006). ¶ 70 Furthermore, the majority opinion's reliance on Pitcher and Casey is misplaced because in neither Pitcher nor Casey did the court conclude that the plan administrator had the power to interpret the plan. In Pitcher, the court said if the plan were ambiguous, it would rely on the rule of contra proferentum for its decision. [13] Pitcher, 93 F.3d at 418. However, the court concluded there was no ambiguity. Id. In Casey, the court began its analysis by pointing out that [t]he benefit plan does not grant discretion to the administrator to construe uncertain terms. Casey, 32 F.3d at 1096. ¶ 71 The differing powers of a plan administrator are critical to an ERISA analysis because when the plan administrator does not have the power to interpret the policy, the review of its interpretation is de novo. [14] Firestone, 489 U.S. at 115, 109 S.Ct. 948. Under a de novo standard of review, decisions of the administrator are given no deference and courts may resolve ambiguities in favor of the insured. Katzenberg v. First Fortis Life Ins. Co., 500 F.Supp.2d 177, 193-94 (E.D.N.Y.2007). ¶ 72 Furthermore, the rule of contra proferentum that was mentioned in Pitcher provides that when one party drafted the document, any ambiguities in the document are resolved against the drafter. Nelson, 421 F.Supp.2d at 572. However, when the administrator has the power to interpret the policy, the rule of contra proferentum is inapplicable because that grant of power to the administrator permits the administrator, not the court, to interpret any ambiguous policy terms. Halpin, 962 F.2d at 688; Nelson, 421 F.Supp.2d at 572. ¶ 73 Having established that we must apply the arbitrary and capricious standard to Touchpoint's decision denying benefits, I shall apply that standard. Touchpoint interpreted the following facts and the words in the policy to come to its conclusion that the treatment that Parker received was experimental as that term is defined in the policy. First, there is no dispute that the treatment is the subject of an ongoing Phase II clinical trial. Second, the policy defines experimental as: EXPERIMENTAL/INVESTIGATIONAL means any service, supply, drug, device, treatment, or procedure that Touchpoint Health Plan's Medical Director determines: . . . . 3. Is the subject of an on-going Phase I or II clinical trial, or furnished in connection with medical or other research to determine its maximum tolerated dose, its toxicity, its safety, or its efficacy[.] ¶ 74 The policy defines the term, experimental, in relation to a service, supply, drug, device, treatment, or procedure. It does not limit the definition by adding that the person seeking benefits must also be receiving such service, supply, drug, device, treatment, or procedure as a participant in a Phase I or II clinical trial. However, the majority opinion implies that such a limitation is a possible interpretation of the definition of experimental. [15] ¶ 75 Touchpoint's interpretation of the policy relied on the plain language of the policy which expressly defines experimental. The external review, conducted by the Medical Review Institute, also concluded that the treatment sought met the policy's definition of experimental. I see nothing in the words defining experimental that creates an ambiguity. However, even if the policy terms could be interpreted as the majority opinion suggests, that possibility does not cause Touchpoint's interpretation to be unreasonable. And, it is only unreasonable interpretations that are arbitrary and capricious. Firestone, 489 U.S. at 111, 109 S.Ct. 948; Johnson v. Dist. 2 Marine Eng'rs Beneficial Ass'n-Associated Mar. Officers, Med. Plan, 857 F.2d 514, 516 (9th Cir.1988); Cook v. Pension Plan for Salaried Employees of Cyclops Corp., 801 F.2d 865, 871 (6th Cir. 1986). ¶ 76 The majority opinion also asserts that Touchpoint's decision was arbitrary and capricious because Touchpoint was inconsistent in its position on what it would cover under the terms of the plan. [16] However, the inconsistent position that the majority opinion identifies is not an inconsistent application of the policy by the plan administrator to similarly situated applicants for benefits, which is required before a decision may be held to be arbitrary and capricious. Vann v. Nat'l Rural Elec. Coop. Assoc. Ret. & Sec. Program, 978 F.Supp. 1025, 1043 (M.D.Ala. 1997). ¶ 77 As with many terms that have developed in ERISA litigation, an inconsistent application is a term of art that has a particularized meaning. To determine whether a plan administrator has rendered an arbitrary decision through inconsistent application of a policy, courts investigate whether the challenged interpretation [of the policy] has been uniformly applied in similar situations. DeAngelis v. Warner Lambert Co., 641 F.Supp. 467, 470 (S.D.N.Y.1986) (citing Denton v. First Nat'l Bank, 765 F.2d 1295, 1304 (5th Cir. 1985); Anderson v. Ciba-Geigy Corp., 759 F.2d 1518, 1522 (11th Cir.1985); Molyneux v. Arthur Guinness & Sons, P.L.C., 616 F.Supp. 240, 246 (S.D.N.Y.1985)). ¶ 78 The majority opinion does not identify the plan administrator's application of the Touchpoint policy to any other person, let alone to one who is similarly situated. Instead, the majority opinion attempts to recast both the statement by Touchpoint's attorney about how he would interpret the policy and deposition testimony of Dr. Ronald Harms, Touchpoint's Medical Director, about the differing types of chemotherapy that may or may not