ERISA Plan Benefit Disputes

If an ERISA healthcare Plan is fully funded, the process for a Provider to appeal a denied claim is generally very similar to appeal with an individual health insurance policy. Accordingly, the following addresses self-funded Plans.

Coverage and benefits disputes

Sometimes, after the patient has been treated and the Plan has been billed, a dispute arises between the healthcare provider and the Plan or the Plan Administrator about whether a particular treatment or service is a “Covered Service” under the Plan, whether the patient is a Plan Participant, or the amount of the Plan Benefit.

A related issue that sometimes arises is that the services are definitely Covered Services, the patient is definitely a Plan Participant, and the amount of the Plan Benefit is clear – but the Plan simply doesn’t want to pay the amount owed, so it delays paying and tries to negotiate a special discount.

Manziel Law Offices, PLLC has extensive experience representing healthcare providers in such disputes.

The administrative appeal process

For self-funded Plans, the federal ERISA law pre-empts (overrides) state-law claims that “relate to” the Plan. This means that if a dispute arises, the Plan Beneficiary (or the Provider who treated the Plan Beneficiary) may not sue the Plan for breach of contract, fraud, etc.

Moreover, unlike Social Security disability, Unemployment Compensation, Worker’s Compensation, Medicare and state Medicaid programs, there is no state or federal agency that handles ERISA Plan Benefit disputes. The Provider cannot simply fill out a government form, file it with the appropriate state or federal agency and get a Benefits Review Hearing, Medical Dispute Resolution, or have issues decided by a hearing officer or an Administrative Law Judge.

ERISA Plan Benefit disputes normally are handled by an internal administrative process conducted by the Plan Administrator. If the provider is not satisfied with the original determination, there are normally two levels of internal administrative appeal. There are also deadlines for filing appeals.

Although a Plan Beneficiary or Beneficiary’s assignee (e.g., healthcare provider) may sue under the federal ERISA law (not under state law) after an unsuccessful administrative appeal, such suits are fairly rare and normally the court may only consider evidence and arguments previously presented in the administrative appeal process.

Common Errors by Providers in Appealing Denials

A common Provider approach to initial claim denial is for someone in Patient Accounts to simply send back a copy of the denial with the medical records attached and a cover letter that says “APPEAL” and to “request reconsideration”. Some letters add that the Provider treated the Plan Beneficiary “in good faith” and “expecting to be paid” by the Plan.

However, without identifying any specific issues, any specific errors in the original determination, or stating what information in the attachment supports the provider’s position, such “appeals” are usually doomed to failure . . .

. . . and the Provider has just used up its first-level appeal.

Furthermore, at each new level of review it becomes harder to get a denial reversed. It is common for persons(s) deciding the appeal to think, “This has already been examined and determined, and then re-examined and re-determined.”

The biggest problem for Providers appealing . . .

The biggest problem for Providers appealing is that appeals deal with the un-ordinary – the non-routine. Patient account managers and similar Provider personnel deal with the usual.

Even if the Provider has an in-house “appeals specialist”, such persons don’t have the background, experience and resources to address the actual problems that typically result in improper denials being upheld on appeal.

Common Causes of Improper Plan Benefit Denials

Denial of Plan Benefits often is the result of a claims adjustor at a Third-Party Administrator (TPA) or an employee of the Plan Administrator with no significant training or experience in healthcare claims, law or claims investigation taking shortcuts (perhaps to meet deadlines or “production” quotas) or making mistakes, e.g.:

  • working with outdated or incorrect information about the Plan Beneficiary’s circumstances (e.g., wrong birthdate, marital status, student status);
  • failing to investigate specific circumstances by carrying out review of relevant documentation or asking appropriate persons for relevant information (treating physician, Employee, etc.);
  • making incorrect assumptions about the circumstances or Plan provisions;
  • unfamiliarity with or misunderstanding of details of a medical condition or treatment or events giving rise to the claim;
  • misunderstanding a Plan provision;
  • reading together Plan provisions that actually deal with unrelated matters;
  • applying an irrelevant Plan provision (“Plan Beneficiary must reside in the Employee’s household” … unless the Beneficiary is the Employee’s dependent and a full-time student.);
  • failing to apply a relevant exception to a provision that usually applies;
  • looking to the wrong benefit rate schedule (applying or failing to apply a stoploss provision, using a per case rate instead of per diem, etc.);
  • applying criteria, policies, procedures, limits, restrictions, etc., created by the TPA or the Plan Administrator or by an outside consultant that are not in the Plan documents or the SPD and are contrary to Plan terms;
  • applying arbitrary maximum prices for particular services or medications based on what some individual at the TPA or Plan Administrator or some outside consultant “feels” is “reasonable” rather than rates shown by market research;
  • deciding “reasonable rate” by looking to government safety-net programs such as Medicare or Medicaid rather than market rates;
  • applying rates in the adjuster’s locale rather than the Provider’s location;
  • applying irrelevant court decisions from the adjuster’s home state.

These are just some of the most common errors. The medical records and “reconsideration requested” won’t get such improper denials reversed on appeal.

Successful ERISA Healthcare Benefit Appeals

In handling any ERISA healthcare Plan Benefit denial, determining the type and amount of benefits available requires first examining the Plan documents. Then the medical documents must be examined to determine what qualifies and what might not.

Particularly in accident cases, obtaining a police crash report is often necessary to understand the circumstances. Sometimes even using Google Street View or Bing Bird’s Eye View is necessary to understand and show traffic patterns or other factors the initial claim adjuster either was not aware of or chose to ignore. A common argument is, “Airbags didn’t deploy.” Being able to provide authoritative literature explaining the factors that will trigger an airbag can be crucial to a successful appeal.

But successful denial appeal also requires understanding the subtleties of ERISA Plan provision language and the relevant law and determining the interplay of various Plan document provisions.

Successful appeal also requires the ability to recognize grounds for denial that are in fact erroneous and the ability to show specifically how and why the Plan’s decision is wrong and what the correct decision should be. Doing those requires knowledge of the relevant medical condition(s) and the ability to research medical, situational and other issues and explain how the applicable standards apply to the specific facts of the denied claim.