In Zahuranec v. Cigna Healthcare, Inc., et al., No. 21-3695, 2022 WL 1619493 (6th Cir. May 23, 2022), Plaintiff-Appellant Lisa Zahuranec appealed the district court’s dismissal of her ERISA lawsuit against Cigna Healthcare, Inc. and two of its medical staff seeking to prevent Cigna from enforcing a self-funded plan’s Subrogation/Right of Reimbursement provisions. Zahuranec underwent bariatric surgery and then experienced severe complications from the procedure. Cigna, as her employer’s self-funded health plan’s claims administrator, approved the payment for the procedure although Zahuranec did not meet the medically necessary criteria for it. Zahuranec would not have pursued the surgery had Cigna not approved coverage because she would not have been able to afford it. Zahuranec pursued a medical malpractice lawsuit against the surgeon and Cigna filed a Notice of Lien in the state court action seeking reimbursement for the cost of the surgery. After Zahuranec settled her malpractice claim, she filed suit against Cigna and the other defendants under ERISA § 502(a)(1)(B) and 502(a)(3) to avoid reimbursing the health plan from her settlement.
Under § 502(a)(1)(B), Zahuranec sought to enforce her right under the terms of the plan not to reimburse the plan. She argued that because her procedure did not satisfy the medical-necessity criteria for bariatric surgery, the procedure would not have been a “benefit” in the first place, and she should not be subject to the plan’s subrogation/right of reimbursement provisions. The court rejected her argument. The plan has a right to pursue a subrogation lien and be reimbursed if it incurred a “Covered Expense”, if a third party is determined responsible for that expense or the participant is able to receive payment for that expense, and if the plan paid benefits provided by the policy. The court found that Zahuranec incurred a Covered Expense when she underwent bariatric surgery and Cigna determined that it was medically necessary when it approved the procedure. The payment for the surgery was a “benefit” under the plan. Whether a procedure is medically necessary does not determine what a benefit is—only when it’s paid. And there’s no dispute that a third party is responsible for the cost.
Zahuranec also brought breach of fiduciary duty claims against Cigna on the basis that its decision to approve her surgery amounted to a material misrepresentation that the procedure was medically necessary. The court found that the question of medical necessity was just a question of coverage. Cigna’s approval only involved a representation that the surgery would be paid for by the plan. Cigna did not make a treatment decision.
Lastly, Zahuranec bought an equitable estoppel claim against Cigna requesting that the court estop Cigna from pursuing its subrogation lien because it promised that Zahuranec’s surgery was medically necessary when it was not. The court found that Zahuranec did not meet the elements of equitable estoppel because she did not detrimentally rely on Cigna’s promise that her surgery was medically necessary. Cigna only represented that her procedure was covered under the policy and the plan paid for the procedure. “Equity does not demand we preclude CIGNA from pursuing the plan’s right to be reimbursed for a procedure Zahuranec requested, CIGNA approved, and the plan paid.” The court affirmed the district court’s decision to dismiss all claims.
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