Fourth Circuit Revives Claims for Residential Treatment Based on Plan Administrator’s Failure to Produce Documents During Claim Review Process

In Wilson v. UnitedHealthcare Ins. Co., No. 20-2044, __F.4th__, 2022 WL 552028 (4th Cir. Feb. 24, 2022), the Fourth Circuit considered whether Defendant UnitedHealthcare Insurance Company abused its discretion in denying residential treatment services for a minor with significant mental health issues and whether Plaintiff Kenneth Wilson, the minor’s father, failed to exhaust administrative remedies as to some of the submitted claims. Plaintiff’s claims were brought under ERISA § 502(a)(1)(B) to enforce the terms of the Towers Research Capital, LLC Welfare Benefit Plan (“the Plan”), in which Plaintiff was a participant and his son a beneficiary. The district court affirmed UnitedHealthcare’s denial of coverage for treatment rendered from December 1, 2015 through May 15, 2016, and dismissed several claims for treatment for failure to exhaust administrative remedies. The Fourth Circuit affirmed in part, vacated in part, and remanded the case to the district court for entry of an order remanding the relevant claims to the plan administrator for a full and fair review under ERISA and the Plan.

With respect to the claims which Plaintiff indisputably exhausted administrative remedies, the court found that UnitedHealthcare acted reasonably in denying the claims based on the relevant factors identified in Booth v. Wal-Mart Stores, Inc. Assocs. Health & Welfare Plan, 201 F.3d 335 (4th Cir. 2000). The Booth factors a court should consider include: “the Plan’s language, the materials the administrator consulted in reaching its decision, whether the Plan has been interpreted consistently, whether the decision was consistent with the procedural and substantive requirements of ERISA, the existence of any external standard relevant to the exercise of discretion, and the fiduciary’s motives and any conflict of interest it may have.” (cleaned up). Plaintiff did not identify a sufficient basis to support his claim that UnitedHealthcare abused its discretion. “Before issuing a final determination to deny coverage, three levels of review occurred—the initial utilization review, the first-level internal appeal, and an external review. The three independent reviewers separately arrived at the same conclusion: the 24-hour residential setting of services provided at [the treatment facility] were no longer needed…”

With respect to other claims submitted on or before January 26, 2017, the Fourth Circuit disagreed with the district court that Plaintiff did not exhaust his administrative remedies. By letter dated January 26, 2017, Plaintiff’s counsel wrote to UnitedHealthcare stating that they were representing Plaintiff who wished for a review of the denials and the production of all relevant documents so that Plaintiff would have a full and fair opportunity to respond to the bases of UnitedHealthcare’s denials. The letter also stated that the appeal was for the claims referenced in the letter “as well as any and all claims related to treatment received at [the facility].” The letter enclosed a representation authorization and a HIPAA authorization, the latter of which contained an illegible signature. UnitedHealthcare did not respond to the letter, send the requested documents, or start a review of the denied claims. Plaintiff’s counsel sent a follow-up letter about a month later noting that their January 26 letter was a notice that Plaintiff was appealing the denial of benefits and enclosing another copy of the January 26 letter. UnitedHealthcare again did not respond, provide copies of documents, or initiate an appeal.

The Fourth Circuit determined that all claims denied on or before January 26, 2017 were encompassed by the January 26^th letter and UnitedHealthcare’s failure to respond denied Plaintiff a full and fair review. It was undisputed that the letters requested that UnitedHealthcare provide documents, UnitedHealthcare did not provide documents, Plaintiff had a right to receive the requested documents under ERISA § 503 and the implementing regulations, and Plaintiff could authorize his attorney to request copies of relevant documents on his behalf. UnitedHealthcare asserted that it did not have to produce the documents because the HIPAA authorization was defective. The court did not excuse UnitedHealthcare’s failure to respond to the document request because it had a fiduciary obligation to at least notify Plaintiff that the HIPAA authorization was defective. It could do this without disclosing any protected information. The defective HIPAA authorization was also not an excuse for failing to provide Plan related documents since those would not identify the beneficiary or lead to his identification. UnitedHealthcare should have responded to the 2017 letters and its failure to do so denied Plaintiff a full and fair review. With respect to the remedy, the court explained that the usual course for when a plan administrator fails to comply with ERISA’s procedural requirements is to remand the claim to the plan administrator so that a full and fair review can be accomplished. On remand here, the process should be reset to the time remaining on January 26, 2017 so that Plaintiff can provide a HIPAA-compliant authorization form, receive the requested documents, and pursue a timely appeal.

Lastly, the court found that all claims denied after January 26, 2017 were not exhausted by the January 26^th letter. These denials are not encompassed by the letter’s statement that it is appealing all denied claims from the treatment facility. Further, there is no evidence in the record that Plaintiff attempted to appeal denials of services obtained after January 26, 2017. Plaintiff also did not demonstrate that appealing the post-January 26 claims would be futile. The district court did not err in dismissing these claims for failure to exhaust administrative remedies.