Court Rejects ERISA Insurer’s Effort to Discredit Treating Physicians in Awarding Disability Benefits

A recent decision from federal court in Oregon is an interesting example of how ERISA disability benefit disputes can arise where the claimant suffers from complex and hard-to-diagnose conditions such as fibromyalgia. Since conditions like fibromyalgia defy easy identification, these cases often turn on the claimant’s treating doctor’s documentation of the claimant’s symptoms.

Jane Medefesser sued her LTD carrier, MetLife, after MetLife denied her disability insurance claim. Medefesser suffered from a host of medical conditions including fibromyalgia and migraines. Medefesser’s doctors opined her medical conditions impacted her ability to function even in a sedentary job.

MetLife initially approved Medefesser’s disability claim. But MetLife subsequently changed its position and terminated Medefesser’s benefits after an “independent” doctor hired by MetLife determined Medefesser could perform sedentary work. MetLife also relied on opinions from its physicians that Medefesser’s doctors were, supposedly, exaggerating Medefesser’s symptoms.

The court disagreed with MetLife that Medefesser’s doctors were exaggerating her symptoms. To the contrary, the court noted that, given the complexity of Medefesser’s condition, the treating doctors who personally examined Medefesser were in the best position to reliably assess her disability.

This ruling is notable because it addresses a common issue in ERISA disability cases involving conditions like migraines or fibromyalgia. Where the claimant’s disability arises from complex conditions that defy easy diagnosis, disability insurers have an incentive to rely on the supposed lack of “objective” findings or review by “independent” consultants. These consultants’ opinions typically boil down to: “if it doesn’t show up on an x-ray, it’s not real.” The Medefesser decision is a great example of a judge rejecting such an argument.

 

Ninth Circuit Emphasizes Importance of ERISA Claims-Handling Regulation in Reversing LTD Benefit Denial

ERISA-governed disability benefit claims are subject to the Department of Labor’s regulation requiring full and fair investigation of claims. The regulation includes rules requiring claims administrators apply plan provisions correctly and thoroughly investigate claims. A claims administrator’s failure to adhere to the rules expressed in the regulation can be the difference-maker if the benefit dispute proceeds to litigation. A recent unpublished Ninth Circuit Court of Appeals decision, Alves v. Hewlett-Packard Comprehensive Welfare Benefits Plan, emphasizes this.

Alves applied for short-term disability and long-term disability under his employee benefit plan. The plan’s claims administrator, Sedgwick, determined Alves’ condition did not render him disabled, i.e., that Alves could still perform his job duties. On that basis, Sedgwick denied both the short- and long-term disability claims. The federal district court agreed with Sedgwick.

The Ninth Circuit Court of Appeals reversed the district court. The Ninth Circuit agreed that Sedgwick’s decision Alves didn’t qualify for short-term disability benefits was adequately supported by Alves’ medical information. But the court found Sedgwick incorrectly evaluated Alves’ long-term disability claim. Sedgwick denied Alves’ long-term disability claim because Sedgwick concluded Alves failed to meet the plan’s one-week waiting period. The court concluded Alves’ clearly met this requirement. Accordingly, the court remanded Alves’ long-term disability claim to Sedgwick for further investigation. The Ninth Circuit admonished Sedgwick to follow ERISA’s rules requiring full and fair investigation of claims in reviewing Alves’ long-term disability clam on remand.

The Ninth Circuit’s opinion is unpublished, meaning it is only persuasive precedent. Lower courts may follow this decision if they find it persuasive, but they are not required to.

The Alves decision is an important reminder that ERISA claims administrators can be held accountable for failing to correctly apply plan provisions and failing to investigate claims in compliance with ERISA’s implementing regulation.

Does ERISA Apply to COBRA Coverage?

ERISA applies to most insurance obtained through an employer. “COBRA” coverage is insurance coverage you get after your employment ends.  So it’s understandable if you assume that COBRA coverage isn’t ERISA-governed.

Surprisingly, many courts have held that ERISA governs COBRA coverage after all.

ERISA generally applies to any insurance procured by an employer for the purpose of providing insurance benefits for its employees.  When an employee’s employment ends under the right circumstances, the employee is eligible to purchase COBRA coverage to replace the lost employer-sponsored coverage. Congress enacted COBRA (the “Consolidated Omnibus Budget Reconciliation Act”) in 1986 to make sure people changing jobs don’t have a gap in their insurance coverage.  COBRA requires that certain employer-sponsored insurance benefits plan allow employees changing jobs to continue coverage under the right circumstances.  COBRA coverage must generally be identical to the coverage the former employer provides.  And if the employer modifies coverage, the modifications must generally apply to the former employee’s COBRA coverage.

Thus, even though COBRA coverage would appear to be distinct from the employer’s ERISA plan, a former employee with COBRA coverage is effectively continuing to participate in their former employer’s ERISA plan by paying the premiums themselves.

For that reason, courts typically treat COBRA coverage as ERISA-governed – a result that might be counterintuitive for many employees.

Aetna Settles Wrongful Depression Treatment Denial Allegations

On February 15, 2019, Aetna Inc. announced a settlement of allegations Aetna wrongfully denied mental health treatment.  The plaintiff and a group of Aetna insureds had filed a class action lawsuit under ERISA alleging Aetna wrongfully denied health insurance for a specific treatment for major depression called Transcranial Magnetic Stimulation (“TMS”).

