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Fifth Circuit Agrees with the Office of Public Insurance Counsel (OPIC) and the Texas Department of Insurance (TDI) Amicus Briefs Supporting Factual Review of ERISA Benefit Denials

In an en banc review of Ariana M v. Humana Health Plan of Texas, Inc. the U.S. Court of Appeals for the Fifth Circuit (Fifth Circuit) overturned a previous decision requiring district courts to defer to a claim administrator’s factual determinations when an ERISA benefit plan claim is denied.

Consumers who receive health coverage directly from their employers through a self-funded plan are subject to the federal Employee Retirement Income Security Act of 1974 (ERISA). ERISA plans generally use third-party administrators to process and pay or deny claims. When an ERISA plan administrator denies a claim, the consumer has a right to appeal that decision for further review by the insurer and eventually a district court.

In 1991, the Fifth Circuit decided in Pierre v. Conn. Gen. Life Ins. Co. that district courts should review challenges to an ERISA plan administrator’s benefit denial under an abuse-of-discretion standard when the ERISA plan delegates “discretion” to the plan administrator through a contract provision known as a discretionary clause. Discretionary clauses provide insurers the sole discretion in deciding if, when, and what benefits are due under the insurance policy. For more than two decades, this decision has prevented Texas district courts from evaluating the merits of the opinions of treating physicians when an ERISA benefit plan claim is denied.

In 2011, the Texas Legislature enacted House Bill 3017 (Smithee) to prohibit the use of discretionary clauses in Texas. At the time the bill passed, the courts had not reevaluated the standard of review for discretionary clauses in ERISA plans. Because of the discrepancy in public policy between the new state law and the standard of review established by the court in Pierre, the Fifth Circuit accepted an en banc review of Ariana M. v. Human Health Plan of Texas, Inc., a case involving an appeal of an ERISA benefit denial for behavioral health hospitalization, to reconsider Pierre and determine the appropriate standard of review in these circumstances.[1] The Fifth Circuit recently overturned the Pierre decision and now applies a de novo review to both legal and factual determinations.

An ERISA plan administrator’s benefit denial is now subject to de novo review by a district court, regardless of whether the denial is based on legal or factual grounds. This means that Texas district courts will be able to evaluate the medical determinations of treating physicians and will not be limited to only reviewing whether the administrator abused its discretion in denying the claim.

OPIC worked with legislators and stakeholders on the 2011 legislation prohibiting discretionary clauses in Texas and OPIC and TDI submitted amicus briefs in support of Texas consumers’ right to a full de novo review by a neutral and independent adjudicator.

Read the decision here.

Read OPIC’s amicus brief here.

 

[1] Ariana M. v. Human Health Plan of Texas Inc., No. 16-20174, 2-3 (5th Cir. 2018).