come within the policy as inconsistencies that indicate the denial of benefits to the Summers was an arbitrary decision. [17] However, the majority opinion's assertion that Touchpoint maintained an arbitrary and capricious reading of its own experimental exclusion [18] is insufficient, as a matter of law, to support the assertion that Touchpoint's denial of benefits to the Summers was arbitrary and capricious. ¶ 79 To prevail on the theory of inconsistent policy application, the Summers were required to present some evidence that the plan administrator granted benefits to other persons similarly situated to them. See DeAngelis, 641 F.Supp. at 470. The record and the majority opinion are silent in regard to any such applicant for, or award of, benefits. ¶ 80 In sum, under federal precedent, we must affirm Touchpoint's interpretation of the policy provisions that led to its decision to deny benefits for the high-dose chemotherapy with stem-cell rescue because Touchpoint's interpretation of the policy is reasonable.
¶ 81 On November 19, 2002, Touchpoint denied benefits for Parker's treatment with high-dose chemotherapy and stem-cell rescue because it was not a covered service under the policy. Touchpoint's notice of denial provided in part: Touchpoint Health Plan received a request on Parker's behalf from Dr. Diane Puccetti to consider coverage for Phase II Study of Two Alternative Intensive Induction Chemotherapy Regimens Followed by Consolidation With Myeloablative Chemotherapy and Autologous Stem Cell Rescue. The request was reviewed and it was determined that this is EXPERIMENTAL and an exclusion of coverage as stated in your CERTIFICATE OF COVERAGE. Touchpoint denied coverage for the treatment for which the Summers sought both prior and subsequent approval. Touchpoint's decision was not a termination of benefits. ¶ 82 When there is a termination of benefits, a court may reinstate benefits pending a full review by the plan administrator of the termination decision. Halpin, 962 F.2d at 697. When there is a denial of benefits and the administrator's notification of the reasons for its decision is deficient, the remedy is to remand the matter to the administrator for another review of the request for payment. Quinn v. Blue Cross & Blue Shield Ass'n, 161 F.3d 472, 477-78 (7th Cir.1998); Halpin, 962 F.2d at 689 (citing Wolfe v. J.C. Penney Co., 710 F.2d 388, 392 (7th Cir.1983)). ¶ 83 Notice of denial of benefits is required under 29 U.S.C. § 1133, which provides: In accordance with regulations of the Secretary, every employee benefit plan shall  (1) provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant, and (2) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim. Federal regulations promulgated by the Secretary that relate to notice provide in relevant part: The notification shall set forth, in a manner calculated to be understood by the claimant  (i) The specific reason or reasons for the adverse determination; (ii) Reference to the specific plan provisions on which the determination is based; . . . . (iv) A description of the plan's review procedures and the time limits applicable to such procedures[.] 29 C.F.R. § 2560.503-1(g)(1). ¶ 84 Substantial compliance [with the applicable regulations] is sufficient to fulfill Touchpoint's notification obligation under ERISA. Schneider v. Sentry Group Long Term Disability Plan, 422 F.3d 621, 627 (7th Cir.2005) (quoting Halpin, 962 F.2d at 690). Substantial compliance is sufficient and technical compliance is unnecessary because the purpose of 29 U.S.C. § 1133 and 29 C.F.R. § 2560.503-1(g) is to afford the beneficiary an explanation sufficiently adequate to enable him to mount an effective appeal, if he seeks review of the denial of benefits. Id. at 627-28. All that is required is a sufficient explanation to enable the claimant to formulate his further challenge to the denial. Gallo v. Amoco Corp., 102 F.3d 918, 923 (7th Cir.1996). ¶ 85 Therefore, the question we must ask in regard to the notice of denial that Touchpoint provided to the Summers is: Were the Summers supplied with a statement of reasons that, under the circumstances of the case, permitted a sufficiently clear understanding of the administrator's position to permit effective review. Schneider, 422 F.3d at 628. [19] ¶ 86 The Summers sought prior authorization for the treatment of high-dose chemotherapy with stem-cell rescue that was denied for the first time on November 19, 2002. Touchpoint explained that the treatment for which the Summers sought prior authorization falls into a Phase II clinical trial; experimental is defined in the policy as including treatments subject to an ongoing Phase I or II clinical trial; and experimental treatments are excluded from coverage. The November 19 letter cited the pages of the Certificate of Coverage containing the exclusions from coverage and the definition for experimental. It explained the appeals procedure, as well as the Summers' opportunity for an external review. ¶ 87 The Summers chose an external review. On November 25, 2002, the Medical Review Institute, the external review body, also concluded that the treatment was not covered under the policy because it was experimental. The Summers re-submitted their claim to Touchpoint for the same treatment after Parker had received it. On December 12, 2002, Touchpoint again denied the claim because it was a request for cycle two of the Phase II clinical trial for treatment of anaplastic ependymoma. Therefore, between