The lawsuit alleges Aetna had a uniform policy of denying coverage for TMS on the basis TMS was purportedly “experimental and investigational.”  Experimental/investigational exclusions are common in health plans, particularly plans issued through employers under ERISA.  In theory, such exclusions limit the insurer’s obligation to pay for treatment where there’s insufficient evidence the treatment will effectively treat the insured.  Unfortunately, in practice, experimental/investigational exclusions are frequently used as a justification for health plans’ refusal to cover any treatment that is new or novel enough to be expensive.

If approved by the judge, the settlement would require Aetna to pay $6.2 million to reimburse insureds who were wrongfully denied coverage for TMS treatment.  Aetna had already changed its policies to allow coverage for TMS earlier in the lawsuit.  The settlement class includes participants in employee-sponsored health plans administered by Aetna who were denied health insurance coverage for TMS on the basis of Experimental, Investigational, or “Unproven Services.”

Four Common Disability Insurance Provisions and Why They Matter

As with most insurance cases, disputes over disability insurance coverage or benefits frequently turn on the specific insurance policy language at issue.  Insurance policy fine print can often be read in ways that are counterintuitive.  Below are four common policy provisions that are often key to the outcome of disability insurance disputes.

1.     The Definition of “Disabled”

Disability insurance policies can define “disabled” in different ways.  Some policies define disability in terms of the insured’s employment qualifications.  Such a policy might provide: “you are unable to perform the duties of any gainful occupation for which you are reasonably fitted by education, training or experience.”  Other policies define disability in terms of the insured’s existing occupation, defining disability as: “you are unable to perform the material and substantial duties of your regular occupation, or you have a 20% or more loss in your monthly earnings.”  Further, some insurance policies change the definition of disability once the insured has been disabled for a certain time period, typically tightening the standard.

For insureds, the definition of disability is the key to claiming benefits.  Many disability insurance disputes focus on whether the insured meets the definition of disability.  That’s key because insurers sometimes deny claims under the wrong standard of disability.  Denying claims under an erroneous standard could result in denying benefits where the insured is otherwise entitled to them.

The definition of disability also establishes the specific medical evidence needed to establish the insured is disabled.  That’s key because doctors typically do not write medical records with the insurer’s definition of disability in mind; they focus on the medical information relevant to the patient’s diagnosis treatment.  Accordingly, insurers often claim the insured’s medical records don’t prove the insured is disabled because the doctor’s notes don’t precisely match up with the definition in the policy.

2.     Mental Health Limits

Many disability policies contain special provisions restricting coverage where the insured’s disability relates to their mental health.  Although the federal Mental Health Parity Act generally prohibits health insurers from disfavoring mental health coverage, disability insurers are still often free to do so.

An example of a common mental health limitation in a disability policy: “Disabilities which are due in whole or part to mental illness have a limited pay period during your lifetime.  The limited pay period for mental illness is 24 months during your lifetime.”

Mental health limitations can be critical to disability insurance disputes.  The insured may have both physical and mental health symptoms.  Sometimes, the physical ailments cause the mental health symptoms directly, for example, in the case of a traumatic brain injury which manifests with difficulty concentrating or focusing.  Or, the mental health symptoms may be ancillary to the physical injury; for instance, people suffering a physical disability often seek mental health treatment after becoming depressed and anxious about their inability to work, engage in hobbies or socialize because of their physical disability.  Sometimes the mental and physical symptoms may be completely unrelated, for instance, when a person who has been treated for anxiety for many years sustains a physical disability following an injury.

In these circumstances, insurers often conflate the physical and mental health symptoms to justify limiting benefits under the mental health limitation.  Insurers may ignore the physical ailments that prevent the insured from working and focus on ancillary mental health symptoms that were well-managed prior to the onset of physical symptoms.  Or, the insurer may incorrectly determine that any physical limitations are caused solely by mental health conditions, for instance, by characterizing migraine headaches as a symptom of anxiety.

To avoid this, it’s critical to present the insurer with medical records and statements from treating providers that clearly differentiate mental health conditions from physical ailments, and indicate whether the physical ailments alone render the insured disabled.

3.     “Objective” Evidence Requirements

Similar to mental health, many disability insurance policies limit coverage for so-called “self-reported symptoms,” defined as symptoms that cannot be proven through “objective” testing.

Many disabling conditions are, by their nature, not readily provable through “objective” testing.  Chronic migraines, fibromyalgia, or Chronic Fatigue Syndrome are common examples.  These conditions sometimes result in disabling symptoms, but are difficult to objectively measured through things like MRIs or X-Rays.  Consequently, many insureds have coverage denied for conditions that render them disabled but cannot be identified on objective tests.

Overcoming “objective” evidence requirements often entails establishing that the condition is one that is known in the medical community to resist proof by objective means.  Many courts have recognized the medical consensus that conditions like fibromyalgia do not show up on MRIs, and, consequently, do not allow insurers to deny such conditions for lack of “objective” testing that, by definition, cannot exist.

4.     ERISA

Disability policies issued through an employer are typically subject to a federal law called the Employee Retirement Income Security Act (“ERISA”).  If ERISA applies, it imposes important deadlines and procedural rules insureds must follow in order to contest a disability insurance denial.  For instance, insureds must appeal a denied claim within specific time periods (usually measured in days).  Moreover, the appeal must include all information the insured relies on in claiming benefits; information absent from the appeal often cannot be considered in a lawsuit disputing the denial.