Yesterday, the Wisconsin Supreme Court decided Summers v. Touchpoint Health Plan Inc., No. 2005AP2643 (May 28, 2008), affirming the Wisconsin Court of Appeals decision ordering the case remanded and the participant’s benefits in the Kimberly Clark health plan reinstated as of the date that the benefits were terminated.
When the Summers’ young son was diagnosed with a cancerous brain tumor known as an anaplastic epedymoma, he was covered by the Kimberly Clark health plan through the father’s employment at Kimberly Clark. Touchpoint administers the plan for Kimberly Clark. The plan paid for surgery to remove the son’s tumor and his initial follow-up care. When the son was enrolled in a clinical trial for specialized chemotherapy recommended by the son’s doctor, Touchpoint terminated coverage for that cancert treatment as the plan excluded experimental and investigational procedures. The Court quotes the plan language as excluding:
- “Any ‘service, supply, drug, device, treatment, or procedure’ that Touchpoint’s medical director determined was ‘the subject of an on-going Phase I or II clinical trial’ or was ‘furnished in connection with medical or other research to determine its maximum tolerated dose, its toxicity, its safety, or its efficacy…”.
Under the terms of the plan, once benefits are terminated, the parents could request that Touchpoint submit its termination of benefits to an independent review organization for an expedited review, which they did. The independent review organization upheld Touchpoint’s termination of benefits, finding that while the recommended cancer treatment was within the standard of care and medically necessary, it also met the plan’s exclusion as experimental, stating:
- “Although the proposed treatment would fall under the policy language as experimental/investigational, I would recommend approving the proposed therapy as it would be one of the standard approaches for three-year-old children with this disorder…There is no alternative with superior or proven results and is therefore, medically necessary…All patients with this disorder are standardly enrolled in clinical trials and all mature trials are phase II…The standard of care for patients with this disorder is to enroll patients into the best phase II trials available that are building on the success of previous phase II trials. That is the case for this patient.”
After this decision by the independent review organization, the son’s doctor suggested removing the child from the clinical trial while still providing him with the same cancer treatment. When the doctor submitted another request to Touchpoint for the treatment’s coverage noting that the treatment would not be part of a clinical trial, Touchpoint again terminated coverage by issuing a letter on December 12, 2002.
The parents then sued Touchpoint in Wisconsin state court. The trial court granted Touchpoint’s motion for summary judgment, finding that the plan was unambigous in excluding coverage for any treatments that were the subject of Phase II clinical trials, and that Touchpoint’s termination was reasonable because it was not in dispute that the treatment administered was the subject of such a Phase II clinical trial. The court of appeals reversed the trial court’s decision, holding that the termination letter of December 12, 2002, was arbitrary and capricous, thus violating 29 U.S.C. section 1133, and remanded the case back to the trial court with instructions to reinstate the benefits retroactively. Touchpoint then appealed to the Wisconsin Supreme Court.
In affirming the court of appeals’ decision that the benefits should be reinstated retroactively, the Wisconsin Supreme Court applied a discretionary standard of review, stating that the termination of benefits will not be reversed unless the termination decision was arbitrary and capricious. The Court found that the plan language supported a discretionary standard of review because that language specifically conferred discretion to the administrator or fiduciary when terminating benefits. The Court quotes the plan as stating:
- “Touchpoint Health Plan has the power and authority to administer, interpret and apply this Policy. Touchpoint Health Plan will decide all questions arising in connection with the Policy, and may issue any necessary rule and regulations for the purpose of administering the Policy.”
Since the plan grants Touchpoint’s medical director the discretion to terminate coverage if treatments are experimental or investigational, and the authority and discretion to interpret the plan’s language and its coverage, the Court found the arbitrary and capricous standard of review applicable to this case. The Court then determined that the second termination letter issued by Touchpoint on Dec. 12, 2002, was arbitrary and capricious because it failed to provide a sufficient explanation of the reasons for Touchpoint’s termination of benefits. The Court applied a two-prong test in determining that the letter failed to comply with 29 U.S.C. section 1133. First, every ERISA-governed employee benefits plan must provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied setting forth specific reasons for such denial, written in a manner calculated to be understood by the participant. Second, every ERISA-governed employee benefits plan also must afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.
The Court found that the Dec. 12th letter was inadequate and did not provide a sufficient explanation of the reasons for Touchpoint’s termination of benefits, stating that the letter said:
- “The request was reviewed and it was determined that this is an exclusion of coverage as stated in your Certificate of Coverage…For additional information, refer to your Certificate of Coverage under RESTRICTIONS, LIMITATIONS, AND EXCLUSIONS FOR COVERED SERVICES.”
In evaluating the inadequacy of the letter, the Court discussed Labor Reg. 2560-503-1(g)(1), stating:
- “Furthermore, the relevant Code of Federal Regulations section requires that a notification of an adverse benefits determination must contain the “specific reason or reasons for the adverse determination;” a “reference to the specific plan provisions on which the determination is based;” a “description of the plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under section 502(a) of the Act following an adverse benefit determination on review;” and, for a group health plan with an experimental treatment exclusion or limit upon which an adverse benefits determination was based, “either an explanation of the scientific or clinical judgment for the determinatino, applying the terms of the plan to the claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request.” A termination letter lacking the minimal requirements codified in the statutes and regulations is arbitrary and capricious.”
The Court also rejected Touchpoint’s argument that the second letter should be read in conjunction with the first letter terminating benefits, which was adequate. The Court decided that the sufficiency of the second letter should be determined independently of the first letter due to the different rationale for the second claim. The change in rationale for the second request for coverage was that the child was not enrolled in a Phase II clinical trial, and therefore the plan’s exclusion did not apply. In terminating coverage for this second request, Touchpoint simply repeated its decision to terminate coverage without giving any specific details for its decision. By failing to address the changed rationale for the treatment, and only repeating its termination conclusion, the Court found that Touchpoint failed to communicate fully the specific reasons for its termination. Thus, the second termination letter was arbitrary and capricious.
[tags]Pension Protection Act, ppa, Summers, Touchpoint, Kimberly Clark, Wisconsin Supreme Court, 2560-503, health plan, arbitrary, capricious, anaplastic ependymoma, clinical trial, ERISA[/tags]