November 19, 2002 and December 12, 2002, the Summers received three notices that their claim for high-dose chemotherapy with stem-cell rescue was not a covered service under their policy because it was defined as experimental by the policy. ¶ 88 All three notices must be read together when determining whether Touchpoint substantially complied with its notice obligations under federal law because the notices applied to the same treatment and all were received within one month's time. ¶ 89 Furthermore, the Summers have never asserted that they did not understand Touchpoint's reason for denying their claim for coverage. The complaint they filed to commence this action demonstrates that they understood why their claim was denied. The complaint asserts that the requested treatment is the subject of a Phase II study at New York University Medical Center. Complaint, ¶ 9. The Summers understood that their claim was denied because the treatment fell within a Phase II clinical trial and was therefore experimental and excluded under the terms of the policy. Complaint, ¶ 11. Accordingly, I must conclude that the purpose of 29 U.S.C. § 1133 and 29 C.F.R. § 2560.503-1(g) was fulfilled. ¶ 90 The basis for the Summers' claim seems to be that because their pediatric oncologist recommended high-dose chemotherapy with stem-cell rescue as the best of the available treatments for Parker, that treatment should be covered by their policy. Complaint, ¶ 10. However, a faithful application of the law to the healthcare policy does not permit the conferral of benefits for that reason. Rather, the terms of the policy must be followed. Egelhoff, 532 U.S. at 147, 121 S.Ct. 1322. Because the Summers have a sufficiently clear understanding of Touchpoint's reason for the denial of benefits to permit an effective review, I conclude that Touchpoint substantially complied with the notice requirements under federal law. ¶ 91 Notwithstanding the evidence of the Summers' understanding of the reason Touchpoint denied coverage, the majority opinion concludes that Touchpoint's notice was insufficient. [20] It then seeks a way to base payment for Parker's treatment on that perceived deficiency. [21] It relies heavily on Evans v. W.E.A. Insurance Trust, 122 Wis.2d 1, 361 N.W.2d 630 (1985). ¶ 92 Evans involved the application of guidelines that a claims manager created to evaluate claims for benefits for gastric bypass surgery. Id. at 7, 361 N.W.2d 630. The claim for benefits was denied based on the guidelines. Id. at 12-13, 361 N.W.2d 630. We concluded that the denial of benefits was arbitrary and capricious because the guidelines impose[d] a standard for payment of benefits that is not required by the basic plan, but rather is imposed by an administrative gloss. Id. at 15-16, 361 N.W.2d 630. Evans has no application to the case at hand because Touchpoint interpreted the words of the policy, not guidelines that were inconsistent with the policy, as the claims manager did in Evans. ¶ 93 The majority opinion agrees that Touchpoint has the power to interpret the policy. [22] However, after citing appropriate federal case law that supports this conclusion, the majority opinion recasts the policy as a termination of benefits: The policy grants Touchpoint's medical director the discretion to terminate coverage if treatments are experimental or investigational. [23] The majority opinion recasts the power Touchpoint was granted under the policy as the power to terminate coverage so that later it can assert, the appropriate issue in this case is whether Touchpoint's termination of benefits was arbitrary and capricious. [24] ¶ 94 Touchpoint did not terminate payments for high-dose chemotherapy and stem-cell rescue. No payments have ever been made. Instead, Touchpoint denied payment for high-dose chemotherapy and stem-cell rescue because that treatment was not a covered service under the policy. The Summers' complaint clearly shows that they understood their claim was denied: Defendant sent a letter to plaintiffs denying coverage for Parker's participation in Dr. Findlay's study as proposed by Dr. Puccetti on the grounds that the request [fell] into a Phase II clinical trial, and was therefore experimental and excluded under the terms and provisions of the policy's Certificate of Coverage. Complaint, ¶ 11 (emphasis added). ¶ 95 Under federal law, Touchpoint is prohibited from paying for services unless the services are covered under the policy. Egelhoff, 532 U.S. at 147, 121 S.Ct. 1322. The policy does not permit payment for treatments that are the subject of a Phase I or II clinical trial. There is no dispute that the treatment Parker received is the subject of a Phase I or II clinical trial. Therefore, Touchpoint could not terminate what it could not have awarded in the first instance. Id. Stated otherwise, Touchpoint is not free to pay for any service that is requested by a participant or ordered by a physician. It has the power to pay for only those services that are covered by the policy. Id. ¶ 96 In my view, the majority opinion recasts Touchpoint's denial of benefits into a termination of benefits because it chose to order payment for the treatment that Parker received. Stated otherwise, if the majority opinion acknowledged that Touchpoint's decision was a denial of benefits, it would have to explain how a treatment that is indisputably the subject of a Phase I or II clinical trial is a covered service, before payment for that treatment could be ordered. [25]