In the recent case of Dubaich v. Connecticut General Life Insurance Co., the U.S. District Court for the Central District of California held that medical treatment provided to a participant in an employer’s self-funded medical plan (the “Plan”) was not entitled to coverage under the Plan, despite evidence submitted in support of its “medical necessity” because the treatment was excluded under the Plan’s terms. Ms. Dubaich, a participant in the Plan, sought surgical treatment for her back condition. Her physician performed the surgery and then submitted a claim to the Plan’s claims administrator on Dubaich’s behalf. The Plan’s terms designated the employer’s “Plan Administration Committee” as plan administrator (under Section 3(16) of ERISA), but provided that the employer’s “claims administrator” (which was Connecticut General Life Insurance Company, i.e., “CIGNA”) was authorized to review and make final decisions with respect to internal claims and appeals under the Plan. The initial claim was denied because the medical treatment was determined to be “experimental” and thus specifically excluded from coverage under the Plan. Dubaich’s physician filed an appeal of the denial to CIGNA on Dubaich’s behalf and included various forms of professional medical documentation that were intended to substantiate the medical necessity and appropriateness of her treatment. CIGNA upheld the claim denial on the same ground as the initial claim denial. Dubaich then submitted a second appeal of the claim denial to the employer’s “Benefit Appeal Committee” (the “Benefit Committee”), an entity distinct from the committee appointed as plan administrator. The Benefit Committee denied the second appeal, again based on the “experimental” nature of her treatment. Finally, Dubaich sued CIGNA under ERISA. The court held that Dubaich had provided sufficient evidence of “medical necessity,” but the Plan “unambiguously” excluded coverage for the specific treatment she had received because it was considered “experimental.”
Plan sponsors should note two important lessons from this case. First, coverage terms, including exclusions from coverage, should be clearly set out in the governing documents of a plan, including the plan’s summary plan description. CIGNA’s position was upheld because the exclusion relied upon was unambiguously reflected in the Plan’s governing documents. Second, the plan document and other governing documents must reflect the actual administration of a plan, including designation of the plan administrator and a proper delegation of the plan administrator’s duties to other parties. In particular, the court reviewed Dubaich’s claim on a de novo basis (i.e., without affording any deference to the prior decisions made by the plan administrator or its designee during the internal appeals process) because the Benefit Committee, which reviewed and decided the second appeal, had not been properly delegated the requisite review authority under the Plan by the plan administrator. Dubaich v. Connecticut General Life Insurance Co., No. CV 11-10570 DMG (AJWx) (C.D. Cal. Apr. 25, 2013).